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Understanding Form 990 -Chicago Nonprofit CPAThis article is the start to our Understanding Form 990 Article Series where we will take a deeper dive into Form 990, the information required to complete the Form, and the impact of the completed Form 990.

Most not-for-profit organizations (NPOs) must file Federal Form 990 Return of Organization Exempt From Income Tax (Form 990) if they have gross receipts greater than or equal to $200,000 or total assets greater than or equal to $500,000. Form 990 consists of a 12 page base form and up to 16 schedules depending on the activities of the NPO and the type of the NPO. Form 990 can be intimidating, especially if the NPO is required to attach a number of the 16 schedules. Intimidating or not, if you serve on the governing body of a NPO that files a 990, it is part of the governing body’s fiduciary responsibility to review and understand the NPO’s Form 990. As a part of the Form 990 filing, the NPO must respond to the question:

Has the organization provided a complete copy of this Form 990 to all members of its governing body before filing the form?

Furthermore, the instructions to Form 990 state:

Answer “Yes” only if a complete copy of the organization’s final Form 990 (including all required schedules), as ultimately filed with the IRS, was provided to each person who was a voting member of the governing body at the time the Form 990 was provided, whether in paper or electronic form, before its filing with the IRS. The organization can answer “Yes” if it emailed all of its governing body members a link to a password-protected web site on which the entire Form 990 can be viewed, and noted in the email that the Form 990 is available for review on that site. However, answer “No” if the organization merely informed its governing body members that a copy of the Form 990 is available upon request.

Form 990 also has the NPO disclose the process used by the NPO to review the Form and provides the following instructions for what should be included in the disclosure:

Describe on Schedule O (Form 990 or 990-EZ) the process, if any, by which any of the organization’s officers, directors, trustees, board committee members, or management reviewed the prepared Form 990, whether before or after it was filed with the IRS, including specifics about who conducted the review, when they conducted it, and the extent of any such review. If no review was or will be conducted, enter “No review was or will be conducted.”

Example. The return preparer emails a copy of the final version of Form 990 to each Board member before it was filed. However, no Board member undertakes any review of the form either before or after filing. Because such a copy of the final version of the form was provided to each voting member of the organization’s governing body before it was filed, the organization can answer “Yes” even though no review took place. The organization must describe its Form 990 review process (or lack thereof) on Schedule O (Form 990 or 990-EZ). 

The Internal Revenue Service (IRS) is clearly emphasizing in the Form the importance of the governing board’s knowledge and review of Form 990. This demonstrates that the IRS expects that all members of the NPO’s governing body are provided the NPO’s Form 990 prior to filing and that the NPO should have a procedure in place to review it.

If you serve on the governing board of a NPO, you may ask why reviewing Form 990 matters. What is the risk? Keep the following in mind:

  1. Your NPO’s Form 990 is available to the public. Anyone can view your NPO’s Form 990 on Guidestar.org without paying a fee. This means your NPO’s grantors, grantees/beneficiaries, watchdog groups, employees, and anyone else who might be curious can easily access and read your NPO’s Form 990.
  2. Form 990 makes your NPO answer questions regarding compliance with laws and regulations and can be used as a compliance tool.
  3. Form 990 requires disclosure of compensation information for certain individuals involved with the NPO.
  4. Certain parts of Form 990 have required narrative explanations. This is where the NPO can use Form 990 as a marketing tool by carefully crafting the language to communicate to the reader and the general public how the NPO carries out its mission.

If you have any questions regarding Form 990, please do not hesitate to call us!

Gabe Sumner

Gabe supervises a number of significant engagements for clients in the non-profit sector, including handling audits for educational institutions, social service agencies, trade associations, foundations, charities and social clubs around the Chicagoland area. Clients find his constant availability and commitment to service an added benefit to their Selden Fox relationship.