Board Review of Form 990

Posted on Wednesday, April 23, 2014

Form 990 is much more than just numbers.  Form 990, unlike the tax return of other entities, has no tax calculation.  The 990 is an informational return that must be made available to the public.

So as a board member, how do you know what to look for when reviewing your organization’s 990?

Form 990 is divided into four areas: financial, mission, tax compliance, and governance.

Financial

Parts VIII, IX and X include the financial data of the organization, the numbers, with Part I summarizing this information.  This information shows where the organization’s support is coming from, how it is using its resources, and its “net worth.”  The board should pay particular attention to the following:

Board members should also be sure to note the reasonableness of the amount of compensation and benefits reported in Part VII for board members and key employees. 

Another area to pay attention to is whether the organization hires independent auditors to audit its financial statements and whether it has a committee that assumes responsibility for oversight of the independent auditor.  This is disclosed in Part XII of Form 990.

Mission

Part III of the 990 gives the organization a chance to “tell its story” by describing its mission and programs.  The board should pay attention to the following:

Tax Compliance

Part V asks questions related to the organization’s compliance with tax laws and regulations.  Key areas to look out for are the following:

Governance

Part VI includes a list of governance and policy questions and, although these policies and practicies are not required by the IRS, they are seen as best practices for nonprofit organizations.  The board should pay close attention to the following:

If the organization does not have these policies and procedures in place, the board should consider adopting them. 

The board’s review of Form 990 should be part of its oversight responsibility and is considered best practice for sound management.

Posted by: Carrie Minnich, CPA

Posted in Mission Minded Nonprofits

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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