Form 990 as a Risk Management Tool: What Nonprofits Overlook

For many nonprofit leaders, Form 990 is a compliance checkpoint—a complex IRS form to be filed, reviewed, and signed before being sent off and (hopefully) forgotten until next year. Others have embraced its storytelling potential, using it to showcase mission impact, financial stewardship, and governance transparency.

But there’s another dimension that’s often missed: Form 990 as a strategic risk management tool.

In today’s environment, where public trust can be lost with a single headline and where funders increasingly vet organizations online, your 990 may be the first, most detailed, and most scrutinized public document you produce all year.

Here’s how to view it through the lens of risk:

Public Optics: What Could Be Misinterpreted?

Your 990 is publicly available and easily searchable. Journalists, watchdogs, potential partners, and donors all have access—and they often don’t read it the way you do. What might raise eyebrows?

• High overhead ratios without context
• Sudden revenue drops with no narrative explanation
• Executive compensation that seems out of step with mission or size

Tip: Have someone outside your organization review the 990 with a “skeptical reader” mindset. What questions or red flags might arise?

Governance Signals: Are You Walking the Talk?

The IRS wants to know about your governance practices—conflict of interest policies, audit processes, board oversight. So do funders. But beyond checking the boxes, your answers should reflect actual practice.

• Do your policies align with your practices?
• Are your disclosures consistent year-to-year?
• Does the board really review the 990 before submission (and can you prove it)?

Tip: Treat these questions as a mini self-audit. If you’re saying you do something, make sure you can demonstrate it.

Leadership Transition and Continuity: Are You Exposing Gaps?

The 990 shows names, titles, hours worked, and compensation for key leadership—every year. Gaps or changes in leadership show up clearly.

• Are leadership shifts explained somewhere (e.g., Schedule O)?
• Does it look like your board is disengaged or disconnected?
• Are you showing signs of burnout at the top?

Tip: Don’t assume context is clear. If something changed internally that might look alarming externally, offer a narrative in the appropriate schedule.

 Grantmaker and Watchdog Alignment: Do You Match Their Expectations?

Sites like Charity Navigator, Candid (formerly GuideStar), and state-level databases pull 990 data to build ratings and profiles. If your filings show inconsistent data or trigger certain thresholds (e.g., low program spending), your ratings may suffer.

• Are your program versus admin allocations clearly defined and accurate?
• Do descriptions of activities match how you’re positioning the organization elsewhere?
• Have your reporting choices created an unintentional “bad score”?

Tip: Your finance and communications teams should align on how your financial story is told across all platforms.

The 990 isn’t just an IRS form —it’s a trust document.  It tells a detailed story about who you are, how you lead, and how seriously you take your obligations to the public. Viewed strategically, it becomes a key tool for managing reputational risk and reinforcing your nonprofit’s integrity in the eyes of regulators, donors, and the public.

Before your next filing, ask not just “Is it accurate?” but “What does it say about us if we weren’t in the room to explain it?”