Does Your Board Review Your 990?

Posted on Wednesday, February 02, 2022

One of the Ten Basic Responsibilities of Nonprofit Boards provided by BoardSource is providing financial oversight.  This includes reviewing the organization’s Form 990.  Does your board do this?

Form 990 is the annual informational return that must be filed with the IRS by nonprofit organizations.  Unlike a for-profit tax return, the 990 reports information about the mission, programs, and governance practices, as well as financial data.  It is very important that the form is completed correctly, accurately describes the organization’s activities for the year, and is filed timely.  Form 990 is also open to public inspection.

Every board member should receive and review a copy of the 990 before it is filed with the IRS.  The copy provided to the board should be an exact replica of what will be filed with the IRS (all schedules should be included, as well as the donor’s names and addresses on Schedule B).  Although the IRS does not require the board to review Form 990 prior to filing, it does ask in Part VI, if the organization has provided a complete copy of the Form 990 to all members of its governing body before filing the form.  It goes on to ask for a description of the review process.  Your organization can only answer this question yes if every member of your board receives a copy of the Form prior to filing.  If only the executive committee or only the finance committee receives a copy, then this question must be answered no.  Answering this question, no, may give the perception of poor governance on behalf of the board.

The IRS believes that a well-governed organization with an active board of directors is more likely to obey the tax laws, safeguard charitable assets, and serve charitable interests than one with poor governance.  

Some organizations may feel that asking board members to review Form 990 is too much for them or that they might not understand what is being reported on the Form which in turns creates too many questions.  However, the board should be reviewing the 990 as part of their duties to ensure that the organization is fulfilling its tax-exempt purpose. 

• If your board does not currently review your organization’s Form 990, here are some suggestions on how to get started.
• Educate board members on their responsibilities.
• Provide a copy of the Form 990 to them with ample time for them to review prior to the due date.
• Provide an opportunity for them to ask questions.  Often times Form 990 is prepared by an external CPA.  Utilize the CPA to answer questions and provide an overview of Form 990 for your board members.  Explain to board members what they should be looking for during their review.
• Develop a written review policy.  This will aid in answering the question on 990 as to how Form 990 is reviewed. 

For some nonprofits, Form 990 is the only document that the public will see about its mission and programs.  You want to make sure that it accurately reflects your organization’s activities.

Contributed by: Carrie Minnich, MAcct, CPA | Director | DWD CPAs & Advisors

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.