What Picture Are You Painting With Your Form 990?

CPAs & Advisors

Michael Evrard
Michael Evrard CPA Principal CPAs & Advisors

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Many nonprofit organizations view the Form 990 as a “tax return” – a document that is tedious to complete, and that must be filed with the IRS as one of several requirements to maintain tax-exempt status. However, Form 990 is not really a tax return at all. The core Form 990 and its various sub-schedules are more accurately described as an information return and serve several functions, the most fundamental of which is to serve as a vehicle to transmit information regarding the organization’s activities to the IRS. However, another function of the Form 990 is to paint a picture of the organization that can serve as an invaluable tool to influence public perception, raise awareness for issues important to the organization, and attract new donors.

The Form 990 return is available to the public via and other websites. Private foundations, businesses, and wealthy individuals may review your return (and possibly request the audited financial statements) to make a decision on whether to provide grant funding. Additionally, average citizens may obtain it to decide if they want to volunteer for the organization. In order to make the organization look as attractive as possible and inform the public about all the great things it has accomplished, you should review the return and customize it to include broad concepts such as the mission, long-term plan, and program outcomes. Additionally, the return should include items specific to the most recent fiscal year, such as number of people served, number of volunteers utilized, collaborations with other nonprofit organizations, and projects that were completed.

Create a glowing picture by focusing on these sections

Most of the return is rather standard and doesn’t leave much room for reporting anything other than a number or a ‘yes’ or ‘no’ response. However, you should definitely spend time highlighting the organization in a few key sections:

  • Schedule O – Supplemental Information to Form 990: This schedule is important since this is where you can elaborate on any other part of the core Form 990, and is one of the only places where the response is not limited to a few lines of text. Schedule O can continue for as many pages as desired and contain elaborate narratives that highlight a wealth of information about the organization.
  • Part I, Line 1 – Summary of Mission or Most Significant Activities: This is especially important since this is the first page of the return and the first significant piece of information people will see. Only about two lines of text fit in this space, so you may want to simply state, “See Part III and Schedule O,” if you want to convey more information than can be accommodated in this space.
  • Part I, Line 6 – Total Number of Volunteers: Most organizations simply estimate the number of volunteers and list them in this box, which doesn’t particularly attract attention or tell much of a story. Organizations that have a volunteer program would benefit by expanding on this information in Schedule O and including the number of volunteer hours that were donated, the types of services provided, and the effect of those volunteer hours on the organization.

The more volunteers an organization has, the more important this section becomes. Since donated services must meet certain criteria in order to be recorded on the financial statements, and are not reported on the statement of functional expenses or in the program expense totals in Part III – Program Service Accomplishments, the volunteer services would otherwise go unnoticed. By highlighting the details of the volunteer program, you can illustrate all of the accomplishments that would not be possible without their time and effort at no cost to the organization, and fully illustrate and measure the reach of the organization’s programs. It also shows donors the additional effect every dollar they donate has on the organization’s clients and the community, since the magnitude of a program is not measured solely by the amount of actual dollars spent on it.

  • Part III – Statement of Program Service Accomplishments: This page is the most important section of the return for “tooting your organization’s horn.” Line 1 should state the organization’s mission, as adopted by the board of directors. Line 4a-4c lists the three largest program services (measured by amount of expenses). There is ample room to describe each program in detail and any program can be explained further in Schedule O. Line 4d can also refer to Schedule O to describe the other programs that are not within the top three already described above. This section is the best opportunity to show the public what the organization accomplished during the past year and why they should donate their time and resources to the organization.
  • Part IX – Statement of Functional Expenses: This statement reflects how much of the expenses were spent for direct program activities, and for supporting services including management and general activities, and fundraising. Potential donors will use this statement to see how many cents out of every dollar would potentially be spent on administrative costs. Organizations that spend relatively large proportions of their expenses on administrative costs could be viewed in a negative light when compared to other organizations that spend significantly less.

Without a doubt, fundraising is a huge priority for all nonprofit organizations. With all the time and effort spent on soliciting new donors, marketing, and grant writing, any nonprofit organization would be remiss if it did not ensure that the Form 990 paints an enticing picture of the organization. This year, as you prepare or review this important information return, ask yourself: What does my picture look like?


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