4 quick tips to make your Form 990 shine
It is a rare person that genuinely loves the 990 (and a good portion of those that do are salary snooping---yea, you know who you are). For most of us its a pain--the questions that seem to be written to intentionally confuse, the endless stream of check boxes, the disclosures--yikes! Even if you do not love our friend the IRS Form 990, you should at least give it some love. Here's why...
For most orgs the IRS Form 990 is their most public document.
Say what? No, really--it's true!
For the uninitiated, the IRS Form 990 is the tax docs that most nonprofits are required to file annually, it provides an overview of the organization's finances, their organizational structure and governance practices as well as information on the main activities of that nonprofit. Thanks to organizations like Guidestar, virtually every nonprofit's 990 is easily accessible to anyone with internet access--yep, all the good, the bad...and the ugly is right there, for free. Rather than make this a reason for alarm (or worse, an excuse to engage in some funny business), let us address this challenge head on and make these previously mundane docs a tool for advocating for organizations by showcasing your incredible work. Here are 4 tips to help you do that.
Tip #1: Follow the instructions
I should not have to say this but...yes my friends. The first step to having an awesome 990 is to embrace all the IRS-y mumbo jumbo and Follow.The.Dang.Instructions. Or hire someone who knows IRS-y mumbo jumbo and have them do it (this is my preferred method). However, if you hire out for this--at the end of the day, you are the one responsible for the accuracy of the 990's content. The form matter, the questions are being asked for a reason. Failing to answer a question properly (or not answering at all) can not only trigger someone at the IRS to take a closer look but could also be a turn off to a potential donor or result in a probing phone call from a reporter. Let's not go there. Follow the instructions. Send in a complete and accurate doc.
Tip #2: Discuss the draft in a board meeting
Aside from the fact it is a question in the 990 itself "has the organization provided a copy of this Form 990 to all members of its governing body before filing the form?", this is critical. All board members should review the 990 before it is submitted and there should be some discussion about its content. Whenever possible the board should be sent a copy electronically and they should review it in advance. If only hard copies are being provided at the meeting itself, the board should take 10-15 minutes to actually read it, not just thumb through. Please ask questions. If you don't understand something, ask--chances are someone else was sitting on the same question. Finance staff should be made available for to help guide the discussion or answer questions. Whether you are a board member or an exec, this doc is going in with your name on it, so don't just gloss over its content. Make sure you understand what story it is telling you because you never know when you might have to answer a question about it.
Tip #3: Know what can trigger a red flag
We can talk all day about what may trigger a red flag with the IRS or a potential donor--and most of it is common sense stuff, such as not following the directions, skipping questions or leaving items blank, not disclosing compensation where you should etc. There is a wonderful resource that can guide boards through this process. It is from Boardsource.org and its called "The Boards Role in Reviewing Form 990: a Checklist", I cannot break it down any clearer or make any simpler. Grab yourself a copy, send it to your board, send it to your ED. Be about it.
Tip #4: Maximize Part III Program Services and Accomplishments
How often do orgs just but in a sentence or two about what their organization offers? I know I've been guilty. Too often we think "eh, what does the IRS care about how many units of service we provided"--and honestly I don't know if they do-but your donors do care and with click of their mouse they can access you 990 probably easier than they can access your annual report (and most certainly easier than they can access your audit), so put a little effort, make that section shine. Talk about your key program activities, why you did them, how many you served, and what was the impact. Why are you doing what you do? What difference does it make (some survey data would be great if you have it).
Look at it this way--you have gone through the hassle of setting up exceptional fiscal and governance practices so that your organization can do "its thing"--now is your chance to sing the praises of that thing. So sing. Loudly.
Tip #5: Get educated
I know I said 4 quick tips, so consider this a bonus. There is a lot of great information out there and a lot of it is free. Take some time to learn more about the Form 990 and really demystify it. One really great educational opportunity I personally took advantage of was a free webinar from Nonprofit Quarterly. They have a terrific program on how you can make the most of your 990 while avoiding red flags. Make some time and check it out. It is well worth your time.