Form 990 is the form the Internal Revenue Service requires each tax-exempt organization to file yearly. Many organizations may dread the process of preparing the form and filing it with the IRS. Many organizations may want to put in the smallest amount of time, effort and information on the Form 990 just to get it over with, or fear they are giving too much information to the IRS.
However, the Form 990 is a public document that anyone can review, including possible donors, lenders, and potential future board members. So, instead of just trying to get it filed with the least amount of effort and information, you should instead use it as a great opportunity to once again show the public what your organization is all about and tell your organization’s story by providing the best detailed information as possible.
The Form 990 is a great way to showcase your organization. There are disclosures throughout the form from the organization’s mission statement and program accomplishments for the year, to explaining the detailed processes you go through governing, that can greatly shape the perception of your organization to the public. A recent Journal of Accountancy article laid out several examples of how to enhance your narratives in order to bring your organization into a better light. Here are some of the top ways you can use your Form 990 to tell your story.
The first spot is on the first page of the Form 990. Line 1 asks to “Briefly describe the organization’s mission or most significant activities.” While it may be tempting to list everything your organization does, it is better to follow what the question says and be brief and specific. There is limited space to write here so any additional wording will be defaulted to Schedule O, which is an attachment to the Form 990. If a reader of the Form 990 has to turn pages to find the rest of the description, they may choose to skip reading the rest of your narrative and not know specifically what the organization does. The best narratives are ones that completely fit in the space provided and clearly state what the organization does. That way the reader gets a taste of what the organization does without having to page through to find more wording.
The second spot to highlight your organization comes on page 2 of the Form 990. Line 1 of page 2 asks to “Briefly describe the organization’s mission.” Many organizations may decide to restate the exact wording from the statement on page 1, or simply put “See Page 1”, but by doing that, the organization is missing a key moment to expand with more detail on what was said on page 1. The best narratives here are ones that state what the organization’s main focus is and then detail as to how the organization accomplishes it. In this section, it is ok to write more than the space provided and have the overflow go onto the Schedule O attachment. This is also a place where you can provide some information on how much financial support was spent in carrying out the mission. People reading this section like to see how their donations (or potential donations) are being used. Being more detailed and providing some financial information, people reading the Form 990 will be more interested in finding out more about your organization.
The third spot to highlight your organization may be the most important. Just below the mission description on page 2 of the Form 990 is where the organization specifically identifies its largest program accomplishments. These are your three largest programs, as measured by expenses, that the person reading the Form 990 will look to in order to find out what your organization does.
This is the area to provide the most detail possible in order to show specifically what your organization accomplishes and how it is impacting the community. The best narratives don’t just state what the program is, but rather offer more detail into what the program accomplished in the past year. An example would be to give the exact number of meals prepared or give the exact number of people served rather than just stating that the program is to feed the needy. It is also important to review this yearly and continue to update the accomplishments and detail numbers as the program can change from year-to-year. This area of the Form 990 gives potential donors the best detail of how a donation to your organization is used, so you want to make the best narrative possible to better highlight your work.
These are the three most important areas of the Form 990. There are, of course, other areas that are important as well, such as making sure the correct allocations are used when identifying the program, management, and fundraising expenses on page 10 of the Form 990, and offering good detailed answers to the questions on page 6 of the Form 990 in order to show your organization is governed well.
But overall, if you focus on the top three areas, Form 990 page 1’s brief description of the activities and Form 990 page 2’s description of the mission and program accomplishments, you will shine the best light on your organization and have the best chance of landing future donations or convincing a future board member to get involved.
–Written by Tax Manager, Ryan Vettrus, CPA