Readers of the Form 990 – What Are They Looking At?

When board members receive their organization’s Form 990, they can become a little overwhelmed by the substantial amount of information in 25 plus pages.  So when we, the auditors, present the Form 990 to the board members, after assisting management in preparation, we are often asked what readers of the Form 990 are looking at and what they find most informative for their organization.

It is important to know that the Form 990 is a document available to the public, so the readers of an organization’s Form 990 can be potential donors, similar not-for-profit organizations, and even the media.  There are many websites that collect Form 990s for public viewing.  One of the more common websites is GuideStar, which is free with sign up, and has up to 3 years of Form 990s available.

Below we have identified 5 parts of the Form 990 that readers are looking at to get to know your organization better:

1. Form 990, Part I—Summary
   • The first page of the Form 990 is a snap shot of the organization.  It provides the reader with a brief summary of your organization’s mission, activities, governance, and financial information.  It is a great starting point for a reader who is trying to get to know your organization.
2. Form 990, Part III—Statement of Program Service Accomplishments
   • This section of the Form 990 allows your organization the opportunity to sell itself. It’s used to tell the reader how the organization is fulfilling its mission and tout its accomplishments.
3. Form 990, Part VI – Governance, Management, and Disclosure
   • A reader can get an idea of how your organization is governed and managed from this part of the Form 990.  It allows the reader to understand the governing body and what policies and procedures have been implemented by your organization.
4. Form 990, Part VII—Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors
   • Part VII provides the reader with a list of the governing body and members of management in the organization.  It allows the reader to see management’s compensation schedule, and compare it to similar organizations. It also tells the reader how much of your organization’s resources are being used for key management.
5. Form 990, Part IX—Statement of Functional Expenses
   • This section of the Form 990 provides a break out of the organization’s expenses by function: total expenses, program service expenses, management and general expenses, fundraising expenses.  With this break out of expenses, readers can identify the extent resources are being used to support the organization’s mission.  Many organizations strive to have at least 75% of their expenses associated with program services.

Since an organization’s Form 990 has many readers, it is important to make certain that both management and the board members are reviewing the entire form to ensure it is accurate, complete, and filed by the respective due date -- as well as telling the right story.