Filing your IRS Form 990 can Benefit Your Mission
By Natasha Dresner
Most tax-exempt organizations that operate on the calendar fiscal year are expected to file their 2016 annual returns (IRS Forms 990) by May 15, 2017.
Is your nonprofit organization ready to do it? Does it accurately, if at all, describe the nonfinancial aspects of your nonprofit’s operation (e.g. Governance, Fundraising, etc.)? Has it been reviewed by your Board?
Asking and answering these questions is important not only because it ensures your organization’s legal and financial compliance, but also because it changes your understanding of what that form and its schedules – if approached differently – can do for your organization. Between the many text areas to describe your organization, its impact, and practices, and the fact that your form 990 (at least most of it) is available for public review and scrutiny, you are looking at the single most powerful and cost-effective PR tool available to your nonprofit.
So let’s look at some concrete examples to help you make the most out of it:
- According to the IRS, you must file your form 990 by the 15th day of the fifth month after the end of your fiscal year (FY). For example, if your FY ends on December 31, you will be expected to file by May 15 of the following year; if it ends on August 31 (like many Jewish camps I work with), the filing deadline will be by January 15. People looking at your 990 can easily see if it was filed on time by looking at line A on page 1 (your FY) and comparing it to the submission date indicated in the Signature Block. If it was on time, it projects an image of a reliable, professionally run organization. Isn’t that what you want?
- Now, from a legal standpoint, it is possible for an organization to file for two 90 day extensions each (Section B on page 1 of the form indicates if it is an initial return). While you may have really good reasons for taking advantage of one or both extensions, it may affect that “professionally-run-organization” perception you want to project. So, from a PR standpoint, use it cautiously, and don’t make it a habit.
- Lines J and L on page 1 allow you to fill in your organization’s website and year of formation, respectively. All too often, though, those lines get neglected, and their potential of driving people to your website and managing their expectations based on the age of your organization remain unrealized.
- Page 1 (Part I, line 1) allows for a brief description of the organization’s mission or most significant activities, and then the entire second page (part III) allows for another brief description of the mission, and your three main programs with their accomplishments. All of these areas offer you a great opportunity to promote who you are, your main services and programs, the people you touch and the impact you can be proud of. Yet, these lines are most underutilized on the form – they are either not filled out at all, or the language is lacking.
- All of page 6 (Part VI) of the form and Schedule O, that is heavily associated with it are a gold mine to let the world know how healthy and strong the organization and its governance are so that you can inspire donors and other constituencies to invest in the organization. Section A describes our governing body. Section B paints a good picture of the presence and use of the four core policies (conflict of interest, whistleblower, document retention and destruction, and executive compensation). By the way, this section also explicitly asks the organizations if the complete copy of the 990 has been provided to all members of the governing body prior to filing it. Imagine my surprise when I see the same organization answering “no” to this question year after year. In Schedule O you can provide descriptions of the processes and procedures associated with those policies and the governing body. Most organizations provide the bare minimum, thinking that they are just doing this for the IRS and not realizing that it may be perceived as a lack of transparency. And speaking of transparency, Section C (as well as Schedule O) describe how an organization makes these documents (990, financial statements, conflict of interest policy, etc.) available to the public. Most organizations choose “upon request” vs. “own website” or “another website.” While perfectly legal, how transparent is that really? Why not just post it on your website? Did you know that after filing your 990 with the IRS, you can also send a copy of it directly to GuideStar www.guidestar.org (one of the nonprofit watchdog organizations) to make it available to the public months before the IRS would?
- Pages 7 and 8 (Part VII) deal with compensation of Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees. This area can tell multiple stories – presence or lack of solid compensation policies, using nonprofit dollars responsibly or not, overpaying or underpaying your staff, etc. The latter could be particularly difficult to deal with since people’s opinions on the matter are formed by their personal experiences with compensation – a $100,000 annual salary will feel too high to someone who makes $50,000 and too low to someone who makes $150,000. This is where, once again, Schedule O offers a place to describe and explain anything related to Part VII, so don’t pass it over. Furthermore, if you are required to complete Schedule J, it will offer you additional opportunities to show organizational ethics, how employee compensation is determined (line 3), along with lots of space (page 3) to offer any other additional information).
- Schedule G, Supplemental Information Regarding Fundraising or Gaming Activities – if you are required to complete it – offers a new opportunity to promote the nonprofit’s fundraising efforts. In Part I, line 1, you can describe various fundraising activities you engage in. In line 3, you have an opportunity (and an obligation) to list the states where the organization is registered to solicit contributions. Believe it or not, that line often stays completely empty. How do you think it makes your donors feel? Lastly, Part IV, provides space for any additional information. Have you ever considered using it (and Schedule O) to say thank you to your donors?
There are some nonprofits that qualify for filing shorter versions of the Form 990 – e.g. 990-N, 990-EZ (for specific guidelines visit www.irs.gov/charities-non-profits/form-990-series-which-forms-do-exempt-organizations-file-filing-phase-in. I would strongly encourage those organizations to consider filling out a regular Form 990 to take advantage of putting some information out there about the organization that otherwise would not be as available to the public. Please note, that even the IRS, in its guidelines, lists regular Form 990 to those organizations as a suitable alternative.
There are also some nonprofits that are exempt from filing a 990 (see this link for a detailed list www.irs.gov/Charities-Non-Profits/Annual-Exempt-Organization-Return:-Who-Must-File). My suggestion to them is the same as for the group above. The exemption, in this case, is a right, not an obligation. And while, not filling it out might save you some time, the lost opportunity cost might be greater – marketing and PR for the organization, Board education, transparency and accountability.
Natasha Dresner is an organizational development consultant and mentor with JCamp180, the program of the Harold Grinspoon Foundation in Agawam. She can be reached at Natasha@hgf.org
This article originally appeared in The Berkshire Eagle; reprinted with permission.