How to Maximize the Benefits of Filing Form 990
Firm Consultant
Many nonprofit executive directors, finance directors, and financial personnel see filing the annual form 990 as simply a necessary evil for their nonprofit organization. (If you’re not very familiar with the 990 and want to brush up on the basics, check out The 411 On Your Form 990.) Instead of just doing the bare minimum to meet the filing requirements, you can use this required filing to your advantage, to help support and promote your organization to the general public and to potential donors and grantors. In this blog, you’ll learn how to maximize the benefits of filing form 990.
File the Full Form 990 – Even If Not Required
There are three levels of form 990: the full 990, the 990 EZ, and the 990-N.
Full 990 – must be filed by nonprofit organizations with either gross receipts of $200,000 or more, or total assets of $500,000 or more. There are a few other criteria that would make a full 990 required, but they are likely to meet these thresholds anyway.
990 EZ – a short form 990, applicable to organizations with annual gross receipts of less than $200,000 per year, and less than $500,000 in assets at the end of the year.
990-N – available to organizations with annual gross receipts $50,000 or less.
Even if you don’t meet the full 990 threshold and could file a 990 EZ or 990-N, you may still voluntarily file a full form 990, which can benefit you in nonfinancial ways. Filing a full form 990 provides more detailed information, and demonstrates transparency to donors and the public. Filing a full form 990 can also support your stance and application when applying for grants. Although it is more work and disclosure, we recommend filing a full form 990 to give your nonprofit organization a boost in the eyes of the public and potential donors and grantors.
Update Your Program Service Accomplishments Every Year
The full form 990 provides you with the opportunity to talk up your organization and describe all your biggest accomplishments for that fiscal year. Even if you’re keeping the same programs and program names from year to year, use the opportunity to brag about your amazing nonprofit organization by describing what each program accomplished, how many volunteers supported you, the problems you solved, or the number of people who benefitted from your nonprofit organization’s mission. Your organization benefits by public recognition of its accomplishments and wins.
Use the Lobbying Schedule to Calculate Non-Deductible Dues
When preparing the 990, compare your nondeductible membership dues to what you’ll report on the 990 to ensure that both numbers are accurate and corroborate. We frequently find that these figures don’t match, which leads to questions in accuracy and the concern for potentially taxable income.
Try to Answer Positively to Policy and Controls Questions
The full form 990 includes a schedule of yes/no questions regarding the policies and controls implemented by the nonprofit organization. These questions ask whether or not certain policies and controls are implemented, and may ask for elaboration in certain instances. In general, donors and grantors want to see “yes” responses to these questions. Examples of the policies and controls discussed in these questions include:
Document retention
How Officer and Key Employee salaries are determined
Conflict of interest policies and how conflicts of interest are resolved
Whistleblower policies
Read through these questions carefully when answering them, as some of the questions give you the opportunity to expound on your responses on Schedule O. If you find that you do not have certain policies or controls in place, try to implement them as soon as possible. In cases where implementing the missing policy or control isn’t reasonable or even necessary, you have the opportunity to document and explain your position. This helps demonstrate how the organization approaches policy and controls, demonstrating the “tone at the top” to potential donors and grantors.
If you do encounter a missing policy, get in touch with one of our nonprofit professionals for a template and guidance.
Allocate Your General & Administrative Costs As Much As Reasonably Possible
Ideally, your general and administrative expenses should be the lowest percentage of revenue possible. Low general and administrative costs demonstrate that all available funding is being spent towards further the nonprofit organization’s mission, rather than on perhaps unnecessary management “extras.” Many donors and grantors look at how much of their funds will be spent on program costs that meet their needs and motives, versus how much will be spent on administration. Overhead costs like salary should be allocated across all applicable expense types, not just dumped in General & Administrative, to show how personnel time and other overhead costs are geared towards furthering the mission. Classifying too many expenses to General & Administrative instead of allocating them to the appropriate programs causes your ratio of program costs to revenues to be too low, especially when compared to similar, competitive nonprofit organizations.
Publish Your Filed Form 990 On Your Website, And With Guidestar
Get a public disclosure copy from your information return preparer, and make use of all your hard work by publishing your full 990 on your website and with Guidestar. Guidestar is a central source of research and financial reporting on nonprofit organizations, serving as a repository for key financial and nonfinancial information on various organizations. Most nonprofit organizations appear in some capacity in a Guidestar search, including their form 990. Allowing public access to your 990 proves transparency, increases your credibility as a nonprofit organization, and gives the public confidence in your operations.
Use a Professional with Nonprofit Experience, and File ASAP
While it is completely possible for you to prepare and file your full form 990 on your own, there are certain nuances to the form and filing that are best guided by an accounting professional with experience in nonprofit organization reporting. Additionally, filing your form 990 as soon as possible after your year-end gets the most current information out to interested parties, and demonstrates your ability and dedication to properly handling financial responsibilities.
Your full form 990 gives you the opportunity to explain your nonprofit organization’s mission and strategic goals, which makes a difference to those parties interested in supporting your organization. Aldridge Borden - OneSource’s experienced professionals understand these priorities, and are trained to help you maximize the benefits of filing form 990.
Succeed Sooner
With all the key points above, you can maximize the benefits of filing your 990 – even if a full 990 is not required for your organization. By partnering with Aldridge Borden - OneSource, maximize the benefits and succeed sooner.