810 Quincy Street | Rapid City, SD 57701
(605) 342-5630
(605) 342-2172

990’s – Who Else is Watching Your Organization?

Who else is watching your Organization’s 990 besides the IRS? And why?

There are over 1.5 million other 990 nonprofit tax exempt organizations out there like yours.

Transparency: much important information about your organization is available to public scrutiny in your tax Form 990.

How do people get a copy of your 990? By law, you are required to provide a copy upon written request from a third party.  The IRS also has to provide a copy upon written request.  Some organization’s put a copy of their 990 on their website.  And then there are national nonprofit watchdog organizations like “Guidestar” (“Guidestar.com”) that have compiled 990 tax forms for thousands of organizations, and made them available on the web.  They even go so far as to compare and contrast organizations with quantitative and qualitative analysis and tell everyone about it.

Who else besides the IRS and Congress would want to read your 990?

  1. Potential major contributors
  2. Grantor Agencies
  3. Job applicants
  4. Former employees
  5. Regulators
  6. State Agencies/officials
  7. Law Enforcement agencies
  8. “Watchdog” organizations
  9. News Media

All of these are potential “users” of information of your 990, all having the same general intention to understand your entity’s financial information, but many with more specific intentions of checking up on your organization.

What are some (but certainly not all) of the things these “users” are looking for?

  1. Is your organization carrying out activities to accomplish your exempt purposes and for your own tax exemption maintenance? How do these activates compare with other competing organizations? Have there been any major changes in purpose?
  2. Comparison to similar organizations, using financial data for program expenses vs. administrative and fund raising expenses (are you spending enough on programs?)
  3. Good governance compliance with IRS “best practice” management procedures/policies.
  4. Conflict of interest situations.
  5. Did your organization get an audit or other financial statement service by a CPA firm?
  6. Governing board and related efforts and compensation?
  7. Executive and key management personnel compensation?
  8. Any lobbying conducted?
  9. Any foreign activities conducted?
  10. Any “unrelated business income tax” from revenue other than tax exempt activities?

How can your organization be best prepared for any such scrutiny?

When preparing your annual 990, approach it like a “public relations opportunity” – – tell your story in your own words as to how you accomplish your tax exempt purposes. Be pro-active with best practice tax compliance management-this sends a positive message to the public about your organization’s intent for compliance and controls.  Incomplete or inaccurate information may cause significant compliance problems or misinterpretation of the facts surrounding your organization.  If you don’t take a pro-active approach, you may be more vulnerable to a breakdown in organization controls, as well as risk potential damaging negative publicity from one or more of the users mentioned above, if they come knocking!

Jean Smith

Jean Smith

CPA, Partner at Ketel Thorstenson, LLP
Jean joined Ketel Thorstenson, LLP in August of 1994 with the motivation to make the audit experience a positive one for clients. In November of 2005, she was named a Partner in the firm. She specializes in audits of non-profits, financial institutions, tribal organizations, and closely held commercial entities.
Jean Smith

Latest posts by Jean Smith (see all)

    Share
    Tweet
    Pin
    +1
    Share
    X