A nonprofit board members’ review of Form 990 is not required, but the form encourages board participation and may provide several benefits to an organization. A draft of the form should be provided to board members, whether it is to everyone on the board or a select few, for review before filing.

What’s the big deal? The purpose of the Form 990 is to aide the IRS in determining continued tax-exempt status, ensuring the organization is following certain requirements and implementing best practices into everyday operations of the organization. The form is also easily accessible to the public, and potential donors can review the financial performance, policies, compensation of officers and more within the Form 990. 

The Form 990 contains a question regarding whether the governing board members were provided a copy of the Form 990 before it was filed.  All nonprofit organizations must describe the review process, if any, the organization’s governing board and management uses to review the Form 990.  Such description will be different for all nonprofits depending on size and operations. 

There are several benefits to the board’s review of Form 990:

  • An indication of better governance within the organization to outside parties.
  • Provides assurance to external parties that the organization intends to continue operating for tax-exempt purposes.
  • Provides an opportunity for members to inquire, understand, and be comfortable with information that will be available to the public once filed.
  • Assures external parties of greater accountability within the not-for-profit organization.

What should be reviewed? This varies based on the organization, but the main areas of concentration are typically on the mission of the organization, financial information, and anything else that would interest the IRS, potential donors, and any other readers. It is important to keep in mind the purpose of the form, which is to ensure the IRS that the organization is operating for tax-exempt purposes and not abusing their status as a nonprofit organization.

Examples of items that may be reviewed:

  • Mission/purpose of the organization and any changes from previous years
  • Financial information to detect any obvious errors or misstatements
  • Appropriateness of amounts reported for compensation, fundraising efforts, etc.
  • Related party transactions
  • Reporting on program accomplishments and activities (marketing opportunity)

Questions members may ask themselves when reviewing:

  • Does the information reported accurately depict the organization’s activities?
  • Does the organization appear to be operating as a nonprofit?
  • Does any information in the form appear questionable?

There are extensive checklists online that may direct a board member’s review of the Form 990.

If board member does not understand questions or information on the form, he or she should ask the preparer. In most cases, organizations request an external CPA prepare the Form 990.  Nonprofits should have the external CPA available for questions after the board has had time to review the draft. This provides an opportunity for the board to gain a better understanding of the form and feel more confident with the information being reported. 

For more information regarding the Form 990 or the board’s review of the Form 990, contact the nonprofit professionals at Ketel Thorstenson, LLP.