As a grant writer and trainer, I often emphasize the importance of having your financials and 990s tell the same good story as your narratives. The 990 your organization files annually with the IRS is public information. Every donor and potential funder can access your agency’s 990 from several sources: on the IRS website or on Guidestar/Candid website. A best practice is to list your 990 on your own website for transparency. Read more about getting ready for grants HERE.
We can easily understand the importance of properly file our 990 to protect our legal status, but a 990 can also make or break an agency’s reputation and influence a funder’s decision.
Funders and grant reviewers will study your 990 to determine if the information shows your organization in a positive light. Many will review the board list, the functional expenses, and check for clarity and completeness.
Here are a few of the most damaging common mistakes to avoid:
Missing the deadline.
Most deadlines are either May 15th or November 15th, depending on the agency’s fiscal year end. Late filing fees can be high and failure to file for three consecutive years means losing tax exempt status. Having to file for extensions on a regular basis can turn away potential funders and board members who fear the organization isn’t fiscally responsible.
Wrong organization name or EIN.
The name your organization is most commonly known by may not be the legal name. Check your articles of incorporation. Double check your EIN for transposed numbers. Your 990 can be rejected if the EIN is wrong.
Filing incomplete return.
This often happens when the proper Schedules are not completed and attached. For example, Schedule A is required of all charities.
Improper allocation of expenses between programming, management, and fundraising.
A red flag is when a nonprofit raises a lot of revenue but has little or no fundraising expenses. Make sure your monthly allocations are correct when reporting program and fundraising expenses. For example, the executive director’s salary should be allocated between program, fundraising, and general management expenses based on how his/her/their time is spent.
Outdated mission statement and/or program activities.
If you have updated information, make sure the firm handling your 990 has the new details.
Outdated board roster.
Along with maintaining updated board lists, you must ensure the board list is correct for the 990 and reflect the terms for that filing year. Have a checklist for new and exiting board members to update the list for the next 990.
Schedules don’t match the main return.
For example, total contributions reported on Schedule B should not be higher than total contributions on Part VIII of the 990.
Answer all questions.
Many are simple Yes/No answers. Some of the newer questions are confirming the nonprofit has appropriate polices in place, such as conflict of interest, whistleblower, and a retention and destruction policy.
Take the time to complete your organization’s 990 properly and accurately. Being prepared for your annual 990 is helpful in meeting the deadline. The 990 is more than a federal tax document. This is another way to tell the story of your organization, to highlight your place in the community, and the services provided to those in need.
Michelle Crim, CFRE
Dynamic Development Strategies can help. We offer coaching, grant writing, and fundraising services for our nonprofit clients. We specialize in small to mid-size organizations because we understand your challenges. Please contact us for more information.