| Fall 2007 |
Nonprofit Advisor
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Power Up Your Form 990
Think your organization's Form 990 is filed away unseen in some
dusty government file cabinet? Think again. Thanks to the digital
age, the venerable Form 990 is now widely viewed by donors,
reporters, competitors and curious members of the public.
Make Some Hay
With this in mind, savvy organizations are using their Form 990 to
demonstrate responsible stewardship and tout their accomplishments. Some key
sections and opportunities include:
Program Service Accomplishments—Part III on page 2 of Form 990 is
where you describe in detail your organization's program service
accomplishments. The key word here is "detail."
Opportunity: This is the one part of Form 990 that gives the reader a
chance to understand what your organization is all about. So instead of simply
stating, "Summer Jobs Program: $258,680," say something like, "Trained, coached
and successfully placed 182 low-income teens in summer jobs."
Caution: Don't duplicate the same language in this section from year
to year. This practice fails to comply with IRS instructions and amounts to
false reporting if changes in programs are not reflected.
Tip: State accomplishments in numerical quantities (e.g., number of
clients served, number of meals served) and use quantitative measures of results
to describe program outcomes. Note that if your program achievements are not
measurable, you must provide an explanation.
Statement of Functional Expenses—This is the four-column section in
which you are asked to report types of expenses (such as salaries, rent,
postage, grants made, etc.) and then divide and assign those costs to the
functions of Program, Management/General and Fundraising.
Opportunity: This is your chance to show donors and the public that
you have properly spent funds in a manner that best advances your organization's
purposes.
Caution: Many groups do not have a good understanding of how to
allocate expenses and don't keep the records necessary to perform accurate
allocations. They fail to enter expenses on the lines provided or they ignore
the instructions and lump a large portion as "other" expenses on Line 43 with a
schedule attached. This forces the reader to search for the information and may
give the impression that the organization is trying to hide expenses, or that it
doesn't care enough to complete Form 990 properly.
Tip: Create an internal ledger that includes a chart of accounts to
record expenses in each of their natural classes (like insurance or salaries) as
well as allocate each expense to the appropriate functional expense category.
Train employees and others who report their time and expenses to properly
allocate their time and purchases to the appropriate class and category.
Fundraising Expenses—Many organizations fear they will be judged
harshly for spending money on fundraising. The key is to have an effective
fundraising strategy and spend what you must on those activities that work best
for your organization.
Opportunity: Here is the opportunity to demonstrate that fundraising
expenses are reasonable in light of various factors, including your
organization's size, age, types of programs, funding sources and the
"popularity" of its cause.
Caution: Reporting disproportionately high fundraising expenses may
alienate potential or current donors, but reporting unrealistically low
fundraising expenses is a red flag for regulators and watchdog groups.
Tip: The best policy is to tell your story as it is—not as you want
it to be. Misrepresenting or misreporting fundraising expenses destroys
transparency and can undermine public trust.
Don't Miss Out
Form 990 is now the most commonly used data source about nonprofits. With
that in mind, make sure your organization is not missing a key communications
opportunity.
Editor's Note: Bober, Markey, Fedorovich
& Company frequently works with clients on matters such as
this. Please call your partner / manager contact if you would like assistance in this area.
The Nonprofit Advisor is produced quarterly by Bober, Markey, Fedorovich
& Company's Nonprofit Services Team. If you would like additional information about the services that we can provide to nonprofit organizations, please call or email our team leader, Lori A. Sheets, CPA at 330.762.9785 or
lsheets@bobermarkey.com.
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