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What the Board of Directors Should Know About IRS Form 990

24 Aug 2016

IRS Form 990 is an informational tax form that the majority of tax-exempt organizations must file annually. The Form’s main purpose is to give the IRS an overview of the organization’s activities, governance, and detailed financial information. Additionally, Form 990 includes a section to describe its accomplishments in the previous year to justify maintaining its tax-exempt status. The IRS uses the information reported in Form 990 to ensure that organizations continue to qualify for their tax exempt status.

Federal tax law does not define that it is the Board’s duty to receive or review a Form 990, but organizations who do not have a Board review policy in place may be considered to have a significant weakness and lack of oversight. There has been a substantial increase in the demand for transparency and accountability within the nonprofit sector, further cementing the importance in the Board’s involvement in the organization’s review of the final Form 990.

The following “Board Member Review Checklist for Form 990” highlights some key areas that Board members should examine as a part of their review of Form 990.

BOARD MEMBER REVIEW CHECKLIST FOR FORM 990

PART I – SUMMARY

  • Is the brief description of the organization’s mission truthful and clearly defined?
  • Will the mission description positively influence a potential donor?
  • Does the current year summary of financial information compare favorably or unfavorably with the prior year?

PART III – STATEMENT OF PROGRAM SERVICE ACCOMPLISHMENTS

  • Does the information in Part III explain to the user of Form 990 why the organization exists, who it serves, and the information about activities it will undertake to accomplish its mission?
  • Are the program services described in enough detail to present an accurate depiction of the organization?

You can view the full article by downloading our free guide for Nonprofit Board Members