Local 990-NAC

Different NACs will perform different activities but the goals of each will be the same. The Local NAC Project Office offers these comments on each of the goals and how a NAC should approach each one.

(1) Increase nonprofits' understanding and compliance with IRS regulations regarding Form 990 disclosure.

The first goal is perhaps the easiest for NACs to tackle, since the regulations have been published and offer clear rules as to what nonprofits are required to do. A series of forums or presentations would provide a NAC with an opportunity to educate nonprofits in a local area about the new regulations. A critical aspect of this goal and the entire project is the flow of information from the NAC to local nonprofits. Attendees at a forum should leave with enough information to be able to include an article in their own organization's newsletter or magazine about the Form 990 (provide a sample article for a handout). A NAC might also develop a model speech or material that could be used by anyone making a presentation on the Form 990 disclosure rules.

(2) Improve the quality of information that nonprofits report in their Forms 990.

This goal is the broadest and potentially the most difficult for NACs to wrap their arms around. It is clear that the quality of information that nonprofits report on their Forms 990 needs to be improved. But there are a couple of factors involved with improving reported information.

First, an incorrect perception exists among nonprofits and accountants that the Form 990 is required but not important. That perception erroneously accommodates errors and omissions. Second, the Form 990 can be a confusing document for those with little training. Whatever the reason, NACs will essentially be working on changing attitudes towards Form 990 reporting. NACs might try a "carrot and stick" approach. Discuss incentives for accurate reporting contrasted to penalties associated with incomplete or inaccurate forms.

The "carrot" perspective is a self-policing approach, encouraging accuracy and accountability because they are needed in order to live within the government's guidelines while upholding public trust and confidence. Accountability and accurate reporting are essential because the sector cannot prosper without public support.

The "stick" approach focuses on the implications of incorrect and incomplete Form 990 reporting. Now that the Form 990 is easily available to the general public and being posted online, it will receive much more scrutiny than before. The public will be able to view errors and discrepancies on the form and ask questions about the information. Negative publicity hurts not only the organization involved, but also the entire sector. In addition, new electronic systems are being developed that can spot omissions quickly, making up for inadequate staffing. While regulatory agencies in the past have allowed nonprofits to correct errors and not be penalized, automated systems will increase their ability to levy fines.

NACs will need to use a combination of the "carrot and stick" approach in their educational activities. Different groups of people connected with the Form 990 may respond better to different NAC activities. Accountants who prepare the Form 990 may be interested in an in-depth workshop on completing the form, while nonprofit executives may be more interested in using the Form 990 as a public communications tool. The Project Office encourages NACs to be creative and innovative.

(3) Inform the public about the Form 990 and its useful information.

Mention the Form 990 to the public and almost no one will have heard of it. Publicizing a forum on the Form 990 will get little or no response. NACs should consider marketing their public education activities as consumer protection or donor information events. Attendees should be able to learn tips on wise giving, how to spot fraudulent solicitations, where to get information about a charity, etc. The Form 990 should be introduced as a document that donors can use to learn more about the charities they want to support. NACs should take care to inform donors what the Form 990 says (and equally important, what it does not say), and how it is different from an audit. If possible, NACs could show attendees specific websites where information can be obtained and how to use them. Again, handouts and other printed material will be important to leave with attendees.