The Quality Form 990 Resolution

The Quality Form 990 Resolution is being
developed with assistance from the 990 In 2000 project

Co-sponsored by the Greater Washington Society
of CPAs and the California Society of CPAs

"Quality" means readability, reliability, comparability, consistency, completeness, accuracy, timeliness, decision-usefulness, accessibility, and cost-effective.

Whereas there is broad nonprofit sector support for public disclosure and accountability; and

Whereas while audited financial statements of nonprofit organizations provide comprehensive financial information and disclosures and offer the highest level of assurance by independent auditors, many nonprofit organizations that must have Forms 990 do not have their financial statements audited, and, consequently, the data source that provides the broadest and most accessible base of information about the nonprofit sector is Form 990; and

Whereas federal and state laws require (a) public disclosure by way of the uniform federal/state Form 990 and other reporting requirements; (b) that Forms 990 be prepared in accordance with the instructions; and (c) that nonprofit organizations make their Forms 990 readily available to the general public; and

Whereas many of the nonprofit sector standards and codes of ethics require compliance with the law; and

Whereas fiduciary duties imposed by state law on board members require compliance with the law; and

Whereas for over 30 years, leading nonprofit sector groups have lobbied in support of federal and state public disclosure laws including the 1996 amendments to federal law requiring increased accessibility to Forms 990 (widely-available provisions) and increased penalties for non-compliance with the Form 990 instructions and/or disclosure requirements; and

Whereas Form 990 is increasingly becoming the primary instrument for public accountability by nonprofits especially via the Internet (e.g., as a way of meeting the new IRS’ widely-available disclosure regulations); and

Whereas nonprofit organizations need their Forms 990 to present their organizations as fairly, accurately, and completely as possible, especially to prospective contributors; and

Whereas Form 990 is the principal source of data on the nonprofit sector that is used for (a) public policy purposes of all kinds, (b) comparative statistics for governance and management, (c) sector advocacy, (d) research of all kinds, and (e) marketing useful products and services by for-profit and nonprofit organizations to the sector; and

Whereas reports by users of Forms 990 and studies of the quality of Forms 990 filed with IRS and state charity offices indicate that numerous errors are made by nonprofit sector organizations and their accountants in the preparation of Forms 990; and

Whereas there is extensive noncompliance with respect to the disclosure requirements of Section 6104(e) of the Internal Revenue Code which requires nonprofits to make their Forms 990 readily available to the general public;

Therefore, let it be resolved that, to improve the quality of Form 990 reporting and reduce the cost and burden, the sponsors of this resolution make 12 quality Form 990 recommendations:

1. That the accounting profession employ the necessary quality assurance procedures to be able to prepare Forms 990 efficiently, accurately, completely, consistently, and on a timely basis; and establish procedures that assure the proper and timely disclosure of Forms 990;

2. That nonprofit organizations assure that their Forms 990 are prepared by competent professionals accurately, completely, consistently, and on a timely basis; have their Forms 990 reviewed, before they are filed, by officers or a committee of their board of directors and, when there are significant changes from prior Forms 990, by knowledgeable legal counsel; have their boards of directors learn how to read and understand Forms 990 and use it as an essential internal control document for fulfilling fiduciary duty; and implement procedures to assure proper and timely disclosure of their Forms 990;

3. That national, state, and local nonprofit sector and sub-sector organizations, umbrella groups, and other associations of nonprofit organizations, as part of their ethics, standards, accountability, and public policy programs, encourage their respective constituents to prepare their Forms 990 accurately, completely, consistently, and on a timely basis, and to properly disclose their Forms 990 by adopting and implementing those parts of this Quality Form 990 Resolution that are relevant to them;

4. That IRS pursue electronic filing of Forms 990 and placing of all the public sections of Forms 990 for all filers on an IRS Form 990 Web Site and promote its use world wide;

5. That IRS and state charity officials seek the participation of the nonprofit sector and professional groups in federal and state efforts to identify and publicize common reporting errors and to enforce compliance with public disclosure laws related to Forms 990;

6. That accounting software suppliers develop and provide software products and services, including implementation of the standard chart of accounts for not-for-profit organizations, that enable users of their software to prepare Forms 990 accurately, completely, consistently, and on a timely basis;

7. That nonprofit academic centers and technical assistance providers develop and provide educational and training tools and services that enable their nonprofit financial management students and clients to be able to prepare Forms 990 accurately, completely, consistently, and on a timely basis, and to understand and comply with the requirements for proper and timely disclosure of Forms 990;

8. That institutional donors (e.g., corporations, foundations, United Ways, federal and state government agencies) include Forms 990 (along with audited financial reports when available) in their application guidelines and grant reporting requirements and encourage their grantees to comply with Form 990 reporting and disclosure requirements;

9. That charity review groups request and use copies of Forms 990 as a routine part of their review, evaluation, and reporting activities and encourage the nonprofits they report on to comply with Form 990 reporting and disclosure requirements;

10. That information centers—via the Internet and otherwise—request and use copies of Forms 990 as a routine part of their data collection and reporting activities, and encourage the nonprofits they report on to comply with the Form 990 reporting and disclosure requirements;

11. That national, state, and local nonprofit sector advocates of ethical practices and full public disclosure and accountability, together with their public policy counterparts, organize Quality Reporting Collaboratives—by state and by subsector—that involve the accounting, legal, and fund-raising professions, technical assistance providers, academic centers, software suppliers, charity review groups, grantmakers, state charity officials, nonprofit database developers and users, and groups interested in assuring that Forms 990 are reliable and comparable, are prepared consistently, completely, and accurately, and are properly disclosed to the public in a timely fashion; and