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About Form 990
The Value of Form 990
Why Should We Care about Form 990?
Forms 990 are the most commonly used data source about not-for-profit organizations.
The Form 990 is the information return that most 501(c)(3) charities file annually with the IRS. (Organizations with revenues of less than $25,000 or are religious organizations are exempt.) Although audits provide more comprehensive financial information, few not-for-profit organizations conduct or are required to conduct audits. Consequently, the Form 990 is the primary source of information about the nonprofit sector.
With the new IRS regulations, anyone can request a copy of an organization's Form 990.
In the past, a nonprofit only had to disclose its Form 990 if a request was made in person at the nonprofit's offices, and was not even required to make a copy. The new regulations require that a 501(c) organization make copies of its three most recent Forms 990 for anyone who requests them, whether in person or by mail, fax or e-mail. Anyone can also request a copy of a nonprofit organizations's Form 1023, the IRS form used to apply for tax-exempt status.
The Internet is making the Form 990 more widely available than ever before.
Since July 1998, Forms 990 received by the IRS have been scanned. The images are being posted on a website jointly sponsored by the National Center for Charitable Statistics and Philanthropy Research, Inc. (PRI). There will be over 200,000 forms on the website by the end of 1999. With just a click of the button, potential donors, reporters, and others can have access to the Form 990 without an organization ever knowing.
Several studies of 990 returns have shown that a sizable portion contains errors and omissions.
Many Forms 990 not only have mathematical errors, but also simple mistakes, as well as omissions and information that has been put in the wrong section. Donors, policy makers, and others will be using the Form 990 to make decisions. Inaccurate or just plain wrong information diminishes the credibility of nonprofit organizations across the country and the level of public confidence and trust.
The need for better quality information about the not-for-profit sector is greater today than ever before.
The nonprofit sector has grown tremendously in the past 20 years and accounts for nearly 12% of the American economy and employs nearly 10% of the American workforce. At the same time, the needs of the American population have also grown. Despite the strong economy, some nonprofits are struggling. Information on the sector—its activities, successes, and problem areas—is necessary to increase the understanding of nonprofit needs.
Why is an Accurate Form 990 Important?
Compliance—Quite simply, filing accurate and complete Forms 990 with the IRS and state charity officials is the law. As stewards of the public's money, nonprofits have a responsibility to report on their activities, including their finances. Yet many nonprofits, including their executives, board members, and accountants, pay scant attention to the form. This lack of attention can lead to incomplete and inaccurate data, as well as fines and other legal action.
Public Accountability—While filing an accurate and timely Form 990 is the law, it is also in the self-interest of all nonprofits to do so. Public trust and confidence are the foundations of the nonprofit sector. To keep that trust, nonprofits must show that they are accountable and responsible. If it is in the public's best interest to have the Form 990 information disclosed, then it is clearly in the sector's best interests as well.
Primary Source of Data—All sorts of people will be using the Form 990 for research, especially now that the new regulations make it much more accessible. In a recent study, 2 out of 3 grant makers asked for the Form 990, and one out of three said that the data influenced their final decision. Researchers will be using the 990 information to get a handle on the ever-growing dimensions of the sector (NCCS and PRI are leading the way in scanning and digitizing Form 990 data, creating the most comprehensive database ever). And while many donors may not be familiar with the Form 990 yet, regulators and other groups will undoubtedly begin suggesting that donors ask for copies of the Form to help in their giving decisions. Nonprofits should prepare now!
Policy Making—As the sector grows, so does its prominence, which means that legislators and other government officials will pay more attention. Already, certain states have debated proposed legislation to change the tax-exempt status of certain nonprofits, or the granting of tax credits to donors for contributions to certain charities. Accurate data will help policy makers develop the most effective ways of helping the
sector, and allow nonprofits to better defend themselves against ill-advised legislative initiatives.
Public Relations—Completing the Form 990 is usually considered a bothersome chore by most organizations. However, nonprofits need to change the way they view the Form and see it as an opportunity to present themselves and their programs in the most accurate and positive way. The new disclosure regulations will undoubtedly allow the media to develop more stories and studies of nonprofits. Presented in the right way, Form 990 information can help inform the media about issues such as executive salaries, fund-raising costs and others.
 Comments and questions may be
sent via email to QRLevis@aol.com.
www.qual990.org is maintained and hosted by the Urban Institute.
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