Are you adequately using your most public marketing tool?

When the IRS Form 990 became available to the public via the Internet via (www.guidestar.org) they were immediately transformed from basic tax returns into marketing pieces.  The added significance may make 990's more time-consuming to complete, but it also provides an additional way to demonstrate your accomplishments and responsible stewardship of public dollars.

There are three sections of IRS Form 990 that nonprofit organizations commonly misreport:

• Part II: Statement of Functional Expenses
  The section requires you to report expenses either as Program, Administrative or Fundraising expenses. Typically, administrative and fundraising account for up to 30 per cent of total expenses, yet many organizations under-report fundraising because of the fear they'll be judged negatively for spending money on it, especially if a campaign was unsuccessful.  On the contrary, the number one complaint of the media, the watchdog groups and the state regulators is that organizations misrepresent fundraising costs.  These include:
  
  
  • Personnel expenses based on the percentage of time spent fundraising or overseeing fundraising activities
    
    
  • Printing, postage, phone and computers used for fundraising activities
    
    
  • Fees paid to outside fundraising consultants
    
    
  • The gross (not net) amount of contributions raised by any fundraising consultants
    
    
• Part III: Program Service Accomplishments
  Here’s your opportunity to describe in detail your accomplishments, yet many organizations simply list a program name and dollar amount. Be sure to describe what you did, as well as detailed program outcomes.
  
  
• Schedule A, Part III: Statements About Transactions
  This section requires you to identify and explain any insider transactions. Many organizations fail to do this. The following acts, between the organization and an employee or board member, are considered insider transactions and must be reported:
  
  
  • Sale, exchange or lease of property
    
    
  • Lending money of extension of credit
    
    
  • Furnishing goods, services or facilities at no cost
    
    
  • Compensation or reimbursement of expenses greater than $1,000
    
    
  • Transferring any part of income or assets
    

If you have questions about completing these or other sections of your Form 990, feel free to contact one of our nonprofit experts. To learn more about how we can help improve your financial reporting and performance, visit our CPA Services section.