Who's Reviewing Your Form 990?

Thoughtware Article Published: Oct 01, 2017
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Health care is highly regulated and leaders responsible for not-for-profit governance have a multitude of areas clamoring for their attention. However, there’s one form far more critical and visible than many organizations realize—Form 990.

While some may not realize Form 990 is a public document, the general public and media have become more aware of the form’s accessibility. Readers often quickly gravitate to the highly compensated employees and vendors—it’s not uncommon to see not-for-profit salary comparisons in the local newspaper.

Part VI of Form 990 asks if the organization has provided a complete copy of Form 990 to all members of the governing body before filing the form. An equally important follow-up question asks the organization to describe the process used to review Form 990. While there’s no requirement to answer “yes” to the first question, doing so generally is considered a best practice. When rating charities, watchdog groups like Charity Navigator use this question for assigning accountability and transparency ratings.

Imagine you’re a board member of an organization where a fraud or embezzlement occurs. When this story hits the media, the first place they’ll look for information about the organization will be the Form 990. What will the story be when the media reviews the Form 990 in detail and determines there were obvious concerns that should’ve been apparent to management and the board? The issue is further complicated if the organization didn’t provide a copy of Form 990 to the board. The attorney general likely will be interested in reviewing the organization’s Form 990 after reading this story.

Your Form 990 also may be a tool for local authorities and plaintiffs’ attorneys. Local taxing authorities are struggling to fund public education and other programs and seeking additional tax dollars. One focus area is the money not-for-profit organizations take in and who their consumers are. County assessors are using Form 990 information to challenge property tax exemptions.

Similarly, plaintiffs’ attorneys have been known to use these public documents against providers in court. Having everything accurately grouped, disclosed and accounted for is critically important when your organization is examined under the microscope of the court system.

Demonstrating social accountability and taking credit for your community involvement on your Form 990 are imperative. Selling yourself short could leave your organization exposed to these unnecessary risks.

Contact your BKD advisor if you have questions about whether you’re taking full credit for your organization’s social accountability or how your Form 990 is being prepared.

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