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Nonprofits need to flex the power of Form 990

By January 28, 2021Newsletter

Each year, tax-exempt organizations that take in at least $50,000 a year have to file a Form 990. The 12-part document is equivalent to a tax return and gives the IRS a look at an organization’s finances, accomplishments, and structure.

But unlike other clerical documents used by the IRS, Form 990 is an opportunity to tell an organization’s story to potential donors and grantors — it’s a report that’s equal parts clerical tool and marketing opportunity and can be a mechanism for attracting new funding.

What’s so special about Form 990?

Unlike most other tax returns, Form 990 is public.

Organizations are required to disclose copies upon request for three years after the form is due. Many choose to post their Form 990 on their organization’s website, or with the nonprofit information website – GuideStar.org – to fulfill this requirement.

Because Form 990 provides the public with an overview of an organization’s services and accomplishments, potential donors and grantors can use the form to gain a better understanding of its impact and reach before deciding to move forward with funding.

“Because Form 990 must be made publicly available, organizations can give prospective donors more specifics about the activities and goals of the organization simply by answering some of its questions more fully and with particular attention to the impact the form may have on readers other than the IRS,” writes Jean Gordom Carter, attorney and CPA, for the Journal of Accountancy.

How do people use Form 990?

Donors use Form 990s in various ways. For example, foundation board members might assess a charity’s Form 990 when deliberating their grant request, while an individual donor might skim through Form 990s on GuideStar when determining where to donate extra cash.

The form is a one-stop-shop for funders to learn all they need to know about an organization before deciding to donate. To that end, it’s crucial that the person(s) filling out the form write with donors and grantors in mind and use the form’s narrative sections to show off the organization’s success and strengthen mission and impact statements.

“The [Form] 990 gives me a snapshot of the financial health, governance, and operations of our applicants in one document,” says Debra Faulk, vice president of Community Affairs at Wells Fargo, who reviews current- and prior-year Forms 990 in her evaluation of not-for-profit grant applications. “I can’t emphasize enough how important it is for nonprofits to sell themselves in the mission and program descriptions required on Form 990.”

What do donors want to know before donating?

According to Guidestar, donors want a holistic view of an organization’s performance before donating. Information of particular value includes:

  • Financial information; including how money is spent throughout the organization
  • Impact; what program services were performed, performance metrics,
  • Legitimacy; how long the organization has existed, how successful they are in meeting goals

Form 990 allows organizations the opportunity to address these questions and shape public perception of their organization and cause.

What are the best practices for filling out Form 990?

There are four “narrative sections” of Form 990 that communicate an organization’s mission and impact.

  • Part I, “Summary,” (mission or most significant activities).
  • Part III, “Statement of Program Service ­Accomplishments,” (mission statement).
  • Part III, “Statement of Program Service ­Accomplishments,” (description of program service accomplishments).
  • Schedule O, Supplemental Information to Form 990 or 990-EZ (continuation of the narrative sections as well as explanations of answers in other sections).

Maureen Butler, CPA, Ph.D., advises organizations to “put careful thought into writing these narratives,” and be specific, clear, and convincing when addressing each section.

According to Butler, organizations and their CPAs should consider two fundamental questions when writing the narrative portions of Form 990:

  • Who is the audience?
  • What are the most powerful marketing points that will resonate with the audience?

Answering these questions can help organizations zero-in on their most compelling or valuable features and form a strategy for filling out Form 990.

Each section of the form should seek to answer or clarify any questions that a reader might have through qualitative and quantitative information.

“With an increased number of not-for-profits competing for the same pool of donors, each not-for-profit needs to be strategic in communicating its mission, marketing, and fundraising,” Butler says.


About the Author

Lia Tabackman is a freelance journalist, copywriter, and social media strategist based in Richmond, Virginia. Her writing has appeared in the Washington Post, CBS 6 News, the Los Angeles Times, and Arlington Magazine, among others.

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