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More and more third parties are looking at not-for-profit organizations’ IRS Form 990, so don’t just report; learn how you can use your 990 to tell your organization’s story.

The 990 is an annual informational tax return that is required to be filed by not-for-profit organizations under the IRS Section 501(a).  Many organizations view the 990 as purely an accounting and tax requirement, but because this form is often used by outside third parties to evaluate an organization, it should also be viewed as a marketing tool.  To better appeal to these parties, a wide range of leaders in your organization need to be involved in the preparation of the form to produce a final product that better engages and connects with readers.  The 990 gives organizations the opportunity to explain the organization’s mission, work, and accomplishments.

Related: Read more not-for-profit news here

Your organization may not be leveraging your 990 and should be expanding the team that prepares the 990 from beyond just the outside accounting firm and the internal accounting department to include development, programmatic and other leaders of your organization.  The following are just a few considerations:

Part 1, Question 1 – Briefly describe the organization’s mission or most significant activities:

This section is often the first area that potential funders review.  Your mission is your organization’s chance to communicate concisely and effectively to readers both within your organization and outside exactly what the organization does and how that benefits communal or societal needs.  Thinking about and asking thoughtful questions will help keep your mission statement working for your organization:

• Is it up to date?
• Does it represent the organization’s current goals and objectives?
• How does it compare to the competing not-for-profits in your area?
• Is it making a connection to the appropriate people?
• Is it clearly stated what the organization does?

These types of questions clearly do not involve only thought from an accounting and tax perspective. Organizations should involve Board members, development and marketing personnel, programming staff and the executive director in the annual re-evaluation of the mission as reported on the 990.

Part III - Statement of Program Service Accomplishments (Especially Question 4):

Donors will likely use the mission statement to earmark several not-for-profits for potential funding initially, but what can set your organization apart is specific connections that are made with the program descriptions in this section.

Don’t view this section as a burden and provide vaguely, monotone descriptions of your organization’s programs.

Do view this section as a marketing tool that identifies beneficiaries in a way that connects with current and potential donors, boasts about your programs’ successes and finally describes the prospect of growth.

With so many not-for-profits competing to serve the same types of needs and from the same funding sources, mission statements alone may not always enable your organization to differentiate itself from other competing organizations.  Part III is where that differentiation can be illustrated.

Part VII, Section A - Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors:

The IRS wants to know if certain personnel of the organization are receiving reasonable compensation, which means that an organization needs to know what is considered reasonable and determine if all reportable compensation falls within those guidelines. 

This area can also come under scrutiny from various other third parties such as the press, joint organizations, from current and potential donors and the general public, making it even more important to understand the definition of reasonable compensation in your sector and ensure that all personnel salaries that are required to be disclosed are being reported and that there is a review and approval process for determining compensation for the top management officials and other key employees.

Remember, they are looking even if you are not!

Funders typically ask for a most-recent 990 to be submitted with a donor’s grant application.  Think about the discrepancies and questions that are raised when a person in your development or marketing departments spends time writing an application and attaches the required Form 990, which is prepared by a separate department.  These funders are reading the 990, and if it does not coincide with the message in the application, it raises the question in the minds of the funders: “Why is this organization representing itself in one way to us as a funder and another way to the general public in the Form 990?” Finally, what if, all a potential funder knew about your organization was based on the 990? Would they feel a connection and compelled to reach out to your organization?