Module 6 IRS Form 990 vs GAAP Reports

Module 6 IRS Form 990 vs. GAAP Reports Convery 2013 1

Learning Objectives �Distinguish between the annual Form 990 and the audited annual financial statements �Determine the likely recipients of each one �Identify the typical reasons why a Form 990 and annual auditor report may need to be reconciled (see Part IV-A and B Reconciliation) �Describe the “revised” 2008 Form 990 Convery 2013 2

Form 990 vs. Audited Financial Statements Form 990 Accounting Method Who receives it? Required to be publicly available? Audit Report GAAP (accrual) Cash or Accrual IRS; Public through www. guidestar. org Board; funders; state/ oversight body YES NO Convery 2013 3

Form 990 Reconciliation – Part ? ? � If Form 990 is prepared on a GAAP basis, there won’t be any reconciling items. Convery 2013 4

Typical reasons why Form 990 s and GAAP statements are different • REVENUE – Net unrealized gains on investments – Donated services and use of facilities – Recoveries of prior year grants – Investment expenses • EXPENSES – Donated services and use of facilities – Prior year’s adjustments – Losses reported as change in net assets – Investment expenses – Depreciation expense Convery 2013 5

Which Organizations File a Form 990? � All NPOs that are tax-exempt under IRC Sec. 501, although some may be able to do a postcard Form 990 -N � Private foundations file a Form 990 -PF � Note that churches are not required to file Form 990 s. The separation of church and state in the U. S. means churches do not need to apply for exception from federal taxes. However, the IRS can challenge whether an organization is a church. Convery 2013 6

What Information is Available on a Form 990? Financial and nonfinancial, such as: n n n Balance Sheet, Statement of Revenues and Expenses Details of Revenue Sources and Functional Expenses List of officers and key employees with compensation Largest contributions with donors’ names Lobbying expenses Statements of program services accomplishments Convery 2013 7

Parts and Schedules of Form 990 � Include parts of Revised Form 990 (for 2008 and beyond) Convery 2013 8

Public Disclosure Rules � IRC Sec. 501(c)(3) organizations must provide their last three year’s Form 990, EZ, BL, Form 1065 (but not Form 990 -T), and exempt application immediately to anyone requesting them in person, within 30 days for mail-in/fax/e -mail requests. ◦ IRS Announcement 99 -62 effective June 8, 1999 and IRC Sec. 6104, 6652, 6685. ◦ Copying and postage fees may be assessed ($1 for first page, $. 15 each subsequent page plus actual postage). ◦ Names and addresses of contributors may be omitted (from 990 s, but not 990 -PFs). Convery 2013 9

Penalties for Not Disclosing � Penalties for not meeting the public disclosure rules for Form 990 s are $20 a day up to a maximum of $10, 000 assessed on the person(s) who was responsible (double the old rules). � “Willful” failure results in additional penalties of $4, 000. � Could post forms on the Internet so they are “widely available” if the format exactly replicates the form, e. g. , PDF Convery 2013 10

Where to get Form 990 s � www. guidestar. org � Individual � State � Call NPO’s Web sites “Nonprofit Corporation” office or stop in the NPOs office Convery 2013 11

Other resources • • • Urban Institute www. urban. org National Center for Charitable Statistics (NCCS) www. nccs. urban. gov Independent Sector www. independentsector. org Association of Fundraising Professionals (NSFREE) www. nsfree. org National Council of Nonprofit Associations www. ncna. org IRS www. irs. gov then Charities Convery 2013 12