Quality Reporting on Form 990

1
Quality Reporting on Form 990

• 15th Annual NCCS/NASCO/IRS Meeting
• April 2005
• The Urban Institute

2
Overview

• NCCS sponsorship of IRS/state regulators (NASCO)
  meetings
• Add input from nonprofit accountants and
  practitioners
• Senate Finance Committee proposals and
  Independent Sector Panel recommendations this year

3
Sources of Quality Problems

• Late in filing
• Incomplete or missing information
• Inconsistent data
• Hard to interpret
• Why ?
• Poor instructions?
• Wrong questions?
• Lack of expertise?
• Bad guys?

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The Big Issues

• Information for the public vs. information for
  the regulators
• Electronic vs. paper environment
• Relationship between Form 990 and audited
  financial statements

8
What Happens Next?

• Expect legislation
• Expect more consequences for noncompliance
• Expect efiling
• Expect change!

9
Improving Quality

• Most common errors
• No Schedule A or B
• Incorrect form (990 vs 990EZ)
• Incomplete Part II
• Incorrect EIN and/or Tax Period
• No signature
• Incorrect IRC subsection
• Endless hours and expense to fix
• Few consequences if errors made

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What Can Be Done Now

• 1 -- File on time
• 2 Use software
• 3 Efile
• 4 Provide efiled Form 990 data to state
  regulators

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File Form 990 on Time

• About 70 percent of all Forms 990 received more
  than 5.5 months after the end of fiscal year
• With year ending 12/31, about 75 percent file
  late
• Conclusion few consequences for late filing, so
  why not?

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Use Good Software

• Cant have blanks or omitted attachments
• No arithmetic errors
• Easy access to relevant IRS instructions and
  tips from experts
• NCCS 990Online (http//efile.form990.org)

13
Efile Now

• Cant file with wrong name or EIN
• No omissions
• Must have signature
• All this, and a receipt from IRS!
• Mandatory for large charities in 2006

14
Enable State Regulators

• States spend half their budgets collecting
  information few resources left to regulate
• Support IRS fed-state retrieval system for efiled
  data
• Technical assistance to states so they can use
  the data

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Form 990 Issues

• Compliance
• Functional cost allocations -- 2
• Compensation -- 11
• Income from government -- 12
• Other expenses -- 13
• Poor preparation -- 14
• Lobbying expenditures/reporting -- 15 and 16
• Actions?

16
Form 990 Issues

• Better portrait of finances
• Restricted vs unrestricted revenues-- 1
• Reporting professional fees -- 3
• Annual reports/audits available -- 5
• Consolidated returns -- 10
• Actions?

17
Form 990 Issues

• More accountability
• Review/approval of Form 990 by Board -- 5
• Performance reporting -- 8
• Annual reporting for charities below filing
  threshold -- 17
• Actions?

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What To Do Now

• 1 -- File on time (or as soon as that audit is
  done)
• 2 Use good software
• 3 Efile
• 4 Support sending efiled data to state
  regulators
• And join the discussion!