How to Use the Long Form 990 for Your Nonprofit
If your nonprofit organization has gross receipts of $200,000 or more or assets of $500,000 or greater, you're required to tackle the full 990 experience. The Form 990 emphasizes accountability and transparency in nonprofit organizations, which reflects growing public scrutiny of nonprofits.
The first page of the form is a summary of the more-detailed information that follows. You have to describe your mission or "most significant activities" in the first question of Part I. In addition to questions about the number of board members, employees, and volunteers, you must present a summary of the detailed financial information requested in the final pages of the report.
Make no mistake, completing this report requires more time and effort than the 990-EZ. The long Form 990 spans 11 pages and is accompanied by 16 separate schedules. Although you won't be required to complete all the schedules, you may need to submit some of them, depending on the circumstances of your organization.
One section of the 990 is a checklist with questions that must be answered "yes" or "no." Usually a "yes" answer triggers a requirement to complete one of the 16 schedules.
The IRS estimates that you need 16 hours to learn about Form 990 and nearly 24 hours to complete the form. This is likely an underestimate. The instruction booklet contains 71 pages of dense reading. Answering the questions and providing the information required on this form should be a team effort.
And, if at all possible, it's a good idea that a member of that team be a qualified accountant. It wouldn't hurt to have an attorney on board, either. If you decide to undertake the task of completing the long form without the assistance of professional help, start early and plan to spend lots of time with the instruction manual.
When you use the long Form 990, you'll be asked for more-detailed financial information than is needed for the 990-EZ. The IRS wants to know more about where you get your money and where you spend it. Also, all your expenses must be allocated to one of three categories: program, management and general, and fundraising costs. You'll also need to provide a detailed balance sheet.
The IRS wants to know what method of accounting you're using and whether you're following certain accounting standards. You'll also be asked whether your financial statements have been audited or reviewed by an independent accountant. If so, the IRS will ask whether your organization has a committee that provides oversight to the preparation of financial statements and audits.
If it looks like your organization will be required to file the full 990 report in the next year or two, start putting in place the accounting system you'll need to collect the appropriate information.
Describe your programs
In the long Form 990, you're asked to describe the program achievements of your three most expensive programs and whether any programs were added or eliminated in the year for which you're making the report. If you did make significant changes in your program offerings, you need to describe them on Schedule O.
The 990 report is a public document and is available for public review, so be sure to take the time to describe your activities and program achievements completely and clearly and without the use of excessive jargon.
Look at management and governance
The sections relating to members of the board (the IRS refers to the board as the "governing body"), board policies, and highly compensated and key employees are detailed and require special attention.
For example, you're asked how many board members are independent. An independent board member can't be compensated as an officer or employee of the organization or receive more than $10,000 as an independent contractor of the organization. He or a member of his family also may not engage in a business transaction with the organization or a key employee that would trigger the requirement to submit Schedule L.
Also, although not required by the IRS code, the 990 asks whether the organization has established written policies for when it's appropriate to get rid of old documents. (Destroying old documents relates to protecting whistle-blowers and guarding against conflicts of interest.)
Finally, in the board sections, the organization must note whether a process exists for setting the compensation of the executive director and other key employees and whether the organization has a gift-acceptance policy. It's recommended that the board review the 990 before it's filed.