By: Erik Luoma, CPA
As an Association Executive or Board Member, the task of reviewing your CPA prepared Form 990 can be a stressful one. However, with a general plan of attack and the right tools, you can check this item off your list with confidence every year.
Step 1: Get a Copy of Last Year’s Filed 990
This is your starting point. If you can’t find a copy lying around the office, go to Guidestar.org and download a copy. GuideStar collects and disseminates information on all U.S. registered nonprofits. This is an excellent resource which we will discuss further in future articles.
Step 2: Download the Instructions
What? The instructions? I paid a CPA to read the instructions! OK calm down…we just want to have these handy if we have a question about something on the form that we don’t understand! You can download these from the IRS Website at https://www.irs.gov/pub/irs-pdf/i990.pdf. (Quick tip – refer to the pdf version and use the find function to keyword search the instructions)
Step 3: Compare the Current Year’s 990 with Last Year’s Filed 990
Seems pretty simple right! It is. You would be surprised at how many times I have seen simple mistakes that could have been prevented by simply comparing the current year versus the prior year. Make sure you compare line by line and ask your CPA if you do not understand why something has changed.
Step 4: Check the numbers
I realize this is easier said than done. You will need to compare the balances against the trial balance that you sent to your CPA or against your Audited Financial Statements for the current year.
Pay close attention to the major figures such as net assets, total assets, total liabilities, total revenue, and total expenses. Pay close attention to the categories of revenues and expenses and assess whether these categories are correct given what you know about your Association’s transaction history over the past year.
Step 5: Read it
READ THE ENTIRE 990! Read ALL the questions.
- Are there any questions that are not answered correctly? Unfortunately, the 990 has several pages of tedious hard to understand questions. You need to make it a point to try and understand what these questions are asking as these will alert you to other parts of the form that need to be filled out.
- Read the mission statement. Does it make sense?
- Read all the Board Members names. Are they spelled correctly? Are they the correct board members? Are they even listed at all?
- Read all Schedule O explanations (Schedule O is used for additional explanations relating to various parts of the form). Do they make sense? Are there any misspellings?
Step 6: Research
Googling the questions or schedules on the form which are confusing is hands down the quickest way to find answers. For example if a question references an Internal Revenue Code section, just type that section number into Google and click on the first few hits. This will enable you to quickly determine if this applies to you and if you need to dig a little deeper for more understanding.
Use Google as a starting point for your research and then dig down to the form instructions or specific Internal Revenue Code sections and regulations that you have determined are relevant to your specific issue. Again, you are mostly just trying to determine if a question or schedule applies to your Association.
Don’t forget you can always contact your CPA and ask them to explain anything you don’t understand.
These are just a few basic things that you can do to make sure that you have reviewed your 990 thoroughly. The good news is once you’ve done your research, next year’s review will be that much faster!