Form 990 offers a perfect opportunity to communicate the value of your organization to potential donors.
Does it ever end? Filing forms with the federal or state government seems to be a never-ending task. Individuals recently completed their annual filing obligations in April, and calendar yearexempt organizations completed theirs in May. Many of us look at these filings as a task to complete, something to check off so we can move on to more important business.
But this is not really the case for an exempt organization. Form 990 can be viewed as just another act of compliance because some governmental agency requires it…or an organization can use it as an opportunity to communicate to a wide pool of potential donors.
A common concern among donors is wondering whether or not an organization is exempt. In general, an organization applies for exemption with the IRS. A listing of these organizations can be found at irs.gov by clicking the link to charities and then searching. (A simple search of exempt organizations in Peoria resulted in a list of 477 organizations.) When a donor is looking to verify if a donation will qualify as a charitable contribution deduction on their individual tax return, doing online research on this site is a great first step.
A prudent next step is to investigate additional sources of information on the charity, outside of its own website (if it has one), for objective data. What is its mission? Is it well-run? Will donations go toward fulfilling its mission, or to administration and fundraising? Reviewing the organization’s Form 990 may provide some insights regarding these issues.
Filed by not-for-profit organizations, Form 990 (Return of Organizations Exempt from Income Tax) has gone through dramatic changes over the last few years. The new format requires a significant amount of financial and governance information. Many organizations view the time required to accurately comply with the new disclosures as a burden. While no one likes to spend time gathering information for the sole purpose of filling out a form, rarely do we get a chance to market ourselves in the process. But unlike a personal income tax return, an exempt organization return is available to the public. This presents organizations with a unique opportunity to tell their stories; unfortunately, many don’t take advantage of it.
A donor’s access to an organization’s Form 990 is easy to obtain via the Internet on sites such as guidestar.org. This site is easy to use and provides a great opportunity for a donor to gather information. Unfortunately, this access comes at the expense of face-to-face meetings at which an organization can fully present its case to potential donors. If the first impression a donor has of the organization is through the search online, however, Form 990 provides organizations with the opportunity to properly describe their mission and present their effectiveness in the community.
In addition to individual donors, organizations that accumulate funds for distribution to other organizations—the United Way, for example—may also use the Form 990 as one source of information when determining where to allocate funds.
Benchmarking and best practices are available to donors through various websites such as bbb.org/us/Charity-Evaluation, which provide valuable information to both donors and not-for-profit organizations. Organizations should take the opportunity to review these standards and evaluate the observations it may draw from reviewing its Form 990 from a donor’s perspective. For governance issues, pay careful attention to Form 990, Part VI. Organizations will want to compare information presented to the benchmarks and, if anything appears out of line, review the information for accuracy. Organizations may feel it necessary to enhance descriptions of an item to inform donors of any unique circumstances.
Organizations should not consider the annual filing of Form 990 as an act of compliance. Rather, it is a great opportunity to clearly communicate the true value of an organization to potential donors. Donors are becoming more informed and increasingly want to contribute to organizations that deliver on their mission statement. This information is readily available to donors along with access to benchmarks and best practices through the internet. The first page of Form 990 asks an organization to describe their mission. Use this opportunity to excite the donor with key insights regarding the organization’s mission and its value to the community.iBi
