Form 990 Accounting and Reporting Issues (March 2006)

THE URBAN INSTITUTE 2100 M STREET, N.W. / WASHINGTON D.C. 20037

National Center for Charitable Statistics phone: 202-261-5806Center on Nonprofits and Philanthropy fax: 202-833-6231

FORM 990 ACCOUNTING AND REPORTING ISSUES - 2006(COMMENTS WELCOME)

BACKGROUND

As the national repository for research data on the nonprofit sector, the National Center for Charitable Statistics (NCCS) at the Urban Institute works to improve the quality of nonprofit reporting. We host annual meetings with representatives of the IRS, state regulators represented by the National Association of State Charity Officials (NASCO) and nonprofit sector financial professionals and practitioners to address Form 990 accounting and reporting issues. These meetings have been held for the past 15 years.

NCCS maintains an ongoing list of issues and adds ideas suggested by the many national and subsector organizations, nonprofit managers, attorneys, accountants, and other interested individuals who are part of the NCCS Quality Reporting Network (See 2001, 2003, and 2005 issue papers at www.qual990.org).

While suggestions to improve the form and its instructions have been ongoing since its development in the early 1980s, there has been more focus in recent years on using Form 990 to improve charity performance and accountability. Some have focused on the need to resolve differences between Form 990 reporting and audited financial statements, in accordance with generally accepted accounting principles (GAAP).

In 2004, the US Senate Finance Committee began to consider a number of comprehensive reforms on charity oversight and asked INDEPENDENT SECTOR to convene an independent national panel to consider and recommend actions to strengthen good governance, ethical conduct and effective practice of public charities and private foundations. The final report of this Panel on the Nonprofit Sector was delivered to Congress in June 2005 and contained a number of specific recommendations for the Form 990 and Form 990-PF.

Panel recommendations of particular relevance to our Quality Form 990 meeting this year include the following:

o Mandatory electronic filing for all Form 990 series returns;o Annual electronic filing of basic contact and financial information for tax-exempt

organizations that fall under the filing threshold of $25,000 in annual gross receipts;o Revisions to Form 990 series returns to include distinct schedules for information

required of only certain types of organizations; placement of charitable purpose and key program achievements on the first page; improved disclosure of compensation.

http://www.qual990.org/

The Panel also dealt with the problem of differences between the numbers reported on a given organization’s Form 990, prepared according to IRS instructions, and its audited financial statements, prepared according to Generally Accepted Accounting Principles (GAAP). In response to this discussion, NCCS created a Work Group on the GAAP-to-990 differences to develop proposals to better reconcile these differences. The members, nonprofit accounting experts, met in 2005, and the specific issues they addressed are included in this Form 990 issues paper for 2006 (See issue numbers 1, 9, 10, 12, 18, 19, 21, 22 and 23).

We hope you will review the issues in this paper, submit comments, recommendations, and additions to Bill Levis at [email protected] and Linda Lampkin at [email protected] and track our progress on these issues at www.qual990.org.

The 16th Annual Quality Form 990 meeting, hosted by NCCS in conjunction with NASCO and IRS, will be held on March 15, 2006, at the Urban Institute. The issues in this paper will be discussed. If you would like to attend, please send an email to Bill or Linda.

http://www.qual990.org/

mailto:[email protected]


National Center for Charitable Statistics at the Urban Institute Page 12/16/06

FORM 990 ACCOUNTING AND REPORTING ISSUES - 2006

1. Reporting Unrestricted and Restricted Amounts Separately from Total Amounts

The current non-GAAP line 18 – Excess or (deficit) for the year in Part I of Form 990 can be misleading when nonprofits have restricted revenues. First, temporarily and permanently restricted contributions are combined with unrestricted contributions on the Form 990 on line 1d in the year received but not expended, causing line 12 - Total revenues to exceed expenses by that amount. In the year the restricted contributions are received, line 18 looks very high. Then, in subsequent years when the temporarily restricted contributions are expended, they are combined with unrestricted expenses on the Form 990 on line 17, causing expenses to exceed revenues for that year and resulting in a deficit in line 18 when, in fact, there is no operating deficit.

Another related issue is that Part I does not include all four of the mandatory Changes in net assets line items required by GAAP for Statements of Activity. In GAAP reporting, the line “Changes in unrestricted net assets” can represent the equivalent of a for profit business’ operating excess or (deficit) for the year, while the current non-GAAP Form 990 line 18 - Excess or (deficit) for the year does not represent the equivalent operating figure for a nonprofit. While many line items can be misleading when comparing Form 990 to audited financial statements, line 18 is the one most frequently identified as a problem.

Recommendation:Eliminate the current line 18 – Excess or (deficit) for the year and add the four mandatory “Changes in net assets” categories items required by GAAP for Statements of Activity. Specifically:a. Lines 1 through 17 remain unchanged.b. Without revising the intended content and instructions for line 20 – Other changes

in net assets, renumber it to line 18 and move it to follow line 17 – Total expenses.

c. Rename the “Net Asset” section (lines 18 to 21) to the GAAP “Changes in net assets” (new lines 19 to 24) and expand it by three lines to include the four GAAP-required changes in net assets categories now missing from Part I (see proposed new line items 19 through 22 in the illustration below).

d. Renumber line 19 – Net assets at beginning of year to line 23 and renumber line 21 – Net assets at end of year to line 24. There would be no change to the names, definitions and instructions for lines 23 and 24 (formerly lines19 and 21, respectively).


Recommendation for Issue No. 1 – cont’d

Proposed Form 990, Part I 12. Total Revenue [add lines 1 through 11] (**)....................................................................... $ _____________13. Program expenses …………………………………………………................................... $ _____________ 14. Management and general expenses .................................................................................... $_____________15. Fundraising expenses ...................................................................... .................................... $_____________16. Payments to affiliates/services to affiliates ……......................................... ........................ $_____________17 . Total expenses [add lines 13 through 16] (**) .................................................................... $ _____________18. Other changes in net assets …..………………................................................................... $_____________Changes in net assets (***):19. Changes in unrestricted net assets [line 67(B) minus line 67(A)] ………..…................... $____________20. Changes in temporarily restricted net assets [line 68(B) minus line 68(A)] ................... $____________21. Changes in permanently restricted net assets [line 69(B) minus line 69(A)] ………...... $____________22 . Total changes in net assets [add lines 19, 20 and 21 (*)]…….……………….................... $ _____________23. Net assets or fund balances at beginning of year ……................... ..................................... $_____________24 . Net assets at end of year [add lines 22 and 23] ………………………….………………. $____________ (*) Line 22 must equal line 73(B) minus line 73(A) and equal line 12 minus line 17 plus line 18.(**) Total revenues and expenses include $_________ of donated services and/or use of facilities. (***) Organizations that do not follow SFAS 117 are not required to complete lines 19 through 21.

2. Non-compliance with GAAP Functional Cost Allocation Requirements

When program, management and general, and fundraising expenses are not reported in compliance with GAAP, this causes unreliable reporting in both an organization’s Form 990 and its audited financial report.

Recommendations:a. Set up a work group of representatives of state charity officials, accounting

professionals, and other nonprofit accountability stakeholders to develop and disseminate a memorandum on “Functional Expense Allocation Procedures.”

b. Present to IRS and have this memorandum included as a reference in Form 990 instructions; also provide a web link.

3. Clarification of Reporting of Professional Fees

Reporting of professional and other contract service fees on the Form 990 should be in accordance with GAAP functional reporting and government grant reporting requirements. Professional fundraising, accounting, and legal fees are reported on Form 990 in lines 30, 31, and 32, respectively. However, all other professional and contract service fees are lumped in with other expenses in Line 43. Thus, it is almost impossible to determine total professional and contract service fees in any given Form 990 or to develop statistics on these fees. This reporting is also inconsistent with the reporting of all professional and contract service fees in a separate line item that is required for GAAP functional reporting and government grant reporting. Recent research using Form 990 data included a detailed review of Line 43 expenses and found that over one third of these “other expenses” were related to consulting and other contract service fees.


Recommendations:a. Revise a blank line 43 in Part II of the Form 990 to:

“43a – Other consulting and contract service fees”B. Require all professional and other contract service fees to be to be reported in

Lines 30, 31, 32a, and 32b. c. Add new instructions for the new Line 43a as follows1:

“Line 43a – Other Consulting and Contract Service FeesEnter the amount of fees and expenses of professional practitioners, consultants and contract service providers (other than for professional fundraisers, accountants or attorneys, which should be reported on Lines 30, 31, and 32, respectively) who are not employees of the reporting organization and are engaged as independent contractors for specified services on a fee or other contract basis. Examples of such contract service fees include contract payments to independent professional consultants; actuarial fees; data processing services (outside vendor); investment management fees (not commissions on transactions); contracted software development; media production costs; internet, email and website services (outside vendors); contract temporary employee services; and other non-payroll personal service fees.”

4. Review and Approval of Form 990 by Board of Directors

Having Form 990 ask the question “Has the completed Form 990 been presented to and approved by the board of the organization?” would encourage charities to adopt policies of getting board approval of Form 990. This action would be recorded in the board meeting minutes. IRS could also consider whether to require board approval of the Form 990 prior to submission.

Recommendation:Add a question (check yes or no) to Part VI of Form 990: “Has the completed Form 990 been reviewed and approved by the board of the organization?”

5. Making Annual Reports and Audited Financial Statements Available to the Public

The public and other users of Form 990 data currently have no way of knowing if there are additional sources of information available that will be helpful in evaluating the organization.

Recommendation:1 Lines 93f and 93g in Part VII of Form 990 can serve as a model format for specifying the use of Line 43a for “Other consulting and contract service fees.”


Add questions (check yes or no) to the introductory section of the Form 990, asking “Does the organization publish an annual report? Is it made available to the general public? and “Does the organization produce audited financials? Are these made available to the general public?”

6. Separation of Revenue from Contributions by Source

Donors, media, regulators, policymakers, and researchers often want to know more detail about the sources of Contributions, gifts, grants, and similar amounts received (Line 1).

Recommendations:a. Add schedule for Direct and Indirect public support (Lines 1a and 1b) for details

of source of support -- list what was received from Individuals, Other Tax Exempt Organizations (charities or other), Foundations (private and community), and Business (commonly referred to as “corporate giving”).

b. Add schedule for Government contributions (Line 1c) for details of governmental level of source of support -- Federal, State, and/or Local.

7. Addition of Organizational Email Address

In the 2001 version of Form 990, IRS added Website (Line G) for a URL. This has been very helpful but the addition of an organizational e-mail address (not for a specific individual) would help in contacting an organization.

Recommendation:Expand Line G to include both the URL and email address or add a line for an organizational email address.

8. Expansion of Part III to Cover Performance Reporting

The current requirements of Part III – Statement of Program Service Accomplishments call for a statement of the organization’s primary purpose and a description of achievements in each of the four largest programs. The average number of the descriptions is about two. The measures used as examples in the IRS instructions are outputs – clients served, publications issued – not outcomes, typically what is desired in performance reporting. While some government and foundation grantees are required to report on outcomes, the information is not uniform or widely available. If Form 990 is to be used to collect non-financial performance measures, then there must be a lot of thought about how best to implement any changes.


Recommendation:Begin developing approaches for performance reporting for inclusion on Form 990 or in a voluntary supplement to the form.

9. Use of Cash Method of Accounting for Public Support Test

It is difficult for nonprofits that use accrual accounting to accurately calculate Lines 15 to 25 of Form 990 Schedule A Part IV-A (the Public Support Test) because their general ledgers must be translated into a cash system.

Recommendations:a. Test the “Simplified Method” for calculating Lines 15 to 25 of Part IVA of

Schedule A, using prior-year Form 990 line-item entries to calculate most, and for 90 percent of all Form 990 filers, all of the current year’s entries for Column (A), Lines 15 to 25, of Schedule A, Part IV-A.

b. Incorporate the “Simplified Method” in IRS specifications for Form 990 software.c. Consider revising IRS policy and instructions to permit ‘books2’ based accounting

for the public support test.

10. Filing of Consolidated Returns for Affiliated Organizations

Presently, where an organization has a group exemption ruling, the parent must file at least two returns – one for itself and one for the organizations covered by the group exemption. These separate Forms 990 include material inter-company income, expenses, assets, and liabilities that distort the overall operations and financial position of the organization and make it difficult for donors and others to use the information return data. When oversight organizations evaluate charities based solely on statistical analysis of Forms 990, this becomes a serious problem, as the unconsolidated data can lead to highly erroneous conclusions about performance. Further, affiliates and parent organizations often have payments and receipts between entities, which leads to double counting of revenues and expenses. Having a parent and its closely controlled affiliate charities file a combined Form 990 would provide better information to those using the Form 990 information and be less burdensome for the reporting charities.

2 ‘Books’ means the method used by organizations to prepare their year-end general purpose financial statements. Year-end “book-based’ financial statements may or may not be audited; can be based on GAAP or other comprehensive basis of accounting (OCBA) recognized by AICPA (e.g., tax-basis); and can be full accrual, modified accrual or cash basis. Form 990 instructions already require organizations to prepare Forms 990 according to their ‘books and records’ [see “Accounting methods” in Form 990 Instruction G] – except where there are differences with specific Form 990 instructions (‘unless otherwise instructed’/instruction G).


Recommendations:a. Require filing a combined Form 990 for parent organization and all affiliates that

are subject to its supervision and control, and that meet the current criteria for filing a group return.

b. Develop a supplemental schedule providing a breakdown by affiliate, especially for use in reporting to state charity offices.

11. Clarify and Restructure Form 990 Sections on Compensation

It is often difficult to use the information reported in List of Officers, Directors, Trustees, and Key Employees – Part V for a variety of reasons, including:

Determining which listed person is the chief executive Title and average hours worked are combined in same cell in the form’s table Use of an attachment of a separate list by many filers No responses in many of the columns

The compensation information reported on Schedule A Compensation of the Five Highest Paid Employees Other than Officer, Directors, and Trustees – Part I suffers from the same reporting problems.

Recommendation:Convene a workgroup of nonprofit practitioners, researchers, and regulators to develop detailed recommendations for consideration by IRS and other stakeholders.

12. GAAP Classification of Support from Governmental Units as Exchange Transactions

Under GAAP and Form 990 instructions, the costs of bidding on government grants and contracts that are classified as contributions (i.e., not as exchange transactions) are treated as fundraising expense while the costs of bidding on government grants and contracts that are not classified as exchange transactions are treated as management & general (M & G) expenses. However, because IRS may classify some GAAP exchange transactions as contributions (i.e., “support from governmental units”) that are reported in line 1c – Government grants equivalent to contributions, the related bidding costs must be reported as fundraising expense. This results in a difference in the M&G and fundraising figures between the Form 990 and the audit leading to different calculation for the fundraising ratios for an organization.

Recommendations:a. Determine the differences, if any, between GAAP (see relevant AICPA literature)

and IRS (see Form 990 instructions and IRS Revenue Ruling 83-153 for Section 170) definitions and classifications of exchange transactions.


b. If IRS and GAAP differ, have Part I prepared according to GAAP and address the issue in a supplemental schedule connected with public support test in Schedule A, Part IV.

13. Limitation on Use of Other Expenses (Line 43)

An average of 25 percent of all expenses reported in Form 990 are recorded as Other expenses not covered above -- Line 43 of Part II. Some Form 990 filers do not report their expenses in the relevant categories listed in Part II (lines 22-42) but group them on Line 43 and add an attachment.

Recommendations:a. Add a footnote to Line 43, Part II, and clarify and emphasize in the instructions

that Lines 22-42 are to be used for all applicable object expenses. b. Require an explanation if Line 43 exceeds some percentage of Total expenses --

Line 44.c. Improve compliance by IRS rejection of returns that leave the items on Part II

blank.

14. Improved Diagnostics in Form 990 Preparation Software

It would greatly improve the quality of Form 990 reporting if software developers include comprehensive business rules and diagnostics in their Form 990 programming. The business rules developed for efiling serve as a starting point.

Recommendations:Develop a comprehensive set of business rules and diagnostics that would be required in Form 990 preparation software, in addition to the current efiling business rules. These might include, for example, having the preparer review the return if: Total of Part V compensation is less than Part II, line 25, Compensation for key

employees Part II, line 43, Other Expenses exceeds a limit of a given percentage of total

expenses (perhaps 10%); an explicit override would be required Negative amounts reported in expense line items in Part 1 that are deducted from

gross revenue amounts Contributions are reported in Part I, line 1a, Direct public support, and no

fundraising expenses are reported in line 15; an explicit override would be required.

If functional expenses for compensation are reported in lines 25 or 26 of Part II, then an entry for Line 90b, Number of employees, is required.


15. Reporting of Lobbying Expenditures

More information should be provided to preparers on the 501(h) election (Schedule A, Part III, Part VI-A, Part VI-B). Many organizations do not know how to decide if they should take the 501(h) election and IRS documents do not provide enough information.

Recommendations:a. Add instructions that state it is acceptable to take the election even if the

organization has no plans to lobby in the coming year.b. Provide referrals to sources of additional information on which to base the

decision of whether to take the election in the Form 990 instructions.

16. Reporting of Lobbying Activities

Current reporting of lobbying activities on Schedule A, Part III, Part VI-A, and Part VI-B needs to be improved. Many organizations check “Yes” on Schedule A, Part III, Line 1 but may leave the line for total expenses blank. Often the total of lobbying expenditures reported on Line 38 (grassroots expenditures in Line 36 plus the direct lobbying expenditures in Line 37) does not equal the amount reported in Part III under Line 1. Because of the lack of detail on current lobbying activities, it is difficult to make specific recommendations.

Recommendations:a. Develop better information on current lobbying activities.b. Provide referrals to sources of additional information in the Form 990

instructions.

17. Reporting for Organizations Below the Filing Threshold

The IRS Business Master File (BMF) is full of defunct organizations and bad addresses. One reason is because once organizations are listed on the BMF, they are not required to file information with the IRS unless they are above the filing threshold of $25,000 in annual gross receipts. The Joint Committee on Taxation recommended that filings be required of smaller nonprofits and the Independent Sector Panel supported an annual notice.

Recommendation:Create an annual electronic reporting form for tax-exempt organizations currently below the filing threshold. The reporting requirements would be: EIN, public name, mailing address, telephone number, email and URL (if any), a certification that gross receipts and total assets are below the statutory limits for filing Form 990-EZ, and the signature of an officer.



18. Reporting on Special Events in Part I

The current IRS requirements for reporting the exchange portion of “quid pro quo contributions” related to special events in line 9 of Part I, Form 990 are consistent with FASB SFAS No. 116 requirement for distinguishing between contributions and exchange transactions (see Paragraphs 49 to 51). However, both Form 990 and GAAP requirements for reporting special events are confusing and difficult to follow. In fact, GAAP accounting and reporting requirements -- alone -- are confusing and difficult for small nonprofits and local affiliates of national organizations that sponsor a number of events all during the year.

Form 990 establishes two categories of net revenue: (1) contributed income (reported in line 1a – Direct public support), which is gross revenue less direct benefit value (i.e., the GAAP exchange portion of gross revenue), and (2) earned revenue, which is direct benefit value less direct benefit cost. In Form 990, direct benefit value is reported in line 9a – “Gross revenue,” direct benefit cost is reported in line 9b – “direct expenses other than fundraising expenses” and earned revenue is reported in line 9c – “Net income.” The use of the term “gross revenue” to identify the exchange portion of gross special event revenue in line 9a is not consistent with GAAP, which requires dividing gross revenue into contribution revenue and exchange revenue.

Recommendation:Since IRS accounting and reporting requirements for “quid pro quo contributions” and special event revenues are already consistent with GAAP, IRS will not be asked to revise these requirements. However, clarification of the instructions would be useful. a. The title in line 9a needs to be revised from “Gross revenue” to “Exchange

revenue.”b. Other clarifications need to be developed.

19 - Reporting of Sales and Costs of Program-Related Materials and Inventory

Under GAAP, gross sales of program-related materials and inventory may be reported as revenue and the costs reported as program expense3. However, Form 990 does not distinguish between program-related and unrelated sales of materials and inventory and appears to require reporting both categories of sales together, net of “cost of goods sold” in line 10c – “Gross profit or (loss) from sales of inventory.” While Form 990 method is permitted by GAAP, the way these revenues and related expenses are reported in Form 990 can have a negative affect on financial ratios that use line 13 - Program expense as part of the calculation.

3 For example, the “Black Book” Standards of Accounting and Financial Reporting for Voluntary Health and Welfare Organizations states “sales of program-related publications and materials…. are reported gross. Related costs and expenses should be reported in the appropriate program expense category” (page 59).


If the original intent of IRS was to use line 10 to report sales that might be subject to UBIT, is this still needed now that Part VII addresses UBIT issues? And, are lines 9 and 10 needed for UBIT purposes? In any case, program-related sales should not be included in line 10. Rather, these should be reported on Form 990 according to the way the organization keeps its books.

Recommendation:Allow Form 990 sales and related expenses to be reported in the existing Form 990 line items in the same manner as they are shown on the audited financial statements or on the ‘books.’

20. Reporting Gifts in-kind

Form 990 divides gifts in-kind into two types: (a) non-cash donations of tangible items such as land, buildings, equipment, other property, and materials that are included as contributed income in Line 1d and (b) donated services and use of facilities that cannot be reported as contributed income. This distinction is often incorrectly made by filers, and donations of tangible items are excluded along with services.

If donated services represent a substantial part of an organization’s revenues and thus are not included on Form 990, then a calculation of the organization’s financial ratios will look very different from that of an organization with no donated services and may mislead users of the ratios. In addition, excluding non-cash tangible items received can also affect financial ratios.

Recommendations:a. Develop clarifications for Form 990 instructions on gifts in-kind.b. Add a footnote to Part I explaining that donated services and use of facilities are

not included in line 1.

21 – Reviewing Form 990 Requirements for Relevance to Today’s Reporting Standards

An update of the functional expense categories in Part II is needed. For example, one expense often included under “Other” on Form 990 is insurance, which needs a separate line item, especially board liability insurance. Form 990 instructions should clarify that certain insurance expenses need to be put in existing categories (for example, medical and dental insurance in Other employee benefits, and property insurance under Occupancy). The item “Telephone” should be renamed “Telephone/telecommunications” and the instructions broadened to include internet services such as email and websites. This title change was made in the last edition of the Black Book.


To facilitate matching numbers and to minimize the differences in Part IV – Balance sheets and Statements of Position in audited financial statements, it would be useful to reconsider the relevance of certain balance sheet items for today’s financial reporting standards. For example, is a breakdown of cash into Lines 45 – Cash in non-interest bearing accounts and Line 46 – Temporary cash investments now important? This examination for relevancy should be extended to all the Form 990 financial line items, especially to the functional expense categories in Part II.

Recommendations:a. Ask IRS to review Part II and revise the object expense categories to be relevant

to today’s financial reporting standards. b. Ask IRS to review Part IV and revise the balance sheet line items to be relevant to

today’s financial reporting standards. c. Expand this to include updating all other Form 990 financial line items for

relevancy.d. Reducing the number of line items in general would also be useful.

22. Providing a Procedure and Supplemental Report that Reconciles Forms 990 with Audited Financial Statements

A draft reconciliation procedure has been developed for the existing Form 990 and audits, using GAAP-basis summary categories. This 990-to-Audit Reconciliation Report procedure needs to be totally independent of Form 990, as a massive expansion of Parts IV-A and IV-B would be required and that is not feasible. This is an elaborate, cumbersome and burdensome procedure, with use limited to financial analysts who work with Forms 990 and audits together and need to know if they reconcile. However, nonprofits and their auditors could find it useful to have 990-to-Audit Reconciliation Reports available for internal review and evaluation and for ready explanations of differences between their Form 990s and audits.

Recommendation:NCCS devise and make available on www.qual990.org a procedure for reconciling Forms 990 with audited financial statements.

23. Aligning and Mapping GAAP’s “Other Accounting Literature” with Form 990 The Senate Finance Committee Discussion Draft (2004) stated that “there are no common standards for filing Form 990,” and “IRS must promulgate standards for filing Form 990. Because there are no standards for filing a Form 990, similarly situated charities can have different Form 990s.” First, FASB and AICPA authoritative accounting literature for not-for-profit organization do provide extensive “common standards [most of which is relevant] for filing Form 990.”


Second, Form 990 and its instructions are a comprehensive set of “common standards for filing Form 990.” And, in the FASB SAS No. 69 hierarchy of authoritative GAAP accounting literature, Form 990 instructions can be considered “other accounting literature,” except where they conflict with the higher level GAAP literature of FASB and AICPA.

Third, extensive “other accounting literature” for nonprofits is also distributed by sub-sector groups such as those for hospitals, colleges and universities, museums, voluntary health and welfare organizations and by publishers such as Jossey Bass and Wiley.

However, the charts of accounts and elements of accounting that are illustrated in “other accounting literature” for nonprofit organizations are not aligned with and/or mapped to corresponding financial line items and categories in Form 990. When nonprofits and their accountants use one or more of the available “other accounting literature” as resources for designing or revising their accounting systems, the year-end accounting data from those systems are usually not compatible with the financial data requirements of Form 990.

The quality of Forms 990 financial data would be improved substantially if the sub-sector and commercial distributors of “other accounting literature” were to prepare and distribute supplements that mapped the financial elements used in their publications to Form 990 line items and categories. And, the situation would be improved even more if, when they revised their publications, they aligned the financial elements they use in their illustrations with Form 990 line items and categories.

Recommendation:a. Conduct research (1) to identify all the FASB/AICPA recognized “other

accounting literature” applicable to various nonprofit sub-sectors or kinds of nonprofit organizations and (2) to qualify their alignment with and mapping to Form 990.

b. Enlist the cooperation of the sub-sector and commercial distributors of the “other accounting literature” in supplementing and/or revising their publications to align and map the financial elements they use in their illustrations with Form 990 line items and categories.

Comments, questions, and additions are welcome.Please email to [email protected] and [email protected]



Documents

Form 990 Accounting and Reporting Issues (March 2006)