Five oh one see three.
Sounds like a funny string of words doesn’t it, almost a nonsensical line from a song? But to those working in the nonprofit sector, this string of funny little words is the important designation granted by the IRS telling the world that the organization can offer tax deductibility for donations made to the cause.
501c(3) is how we usually see it written, although it’s often spoken – as a point of pride or in place of the words “nonprofit organization.” It’s interesting, isn’t it, how a code itself can be used as code – referred to widely in public – for a type of organization?
Certainly it’s an important designation and something anyone volunteering for, donating to or serving on the board of a nonprofit organization should know when they get involved. Does the organization have its 501c(3)?
For board members especially, another important question is whether the organization is on top of accurately filling out and filing its Form 990 (the nonprofit version of a tax return). The Form 990 might sound like something better left to the executive director and the CFO, but by law, all board members must read the annual filing and be aware of its contents before it is submitted. In fact, this very question is asked in the form itself.
Over the past several years as nonprofits have adjusted to the revised form, executive leadership has been working hard to ensure that board members understand that not only reading, but truly understanding what is in the 990, is an important duty.
In addition to be able to affirm that the data is correct (data for which board members are held accountable), a thorough review of the form helps board members get a sense of how the organization is coming across on paper – and a very specific, format-driven document at that. For the 990 is far more than a tax filing. Instead, it is almost like a complex puzzle made up of pieces of data that provide a series of clues to the organization’s mission, health, leadership and future (check out this great resource that steps you through the top 10 things you should be able to tell about an organization from the form).
The 990 is all of this? Really? Really.
I’ve always been taught that there’s a story behind every number, and the same is true with a 990. Simply looking at what the numbers are is one thing. But understanding what those numbers mean is another. In addition, the anecdotal information provided in the many appendices to the document should give you real color. Done well and with an attention to detail, these pieces all add up to a completed puzzle. They tell a story of mission, give a window to how the cause is funded, convey who volunteers time and effort to lead, and what it costs to deliver on the expectations of both donors and customers.
Yes, this is ALL in the 990. So the next time you are asked to either help provide information for a 990 or find yourself reviewing and approving a 990 – giving it a board member’s nod, use it as an opportunity to ask if the document is really telling the best story it can tell. And if it isn’t, ask yourself what conditions would need to be different to be able to tell that story.
Questions like this really matter – to the nonprofit leader working to differentiate the organization from its peers, to donors who care about how money is spent, to volunteers and board members who are aligning their personal brands with the cause.
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