Page Two of Your Form 990, Making the Most of Part III
posted Apr 29, 2016 by Sandy Ross, CPA, CFE in the Mission Matters Blog
Page two of the Form 990 or Part III, Statement of Accomplishments, provides an opportunity to inform the reader more about your organization. The IRS no longer issues letters confirming the tax-exempt status for exempt organizations that report new services or significant changes so this section is not only a good marketing opportunity but an area where the organization confirms its exempt purpose.
Form 990, Page 2, Part III Statement of Program Accomplishments:
Check if Schedule O contains a response or note to any line in this Part III. The responses to Part III are areas the IRS and the public are focused on when evaluating the organization’s exempt purpose. Schedule O will not appear until the 15th or so page of the Form 990. I recommend short and concise responses to the questions that will fit in the space provided on page two. Like many things, if you do not grab the readers/prospective donors’ attention, they will not continue onto the next page, never mind 15 pages into an informational return.
Question 1: Briefly describe the organization’s mission. If you recall from blog one in this series, “Examining Page One of the Form 990”, there was also a space on page one for the organization’s mission. I review many Form 990s where organizations just repeat the same information from page one onto page two. The IRS clearly considers the mission VERY important so take these two opportunities to tell a more complete story of your organization’s mission and include different information on page two.
Question 2: Did the organization undertake any significant program services during the year which were not listed on the prior Form 990 or 990-EZ? The IRS does not provide any specific guidance on whether something new is significant or what information should be included in the description on Schedule O. Therefore you have a great deal of flexibility when answering this question. Remember, the Form 990 is also a public relations document and an opportunity to tell your story in a very public way. If you believe it is in your best interest to talk about a new program, regardless of the size, you should do so here.
Question 3: Did the organization cease conducting, or make significant changes to how it conducts, any program services? The IRS wants to know when your organization is no longer performing a service that it has in the past, however, the IRS does not describe how to interpret “significant”. As a general guideline, a program that accounted for 10% or more of expenditures of an organization is a significant program, and the answer should be “yes”. Provide brief description of the change in program services on Schedule O.
Question 4: Describe the organization's program service accomplishments for each of its three largest program services, as measured by expenses. How do you know if a program is in your top three? Select the three programs with the highest expenses excluding donated services or materials, equipment or facilities. Once you have selected the top three programs, you should briefly describe the program service provided and the accomplishments achieved during the year. Accomplishments should be specific measurements such as number of clients served, days of care provided, number of sessions or events held or the number of publications issued, etc. If exact figures are not available, it is acceptable to use reasonable estimates. If the program activity is intangible, such as research, describe the activity’s objectives for both the current year and in the long-term. You can use the additional space on Schedule O, but as mentioned earlier it is better to be clear and concise in the space provided.
The IRS obviously believes that the mission and program service accomplishments are very important, which is why the mission is on both the page one and two, and the majority of page two is devoted to program service accomplishments. The reason companies, foundations and individuals provide you with financial support is because they believe in and support the mission and want to fund your future achievements. Your program accomplishments are the result of that support so give these areas the energy and attention that you would give a prospective donor or grantor. I encourage you to use Part III to show off your organization’s achievements and tell the public at large why they should start and/or continue to support you.
Coming Soon: Pt. 4 of our Form 990 series: Checklist of Required Schedules. Read our Form 990 Blog Series here.
Questions? Contact any member of our Not-for-Profit Services Group.