Many nonprofits have public relations problems. Thoughtful preparation of a nonprofit’s Form 990s can be a powerful remedy.
Oh No... Another Nonprofit in the Press
In last week’s Chronicle of Philanthropy, Tim Delaney discussed the fallout from recent negative news stories involving non-profits. The Tampa Bay Times, for example, recently reported, “America’s 50 worst charities rake in nearly $1-billion for corporate fundraisers.” A Washington Post article similarly reported widespread diversions of assets from public charities, “disclosing losses attributed to theft, investment fraud, embezzlement and other unauthorized uses of funds.”
What is the effect of such negative publicity on all nonprofits? Not good. Delaney surveyed the online comments to the Times and the Post stories and concluded, “it’s important to recognize what the public is saying about them. In both cases, people are making comments on the online stories saying they will never donate to a charity again.”
With the weight of public opinion in play, and the real possibility of declining contributions as a consequence of negative press, nonprofits cannot afford to be passive. As Delaney writes, “we cannot sit on the sidelines silently when false or misleading statements are made about our integrity and the work we do helping people and solving problems in our local communities.” Nonprofits must take affirmative steps to ensure that the public is well informed concerning the organizations’ purposes, exempt activities, and integrity in executing those purposes and activities.
Form 990 and Transparency
Thoughtful preparation of a nonprofit’s IRS Form 990 is one such affirmative step. Just as Form 1040 is required of individuals, and Form 1120 is required of many businesses, Form 990 is the annual report required by the IRS of organizations exempt from income tax. Form 990, however, is fundamentally different from both Forms 1040 and 1120. Whereas Form 1040 and 1120 do not make inquiries into the nature and purpose of an organization’s purposes and activities, those inquiries lie at the heart of Form 990. The IRS cares very much about the nature of, and activities of, entities that are exempt from income tax.
Accordingly, whereas on Forms 1040 and 1120, neither individuals nor for-profit corporations are asked to describe their activities, nonprofits are asked to describe their activities in great detail. On Forms 1040 and 1120, no mention is made of a mission statement. Form 990, on the other hand, specifically asks the exempt organization to describe its mission statement and, furthermore, requires the organization to describe the activities and accomplishments for each of its largest program services. Detailed explanations of specific transactions, compensation to various individuals, and relationships among directors, key employees, and other related entities must also be disclosed.
A crucial consideration about Form 990 is that it is a matter of public record. Exempt organizations are held to a high level of transparency. Guidestar is a quasi-governmental organization that gathers and disseminates information about IRS-registered nonprofit organizations (www.guidestar.org). According to the organization’s website, it provides “as much information as [it] can about each nonprofit's mission, legitimacy, impact, reputation, finances, programs, transparency, governance, and so much more. [It does] that so you can take the information and make the best decisions possible.” As the articles in the Times and Post illustrate, such transparency can expose weaknesses in nonprofit organizations that can bring embarrassing publicity. It’s a shame, because it doesn’t have to be that way.
Realizing the Opportunity
Form 990s thus presents nonprofit organizations with wonderful opportunities. It is precisely because Guidestar reports each “nonprofit's mission, legitimacy, impact, reputation, finances, programs, transparency, and governance,” tremendous potential exists for free and positive publicity. Thoughtful nonprofit leaders will use Form 990 to showcase their organizations. Through Form 990, the organization can make known its mission statement --- tell people how it wants to change the world and showcase the exciting and innovative programs it is implementing.
In this way, Form 990 can also be a powerful fundraising tool. Careful donors routinely examine the filings of the organizations to which they will contribute. An organization that clearly articulates its exempt purposes and carefully documents the organization’s pursuit of those purposes through its activities instills confidence in the minds of prospective donors. The public’s appreciation of an organization multiplies when the benefits conveyed by the nonprofit are combined with careful oversight and integrity in the execution of the organization’s activities.
Bottom line: carefully prepared Form 990s will promote the organization in the eyes of the people who matter most - those in the communities to be served, and donors. So make sure your nonprofit organization makes the most of its Form 990 reporting opportunities.