Form 990 Comes First

• Unless your nonprofit has a contract with a government agency or a private foundation that specifies you must submit a completed audit by a specific date, Form 990 should be completed first or simultaneously and submitted to the IRS on its due date of the 15th day of the fifth month after the end of your company's fiscal year. The audit or audited financial statements should agree with the form. Auditors record income and expenses on the audit in categories that correspond to line items appearing on Form 990.
  
  

Audit vs. Form 990

• The auditing process in a nonprofit corporation is a tool to help your organization strengthen its financial management and effectiveness. Use audited financial statements to illustrate your organization's effectiveness and good financial management. Form 990 is, first, a document required by the Internal Revenue Service to maintain your nonprofit status and, second, a report of annual income, expense and activities that serves as a public record. Donors and others frequently access Form 990 via online services such as GuideStar and Charity Navigator.
  
  

Role of the Board and Audit Committee

• Board members of tax-exempt organizations are responsible to understand the basic legal responsibilities of their corporation. Take advantage of free training offered through organizations such as Independent Sector and the IRS itself. Establish an audit committee separate from the board finance committee. Review and work with auditors during the audit and tax return preparation process. Follow advice and guidance provided to strengthen financial management in future years.
  
  

Showing How Funds are Used

• Do advance preparation for your audit by ensuring that your organization's income and expenses are properly categorized. Organizations often inadvertently categorize costs required for operating programs as administrative expenses. True administrative expenses are those that don't benefit the programs or direct activities of a nonprofit organization. Work in depth with auditors to show the true program, administrative and fundraising expenses of your organization in audited financial statements and in IRS Form 990.