IRS Form 990: What Every Board Member Must Know

📖 Reading· ~12 min

Form 990 is public, detailed, and scrutinized by donors and grant-makers. Learn what to look for before you sign off.

Key Takeaways

✓Form 990 is a public document — donors, journalists, and grant-makers can and do read it.
✓Board members should review the 990 carefully before it is filed, not just sign it.
✓Schedule L discloses transactions with board members — even legitimate ones.
✓A program expense ratio below 65% typically triggers scrutiny from watchdog groups.

Form 990 is a public document

Think of the 990 as your organization's public report card. Anything that looks unusual will be noticed by donors, journalists, or grant-makers — and there is no way to unpublish it once filed.

Key 990 sections every board member should review

Form 990 — key sections at a glance

Section	What it covers	Why it matters
Part I — Summary	Revenue, expenses, and net assets at a glance	First thing donors and grant-makers look at
Part VI — Governance	Board practices, conflict-of-interest policy, document retention	Probes governance quality directly
Part VII — Compensation	Officer and highest-paid employee compensation	Unusually high or low figures attract scrutiny
Part IX — Functional Expenses	Program / fundraising / G&A expense breakdown	Watchdog groups use this ratio to rate nonprofits
Schedule L — Interested Persons	Transactions with board members and officers	Any item here must be explainable publicly

How to Review the Form 990 Before Signing

Read Part I (Summary)

Check revenue, expenses, and net assets at a glance. Compare to prior year — big swings in either direction warrant an explanation.

Review Part VI (Governance)

Confirm your board practices are accurately described. Does the 990 say you have a conflict-of-interest policy? Make sure you actually do.

Scrutinize Part IX (Functional Expenses)

Calculate your program expense ratio. If it is below 65%, expect questions from donors and grant-makers — prepare your explanation.

Check Schedule L (Interested Persons)

Any transaction listed here is public. If you see something you cannot explain clearly, resolve it before the 990 is filed.

Compare to Audited Financial Statements

Revenue and expense figures should reconcile between the 990 and the audited statements. Inconsistencies are a red flag.

Schedule L: the conflict-of-interest disclosure

Schedule L must disclose loans to or from board members, grants to related parties, and business transactions where a board member or their family has a financial interest. Even legitimate transactions must be disclosed. If something is on Schedule L, the board should be able to explain it clearly — because donors and grant-makers will see it.

Common 990 errors that attract scrutiny

Watch for: inconsistencies between the 990 and audited financial statements, compensation figures that seem unusually high or low, a program ratio below 65%, undisclosed related-party transactions, and changes in accounting methods without explanation. A board member who spots a discrepancy should raise it before the 990 is filed — not after.