Download Line 43a – Other Consulting and Contract

THE URBAN INSTITUTE 2100 M STREET, N.W. / WASHINGTON D.C. 20037
National Center for Charitable Statistics
Center on Nonprofits and Philanthropy
phone: 202-261-5806
fax: 202-833-6231
FORM 990 ACCOUNTING AND REPORTING ISSUES - 2006
(COMMENTS WELCOME)
BACKGROUND
As the national repository for research data on the nonprofit sector, the National Center for
Charitable Statistics (NCCS) at the Urban Institute works to improve the quality of nonprofit
reporting. We host annual meetings with representatives of the IRS, state regulators
represented by the National Association of State Charity Officials (NASCO) and nonprofit
sector financial professionals and practitioners to address Form 990 accounting and reporting
issues. These meetings have been held for the past 15 years.
NCCS maintains an ongoing list of issues and adds ideas suggested by the many national and
subsector organizations, nonprofit managers, attorneys, accountants, and other interested
individuals who are part of the NCCS Quality Reporting Network (See 2001, 2003, and 2005
issue papers at www.qual990.org).
While suggestions to improve the form and its instructions have been ongoing since its
development in the early 1980s, there has been more focus in recent years on using Form 990
to improve charity performance and accountability. Some have focused on the need to resolve
differences between Form 990 reporting and audited financial statements, in accordance with
generally accepted accounting principles (GAAP).
In 2004, the US Senate Finance Committee began to consider a number of comprehensive
reforms on charity oversight and asked INDEPENDENT SECTOR to convene an independent
national panel to consider and recommend actions to strengthen good governance, ethical
conduct and effective practice of public charities and private foundations. The final report of
this Panel on the Nonprofit Sector was delivered to Congress in June 2005 and contained a
number of specific recommendations for the Form 990 and Form 990-PF.
Panel recommendations of particular relevance to our Quality Form 990 meeting this year
include the following:
o Mandatory electronic filing for all Form 990 series returns;
o Annual electronic filing of basic contact and financial information for tax-exempt
organizations that fall under the filing threshold of $25,000 in annual gross receipts;
o Revisions to Form 990 series returns to include distinct schedules for information
required of only certain types of organizations; placement of charitable purpose and
key program achievements on the first page; improved disclosure of compensation.
The Panel also dealt with the problem of differences between the numbers reported on a given
organization’s Form 990, prepared according to IRS instructions, and its audited financial
statements, prepared according to Generally Accepted Accounting Principles (GAAP). In
response to this discussion, NCCS created a Work Group on the GAAP-to-990 differences to
develop proposals to better reconcile these differences. The members, nonprofit accounting
experts, met in 2005, and the specific issues they addressed are included in this Form 990
issues paper for 2006 (See issue numbers 1, 9, 10, 12, 18, 19, 21, 22 and 23).
We hope you will review the issues in this paper, submit comments, recommendations, and
additions to Bill Levis at [email protected] and Linda Lampkin at [email protected] and
track our progress on these issues at www.qual990.org.
The 16th Annual Quality Form 990 meeting, hosted by NCCS in conjunction with NASCO and
IRS, will be held on March 15, 2006, at the Urban Institute. The issues in this paper will be
discussed. If you would like to attend, please send an email to Bill or Linda.
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FORM 990 ACCOUNTING AND REPORTING ISSUES - 2006
1. Reporting Unrestricted and Restricted Amounts Separately from Total
Amounts
The current non-GAAP line 18 – Excess or (deficit) for the year in Part I of Form 990 can
be misleading when nonprofits have restricted revenues. First, temporarily and
permanently restricted contributions are combined with unrestricted contributions on the
Form 990 on line 1d in the year received but not expended, causing line 12 - Total
revenues to exceed expenses by that amount. In the year the restricted contributions are
received, line 18 looks very high. Then, in subsequent years when the temporarily
restricted contributions are expended, they are combined with unrestricted expenses on
the Form 990 on line 17, causing expenses to exceed revenues for that year and resulting
in a deficit in line 18 when, in fact, there is no operating deficit.
Another related issue is that Part I does not include all four of the mandatory Changes in
net assets line items required by GAAP for Statements of Activity. In GAAP reporting,
the line “Changes in unrestricted net assets” can represent the equivalent of a for profit
business’ operating excess or (deficit) for the year, while the current non-GAAP Form
990 line 18 - Excess or (deficit) for the year does not represent the equivalent operating
figure for a nonprofit. While many line items can be misleading when comparing Form
990 to audited financial statements, line 18 is the one most frequently identified as a
problem.
Recommendation:
Eliminate the current line 18 – Excess or (deficit) for the year and add the four
mandatory “Changes in net assets” categories items required by GAAP for
Statements of Activity. Specifically:
a. Lines 1 through 17 remain unchanged.
b. Without revising the intended content and instructions for line 20 – Other changes
in net assets, renumber it to line 18 and move it to follow line 17 – Total
expenses.
c. Rename the “Net Asset” section (lines 18 to 21) to the GAAP “Changes in net
assets” (new lines 19 to 24) and expand it by three lines to include the four
GAAP-required changes in net assets categories now missing from Part I (see
proposed new line items 19 through 22 in the illustration below).
d. Renumber line 19 – Net assets at beginning of year to line 23 and renumber line
21 – Net assets at end of year to line 24. There would be no change to the names,
definitions and instructions for lines 23 and 24 (formerly lines19 and 21,
respectively).
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Recommendation for Issue No. 1 – cont’d
Proposed Form 990, Part I
12. Total Revenue [add lines 1 through 11] (**)....................................................................... $_____________
13. Program expenses …………………………………………………................................... $_____________
14. Management and general expenses .................................................................................... $___ __________
15. Fundraising expenses ...................................................................... .................................... $_____________
16. Payments to affiliates/services to affiliates ……......................................... ........................ $_____________
17. Total expenses [add lines 13 through 16] (**) .................................................................... $_____________
18. Other changes in net assets …..………………................................................................... $_____________
Changes in net assets (***):
19. Changes in unrestricted net assets [line 67(B) minus line 67(A)] ………..…................... $____________
20. Changes in temporarily restricted net assets [line 68(B) minus line 68(A)] ................... $____________
21. Changes in permanently restricted net assets [line 69(B) minus line 69(A)] ………...... $____________
22. Total changes in net assets [add lines 19, 20 and 21 (*)]…….……………….................... $_____________
23. Net assets or fund balances at beginning of year ……................... ..................................... $_____________
24. Net assets at end of year [add lines 22 and 23] ………………………….………………. $____________
(*) Line 22 must equal line 73(B) minus line 73(A) and equal line 12 minus line 17 plus line 18.
(**) Total revenues and expenses include $_________ of donated services and/or use of facilities.
(***) Organizations that do not follow SFAS 117 are not required to complete lines 19 through 21.
2. Non-compliance with GAAP Functional Cost Allocation Requirements
When program, management and general, and fundraising expenses are not reported in
compliance with GAAP, this causes unreliable reporting in both an organization’s Form
990 and its audited financial report.
Recommendations:
a. Set up a work group of representatives of state charity officials, accounting
professionals, and other nonprofit accountability stakeholders to develop and
disseminate a memorandum on “Functional Expense Allocation Procedures.”
b. Present to IRS and have this memorandum included as a reference in Form 990
instructions; also provide a web link.
3. Clarification of Reporting of Professional Fees
Reporting of professional and other contract service fees on the Form 990 should be in
accordance with GAAP functional reporting and government grant reporting
requirements. Professional fundraising, accounting, and legal fees are reported on Form
990 in lines 30, 31, and 32, respectively. However, all other professional and contract
service fees are lumped in with other expenses in Line 43. Thus, it is almost impossible
to determine total professional and contract service fees in any given Form 990 or to
develop statistics on these fees. This reporting is also inconsistent with the reporting of
all professional and contract service fees in a separate line item that is required for GAAP
functional reporting and government grant reporting. Recent research using Form 990
data included a detailed review of Line 43 expenses and found that over one third of these
“other expenses” were related to consulting and other contract service fees.
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Recommendations:
a. Revise a blank line 43 in Part II of the Form 990 to:
“43a – Other consulting and contract service fees”
b. Require all professional and other contract service fees to be to be reported in
Lines 30, 31, 32a, and 32b.
c. Add new instructions for the new Line 43a as follows1:
“Line 43a – Other Consulting and Contract Service Fees
Enter the amount of fees and expenses of professional practitioners, consultants
and contract service providers (other than for professional fundraisers,
accountants or attorneys, which should be reported on Lines 30, 31, and 32,
respectively) who are not employees of the reporting organization and are
engaged as independent contractors for specified services on a fee or other
contract basis. Examples of such contract service fees include contract payments
to independent professional consultants; actuarial fees; data processing services
(outside vendor); investment management fees (not commissions on transactions);
contracted software development; media production costs; internet, email and
website services (outside vendors); contract temporary employee services; and
other non-payroll personal service fees.”
4. Review and Approval of Form 990 by Board of Directors
Having Form 990 ask the question “Has the completed Form 990 been presented to and
approved by the board of the organization?” would encourage charities to adopt policies
of getting board approval of Form 990. This action would be recorded in the board
meeting minutes. IRS could also consider whether to require board approval of the Form
990 prior to submission.
Recommendation:
Add a question (check yes or no) to Part VI of Form 990: “Has the completed Form
990 been reviewed and approved by the board of the organization?”
5. Making Annual Reports and Audited Financial Statements Available to
the Public
The public and other users of Form 990 data currently have no way of knowing if there
are additional sources of information available that will be helpful in evaluating the
organization.
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Lines 93f and 93g in Part VII of Form 990 can serve as a model format for specifying the use of Line 43a
for “Other consulting and contract service fees.”
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Recommendation:
Add questions (check yes or no) to the introductory section of the Form 990, asking
“Does the organization publish an annual report? Is it made available to the general
public? and “Does the organization produce audited financials? Are these made
available to the general public?”
6. Separation of Revenue from Contributions by Source
Donors, media, regulators, policymakers, and researchers often want to know more detail
about the sources of Contributions, gifts, grants, and similar amounts received (Line 1).
Recommendations:
a. Add schedule for Direct and Indirect public support (Lines 1a and 1b) for details
of source of support -- list what was received from Individuals, Other Tax Exempt
Organizations (charities or other), Foundations (private and community), and
Business (commonly referred to as “corporate giving”).
b. Add schedule for Government contributions (Line 1c) for details of governmental
level of source of support -- Federal, State, and/or Local.
7. Addition of Organizational Email Address
In the 2001 version of Form 990, IRS added Website (Line G) for a URL. This has been
very helpful but the addition of an organizational e-mail address (not for a specific
individual) would help in contacting an organization.
Recommendation:
Expand Line G to include both the URL and email address or add a line for an
organizational email address.
8. Expansion of Part III to Cover Performance Reporting
The current requirements of Part III – Statement of Program Service Accomplishments
call for a statement of the organization’s primary purpose and a description of
achievements in each of the four largest programs. The average number of the
descriptions is about two. The measures used as examples in the IRS instructions are
outputs – clients served, publications issued – not outcomes, typically what is desired in
performance reporting. While some government and foundation grantees are required to
report on outcomes, the information is not uniform or widely available. If Form 990 is to
be used to collect non-financial performance measures, then there must be a lot of
thought about how best to implement any changes.
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Recommendation:
Begin developing approaches for performance reporting for inclusion on Form 990 or
in a voluntary supplement to the form.
9. Use of Cash Method of Accounting for Public Support Test
It is difficult for nonprofits that use accrual accounting to accurately calculate Lines 15 to
25 of Form 990 Schedule A Part IV-A (the Public Support Test) because their general
ledgers must be translated into a cash system.
Recommendations:
a. Test the “Simplified Method” for calculating Lines 15 to 25 of Part IVA of
Schedule A, using prior-year Form 990 line-item entries to calculate most, and for
90 percent of all Form 990 filers, all of the current year’s entries for Column (A),
Lines 15 to 25, of Schedule A, Part IV-A.
b. Incorporate the “Simplified Method” in IRS specifications for Form 990 software.
c. Consider revising IRS policy and instructions to permit ‘books2’ based accounting
for the public support test.
10. Filing of Consolidated Returns for Affiliated Organizations
Presently, where an organization has a group exemption ruling, the parent must file at
least two returns – one for itself and one for the organizations covered by the group
exemption. These separate Forms 990 include material inter-company income, expenses,
assets, and liabilities that distort the overall operations and financial position of the
organization and make it difficult for donors and others to use the information return
data. When oversight organizations evaluate charities based solely on statistical analysis
of Forms 990, this becomes a serious problem, as the unconsolidated data can lead to
highly erroneous conclusions about performance. Further, affiliates and parent
organizations often have payments and receipts between entities, which leads to double
counting of revenues and expenses. Having a parent and its closely controlled affiliate
charities file a combined Form 990 would provide better information to those using the
Form 990 information and be less burdensome for the reporting charities.
‘Books’ means the method used by organizations to prepare their year-end general purpose financial
statements. Year-end “book-based’ financial statements may or may not be audited; can be based on
GAAP or other comprehensive basis of accounting (OCBA) recognized by AICPA (e.g., tax-basis); and
can be full accrual, modified accrual or cash basis. Form 990 instructions already require organizations to
prepare Forms 990 according to their ‘books and records’ [see “Accounting methods” in Form 990
Instruction G] – except where there are differences with specific Form 990 instructions (‘unless otherwise
instructed’/instruction G).
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Recommendations:
a. Require filing a combined Form 990 for parent organization and all affiliates that
are subject to its supervision and control, and that meet the current criteria for
filing a group return.
b. Develop a supplemental schedule providing a breakdown by affiliate, especially
for use in reporting to state charity offices.
11. Clarify and Restructure Form 990 Sections on Compensation
It is often difficult to use the information reported in List of Officers, Directors, Trustees,
and Key Employees – Part V for a variety of reasons, including:
 Determining which listed person is the chief executive
 Title and average hours worked are combined in same cell in the form’s table
 Use of an attachment of a separate list by many filers
 No responses in many of the columns
The compensation information reported on Schedule A Compensation of the Five Highest
Paid Employees Other than Officer, Directors, and Trustees – Part I suffers from the
same reporting problems.
Recommendation:
Convene a workgroup of nonprofit practitioners, researchers, and regulators to
develop detailed recommendations for consideration by IRS and other stakeholders.
12. GAAP Classification of Support from Governmental Units as
Exchange Transactions
Under GAAP and Form 990 instructions, the costs of bidding on government grants and
contracts that are classified as contributions (i.e., not as exchange transactions) are treated
as fundraising expense while the costs of bidding on government grants and contracts that
are not classified as exchange transactions are treated as management & general (M & G)
expenses. However, because IRS may classify some GAAP exchange transactions as
contributions (i.e., “support from governmental units”) that are reported in line 1c –
Government grants equivalent to contributions, the related bidding costs must be reported
as fundraising expense. This results in a difference in the M&G and fundraising figures
between the Form 990 and the audit leading to different calculation for the fundraising
ratios for an organization.
Recommendations:
a. Determine the differences, if any, between GAAP (see relevant AICPA literature)
and IRS (see Form 990 instructions and IRS Revenue Ruling 83-153 for Section
170) definitions and classifications of exchange transactions.
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b. If IRS and GAAP differ, have Part I prepared according to GAAP and address the
issue in a supplemental schedule connected with public support test in Schedule
A, Part IV.
13. Limitation on Use of Other Expenses (Line 43)
An average of 25 percent of all expenses reported in Form 990 are recorded as Other
expenses not covered above -- Line 43 of Part II. Some Form 990 filers do not report
their expenses in the relevant categories listed in Part II (lines 22-42) but group them on
Line 43 and add an attachment.
Recommendations:
a. Add a footnote to Line 43, Part II, and clarify and emphasize in the instructions
that Lines 22-42 are to be used for all applicable object expenses.
b. Require an explanation if Line 43 exceeds some percentage of Total expenses -Line 44.
c. Improve compliance by IRS rejection of returns that leave the items on Part II
blank.
14. Improved Diagnostics in Form 990 Preparation Software
It would greatly improve the quality of Form 990 reporting if software developers include
comprehensive business rules and diagnostics in their Form 990 programming. The
business rules developed for efiling serve as a starting point.
Recommendations:
Develop a comprehensive set of business rules and diagnostics that would be required
in Form 990 preparation software, in addition to the current efiling business rules.
These might include, for example, having the preparer review the return if:
 Total of Part V compensation is less than Part II, line 25, Compensation for key
employees
 Part II, line 43, Other Expenses exceeds a limit of a given percentage of total
expenses (perhaps 10%); an explicit override would be required
 Negative amounts reported in expense line items in Part 1 that are deducted from
gross revenue amounts
 Contributions are reported in Part I, line 1a, Direct public support, and no
fundraising expenses are reported in line 15; an explicit override would be
required.
 If functional expenses for compensation are reported in lines 25 or 26 of Part II,
then an entry for Line 90b, Number of employees, is required.
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15. Reporting of Lobbying Expenditures
More information should be provided to preparers on the 501(h) election (Schedule A,
Part III, Part VI-A, Part VI-B). Many organizations do not know how to decide if they
should take the 501(h) election and IRS documents do not provide enough information.
Recommendations:
a. Add instructions that state it is acceptable to take the election even if the
organization has no plans to lobby in the coming year.
b. Provide referrals to sources of additional information on which to base the
decision of whether to take the election in the Form 990 instructions.
16. Reporting of Lobbying Activities
Current reporting of lobbying activities on Schedule A, Part III, Part VI-A, and Part VI-B
needs to be improved. Many organizations check “Yes” on Schedule A, Part III, Line 1
but may leave the line for total expenses blank. Often the total of lobbying expenditures
reported on Line 38 (grassroots expenditures in Line 36 plus the direct lobbying
expenditures in Line 37) does not equal the amount reported in Part III under Line 1.
Because of the lack of detail on current lobbying activities, it is difficult to make specific
recommendations.
Recommendations:
a. Develop better information on current lobbying activities.
b. Provide referrals to sources of additional information in the Form 990
instructions.
17. Reporting for Organizations Below the Filing Threshold
The IRS Business Master File (BMF) is full of defunct organizations and bad addresses.
One reason is because once organizations are listed on the BMF, they are not required to
file information with the IRS unless they are above the filing threshold of $25,000 in
annual gross receipts. The Joint Committee on Taxation recommended that filings be
required of smaller nonprofits and the Independent Sector Panel supported an annual
notice.
Recommendation:
Create an annual electronic reporting form for tax-exempt organizations currently
below the filing threshold. The reporting requirements would be: EIN, public name,
mailing address, telephone number, email and URL (if any), a certification that gross
receipts and total assets are below the statutory limits for filing Form 990-EZ, and the
signature of an officer.
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18. Reporting on Special Events in Part I
The current IRS requirements for reporting the exchange portion of “quid pro quo
contributions” related to special events in line 9 of Part I, Form 990 are consistent with
FASB SFAS No. 116 requirement for distinguishing between contributions and exchange
transactions (see Paragraphs 49 to 51). However, both Form 990 and GAAP
requirements for reporting special events are confusing and difficult to follow. In fact,
GAAP accounting and reporting requirements -- alone -- are confusing and difficult for
small nonprofits and local affiliates of national organizations that sponsor a number of
events all during the year.
Form 990 establishes two categories of net revenue: (1) contributed income (reported in
line 1a – Direct public support), which is gross revenue less direct benefit value (i.e., the
GAAP exchange portion of gross revenue), and (2) earned revenue, which is direct
benefit value less direct benefit cost. In Form 990, direct benefit value is reported in line
9a – “Gross revenue,” direct benefit cost is reported in line 9b – “direct expenses other
than fundraising expenses” and earned revenue is reported in line 9c – “Net income.”
The use of the term “gross revenue” to identify the exchange portion of gross special
event revenue in line 9a is not consistent with GAAP, which requires dividing gross
revenue into contribution revenue and exchange revenue.
Recommendation:
Since IRS accounting and reporting requirements for “quid pro quo contributions”
and special event revenues are already consistent with GAAP, IRS will not be asked
to revise these requirements. However, clarification of the instructions would be
useful.
a. The title in line 9a needs to be revised from “Gross revenue” to “Exchange
revenue.”
b. Other clarifications need to be developed.
19 - Reporting of Sales and Costs of Program-Related Materials and
Inventory
Under GAAP, gross sales of program-related materials and inventory may be reported as
revenue and the costs reported as program expense3. However, Form 990 does not
distinguish between program-related and unrelated sales of materials and inventory and
appears to require reporting both categories of sales together, net of “cost of goods sold”
in line 10c – “Gross profit or (loss) from sales of inventory.” While Form 990 method is
permitted by GAAP, the way these revenues and related expenses are reported in Form
990 can have a negative affect on financial ratios that use line 13 - Program expense as
part of the calculation.
For example, the “Black Book” Standards of Accounting and Financial Reporting for Voluntary Health
and Welfare Organizations states “sales of program-related publications and materials…. are reported
gross. Related costs and expenses should be reported in the appropriate program expense category” (page
59).
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If the original intent of IRS was to use line 10 to report sales that might be subject to
UBIT, is this still needed now that Part VII addresses UBIT issues? And, are lines 9 and
10 needed for UBIT purposes? In any case, program-related sales should not be included
in line 10. Rather, these should be reported on Form 990 according to the way the
organization keeps its books.
Recommendation:
Allow Form 990 sales and related expenses to be reported in the existing Form 990
line items in the same manner as they are shown on the audited financial statements
or on the ‘books.’
20. Reporting Gifts in-kind
Form 990 divides gifts in-kind into two types: (a) non-cash donations of tangible items
such as land, buildings, equipment, other property, and materials that are included as
contributed income in Line 1d and (b) donated services and use of facilities that cannot
be reported as contributed income. This distinction is often incorrectly made by filers,
and donations of tangible items are excluded along with services.
If donated services represent a substantial part of an organization’s revenues and thus are
not included on Form 990, then a calculation of the organization’s financial ratios will
look very different from that of an organization with no donated services and may
mislead users of the ratios. In addition, excluding non-cash tangible items received can
also affect financial ratios.
Recommendations:
a. Develop clarifications for Form 990 instructions on gifts in-kind.
b. Add a footnote to Part I explaining that donated services and use of facilities are
not included in line 1.
21 – Reviewing Form 990 Requirements for Relevance to Today’s
Reporting Standards
An update of the functional expense categories in Part II is needed. For example, one
expense often included under “Other” on Form 990 is insurance, which needs a separate
line item, especially board liability insurance. Form 990 instructions should clarify that
certain insurance expenses need to be put in existing categories (for example, medical
and dental insurance in Other employee benefits, and property insurance under
Occupancy). The item “Telephone” should be renamed
“Telephone/telecommunications” and the instructions broadened to include internet
services such as email and websites. This title change was made in the last edition of the
Black Book.
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To facilitate matching numbers and to minimize the differences in Part IV – Balance
sheets and Statements of Position in audited financial statements, it would be useful to
reconsider the relevance of certain balance sheet items for today’s financial reporting
standards. For example, is a breakdown of cash into Lines 45 – Cash in non-interest
bearing accounts and Line 46 – Temporary cash investments now important? This
examination for relevancy should be extended to all the Form 990 financial line items,
especially to the functional expense categories in Part II.
Recommendations:
a. Ask IRS to review Part II and revise the object expense categories to be relevant
to today’s financial reporting standards.
b. Ask IRS to review Part IV and revise the balance sheet line items to be relevant to
today’s financial reporting standards.
c. Expand this to include updating all other Form 990 financial line items for
relevancy.
d. Reducing the number of line items in general would also be useful.
22. Providing a Procedure and Supplemental Report that Reconciles
Forms 990 with Audited Financial Statements
A draft reconciliation procedure has been developed for the existing Form 990 and audits,
using GAAP-basis summary categories. This 990-to-Audit Reconciliation Report
procedure needs to be totally independent of Form 990, as a massive expansion of Parts
IV-A and IV-B would be required and that is not feasible. This is an elaborate,
cumbersome and burdensome procedure, with use limited to financial analysts who work
with Forms 990 and audits together and need to know if they reconcile. However,
nonprofits and their auditors could find it useful to have 990-to-Audit Reconciliation
Reports available for internal review and evaluation and for ready explanations of
differences between their Form 990s and audits.
Recommendation:
NCCS devise and make available on www.qual990.org a procedure for reconciling
Forms 990 with audited financial statements.
23. Aligning and Mapping GAAP’s “Other Accounting Literature” with
Form 990
The Senate Finance Committee Discussion Draft (2004) stated that “there are no
common standards for filing Form 990,” and “IRS must promulgate standards for filing
Form 990. Because there are no standards for filing a Form 990, similarly situated
charities can have different Form 990s.” First, FASB and AICPA authoritative
accounting literature for not-for-profit organization do provide extensive “common
standards [most of which is relevant] for filing Form 990.”
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Second, Form 990 and its instructions are a comprehensive set of “common standards for
filing Form 990.” And, in the FASB SAS No. 69 hierarchy of authoritative GAAP
accounting literature, Form 990 instructions can be considered “other accounting
literature,” except where they conflict with the higher level GAAP literature of FASB and
AICPA.
Third, extensive “other accounting literature” for nonprofits is also distributed by subsector groups such as those for hospitals, colleges and universities, museums, voluntary
health and welfare organizations and by publishers such as Jossey Bass and Wiley.
However, the charts of accounts and elements of accounting that are illustrated in “other
accounting literature” for nonprofit organizations are not aligned with and/or mapped to
corresponding financial line items and categories in Form 990. When nonprofits and
their accountants use one or more of the available “other accounting literature” as
resources for designing or revising their accounting systems, the year-end accounting
data from those systems are usually not compatible with the financial data requirements
of Form 990.
The quality of Forms 990 financial data would be improved substantially if the sub-sector
and commercial distributors of “other accounting literature” were to prepare and
distribute supplements that mapped the financial elements used in their publications to
Form 990 line items and categories. And, the situation would be improved even more if,
when they revised their publications, they aligned the financial elements they use in their
illustrations with Form 990 line items and categories.
Recommendation:
a. Conduct research (1) to identify all the FASB/AICPA recognized “other
accounting literature” applicable to various nonprofit sub-sectors or kinds of
nonprofit organizations and (2) to qualify their alignment with and mapping to
Form 990.
b. Enlist the cooperation of the sub-sector and commercial distributors of the “other
accounting literature” in supplementing and/or revising their publications to align
and map the financial elements they use in their illustrations with Form 990 line
items and categories.
Comments, questions, and additions are welcome.
Please email to [email protected] and [email protected]