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Form 990 brings big changes

March 1, 2009
by Amy Mace, CPA and David E. Jose, Esq
| Reprints
A CFO and an attorney discuss the impact of the new IRS form

The 990 is a team effort

by Amy Mace, CPA

Historically, the completion of Form 990 merely signaled to me the end of another annual audit process. Once the 990 was reviewed, signed, and submitted to the IRS, the annual audit “ritual” was put to bed for another year. Compiling the information was largely a joint effort by the business office and our external auditors, with a little input from human resources.

The majority of the information the 990 required was available from the financial audit. Human resources provided salary and benefit information on the five highest-paid employees, as required on Schedule A. Our external auditors compiled and inputted the required information. I simply reviewed it, ticked and tied the numbers back to our internal reports, signed it, and mailed it to the IRS.

There were a few questions regarding our major programs and services, but they were brief and remained static from year to year. Because of this, we required very limited involvement-if any-of our clinical leaders. The 990 and Schedule A asked a handful of yes/no questions regarding compliance and operational issues with little explanation required. Our internal staff spent approximately 3 to 4 hours after the completion of the financial audit to finalize the 990. Those days are over!

The new 990, which became effective for the 2008 tax year (filed in 2009 or 4-1/2 months after fiscal year end), requires much more time and effort. Many more people throughout our organization are involved in the preparation, review, and internal approval processes. This is no longer a project that can be completed in the back office and quietly submitted to the IRS.

The revised 990 is an 11-page, 11-part core document with ultimately 16 additional detailed schedules that may need to be completed based on the complexity of the organization's programs/services. The major changes center on compensation of officers, directors, trustees, key employees, and the highest-compensated employees, as well as governance and compliance issues. Disclosure is required of the governance structure, key organizational policies, and disclosure practices. Another area of significant change includes the determination of public charity status and public support, supplemental financial reporting, fund-raising, special events, and gaming (e.g., bingo).

The new 990's Part I is a high-level summary of organizational information, including the mission, the governing body's number of members, and number of employees and volunteers. Brief, high-level financial information also is disclosed in this summary section. A corporate officer must sign the 990 in Part II.

The second page focuses on the organization's major programs and services. The mission statement has to be restated, along with detailed information on any significant programs that have been added, changed, or closed since the previous 990 was filed. The three largest programs (by expenses) must be disclosed in detail, along with the programs' total revenues and expenses.

The next 4 pages include 97 yes/no questions. The answers to the first 44 determine how many of the 16 supplemental questions must be answered. Questions relate to lobbying and political activities, fund-raising, tax-exempt bond issues, loans to officers, related party transactions, and disposition of corporate assets. The next 29 questions focus on IRS filings and tax compliance, and the remaining 24 questions focus on governance, management, disclosure, and key policies. Additional disclosure is required depending on how the questions are answered. Organizations are required to report how they make the 990 available to public inspection (Web sites, upon request, etc.). Organizations also have to describe whether (and, if so, how) they make governing documents, conflict-of-interest policies, and financial statements available to the public.

The next two pages require detailed disclosure of compensation and benefits of key officers, directors, trustees, key employees, highest-compensated employees, and independent contractors. While this information normally is considered confidential, it now must be fully disclosed for public review. Finally, the detailed financial statement information is disclosed.

To accurately and fully complete the 990 and required supplemental schedules, key leaders throughout the organization must be involved. In addition to the financial staff, personnel from clinical leadership, corporate compliance, risk management, human resources, and the executive team play active and integral roles. Finally, the board of directors must review and approve the 990 before it is submitted to the IRS. An advantage of the 990 is that board members are able to see key clinical, compliance, compensation, and financial information in one document.

Amy Mace, CPA, is the CFO of Cummins Behavioral Health Systems, Inc., headquartered in Avon, Indiana. To contact her, e-mail

The 990 requires increased governance and oversight

By David E. Jose, Esq.

CFOs have been forced to become aware of the new 990's specific features. The changes are significant in terms of the breadth and depth of information about the organization. However, it is important to understand and appreciate part of the rationale for these changes and their implication from a regulatory oversight perspective, as well as an organizational governance perspective.