Expert Tips for Automating Nonprofit 990 Reporting with Sage Intacct
Tax-exempt nonprofit organizations do not have to pay federal taxes, but they do have to file Form 990, an informational return, with the IRS. Publicly available 990 reporting helps ensure the integrity of nonprofit organizations by increasing the transparency of their financial management over both public and private funding.
This reporting helps donors and funders evaluate organizations and find those they think will be the best stewards of their contributions. Form 990 reveals where an organization gets the revenue it uses to fund its mission, how much it pays employees, and how it manages other types of expenses.
Brenda Kahler, CPA, CGMA is a senior manager for nonprofit client engagement at Armanino, LLP. She’s spent over 20 years in accounting, primarily with nonprofit organizations, and also at Big Four firms. Prior to Armanino, she led a total digital transformation for a $50 million international nonprofit operating in 25 countries. Recently, Brenda presented Harnessing the Power of Sage Intacct for 990 Reporting at the Nonprofit Finance Leaders Forum.
Excerpted from her presentation, below are Brenda’s thoughts on some of the ways you can use Sage Intacct to save time and improve the quality of your organization’s 990 reporting:
Leveraging Sage Intacct Nonprofit QuickStart Reports
Organizations using Sage Intacct have powerful tools at their disposal to ease their 990 compliance burden. Many of the QuickStart reports can assist in 990 preparation and Brenda focuses her session on these two:
- 990VIII Statement of Revenue
- 990IX Statement of Functional Expenses
To use these reports, users need to make sure they are installed. If your organization implemented Sage Intacct R3 2018 or later, these reports installed automatically. If you’re unsure, simply visit your Dashboards Library and check the dashboards list for the Compliance and Disclosures dashboards. If you do not see the Compliance and Disclosures dashboards, additional new reports are available for you.
There’s a quick trick to installing the new reports. Install the Compliance and Disclosure dashboards, and you’ll automatically get all of the available new reports, including the two 990 reports. Most organizations will not want to use these reports straight “out of the box.” Instead, make the reports reflective of your organization by reviewing the groupings and adding in dimensional filters.
- Customizing the revenue report
When you look at the revenue report, you'll notice that the groupings are different from the financial reports. They still have been grouped based on category, but here they are grouped based on the lines of disclosure in the Form 990.
First, click into your columns and filter on the correct dimension or dimension structure for your exempt revenue, your unrelated business income revenue, and your excluded revenue. If you aren’t using dimensions to track any of these things—perhaps you are tracking them in an account instead—then this default report might not work for you. But if you are tracking those things with a dimension or a dimension structure, you can update the columns to be able to group that way.
Next, update your rows and make sure the category groupings work for your organization. This will be especially important if you've renamed any categories. It’s very common for some organizations to rename some of the categories of income that were included in the out-of-the-box report. For example, you may have eliminated a revenue stream you never use, such as gambling income, and replaced it with another revenue streams you do have.
If you've done that, take special care to review those groupings and make sure they will work for your 990 reporting. If they don't work for you, you can go into your account groupings and you update them. You can find all of the 990 grouping by searching for “990” in your account groupings and then you can edit them, move them around and regroup them however you need.
- Customizing the Functional Expense report
Updating the functional expense report requires similar steps to those you used to update the revenue report. Start by reviewing the columns, and this time you want to filter for program management in general and fundraising. If you don't already have those dimensions or dimension structures, you will probably see that as some sort of grouping of your department structures.
Next, review your rows, making sure that the category groupings will work for your organization. If you've renamed any categories—which is even more common to do in expenses than it was in revenue—keep in mind that you've got types of expenses that are different than what was available in the original Sage Intacct QuickStart. You'll update that the same way you did for the Revenue report.
With Functional Expense reporting, there are a few additional considerations that may or may not apply to your organization:
- Negotiated Indirect Cost Rate Allowance: If you have a lot of federal grants, you might be used to filing a different functional expense report for financial reporting with your funding agencies than you had with Form 990. But now, financial reporting rules have been aligned and all nonprofit organizations are required to create a functional expense report. It is considered an auditable statement.
- Allocations: It's much easier to back into your allocations if you record them in certain ways. In Sage Intacct, using the dynamic allocations module, it's very easy to back into your original postings, because all allocations are completed on a user-defined book. But if you're doing your allocations at the end of the period, or even less frequently, think about how you are doing it. Are you reversing the original transaction and then posting a new one? Are you posting those transactions in a separate set of departments or accounts? Where in your architecture (in an account, a dimension, a user-defined book) are you housing those allocations? You need to be able to get back to the unallocated numbers when we're talking about allocations for federal and state awards.
- Contra Revenue Accounts: One very common mistake is to forget to include your contra revenue. For example, special events expenses usually net income and expenses together in the top part of your income statement. It's not shown in one of your functions. So, you'll need to add those expenses back in and show their function. In the case of special events, the function would be fundraising.
Form 990 reporting can be time-consuming and complicated for nonprofit finance teams. But it is also an important way that nonprofit organizations demonstrate financial transparency to major funders and prospective donors. Fortunately, the right financial management technology and automated reporting can make 990 reporting much easier.
With donors demanding more financial transparency than ever, nonprofit financial leaders are looking for ways to ensure their 990 reporting is thorough, accurate and compliant. For a deeper dive into how to use Sage Intacct to automate 990 reporting, watch the webinar replay—then check out the six other complimentary, educational sessions at the Nonprofit Finance Leaders Forum.
Nancy Master is a senior nonprofit industry marketing manager at Sage Intacct and is passionate about helping nonprofits achieve mission success. Nancy has more than 15 years of experience in software marketing and close to 20 years of experience working with a human services nonprofit organization.