December 7, 2017
We often get the question, “Why doesn’t my Form 990 match my audit?” The IRS has different reporting requirements than Generally Accepted Accounting Principles (GAAP). Schedule D in Form 990 is intended to reconcile between an organization's tax return and its audit. Some of the most common reconciling items include; donated services, donated rent and unrealized gains.
Schedule D of the 990 is required to be completed by any organization that obtains independent audited financial statements for the same year as the 990. Schedule D provides a complete perspective of an organization’s financial position on the 990 by linking the full financial picture from the financial statements to the return. Parts XI & XII reconcile revenue and expenses from the audited financial statements to the tax return. These sections are the tie-in between an organization’s financial statements and 990. By utilizing Schedule D, the audit committee, board members and potential donors can gain insight into and a deeper understanding of the organization’s financial position.
Part XI covers revenue, gains, and other support reported on the financial statements. The section begins with total revenues. If this number differs from the total revenue reported on the return (page 1 of the 990), the reconciling items are reported in this schedule. Since the IRS has different reporting requirements than GAAP, reconciling items, such as contributed services (e.g. volunteer hours multiplied against the value of services contributed), unrealized investment gains, and recovery of prior year grants are most often reported in this section. IRS rules indicate these items are not reportable on the Form 990, but they are required to be reported in the organization's financial statements.
Part XII covers expenses reported on the financial statements. Common reconciling items include: donated services, prior year adjustments, and losses. As with Part XI, this section also includes the items not reported on the 990 that show up on the financial statements.
As a result of the various reconciling items removed from the revenue and expense of the financial statements, both Total Revenue on line 5 of Part XI and Total Expenses on line 5 of Part XII tie back to the Reported Total Revenue and Expense on page 1 of the 990.
If you would like more information about our Not-for-Profit Services or need assistance with your 990 please contact us at (800) 756-2772. We are here to help!