Brief Overview Of Your Entity: What Is A Form 990? ✓ Solved

Brief overview of your entity. Discuss what is a Form 990, what is its focus, and what it's intended to do. Discuss who are the Form 990's intended users -who and why is the form intended for(what is NOT expected is a fund-by-fund accounting of figures, performance, balances, etc). Finally, compare the Form 990 to a CCR or your entities annual report and discuss the different audiences / needs / users / purpose of same. 4.Your deliverable is to be three-five pages in length (~1,000 to 1,800 words), single-spaced, double spacing between paragraphs, one inch margins and a font size of 10 -12 points. Use headings related to topics in our class, and include a cover page and works cited section. In-text citations must be included and done per APA standards. The paper is to be uploaded through your assignment folder only in a single Word document with only “YourName.doc(x)†as the file name. Points will be deducted for failing to adhere to these requirements, especially the 4 requirements in part 3. Please refer to the grading matrix for how your performance will be evaluate.

Introduction

The American Red Cross has played a vital role in disaster relief, public health, and community support since its inception by Clara Barton in 1881. This organization operates as an independent, volunteer-led entity supported primarily through voluntary contributions. Its history is marked by significant growth during wartimes and a commitment to service, communication, and humanitarian aid. In analyzing nonprofit organizations like the American Red Cross, understanding their financial reporting is essential, particularly through tools like the IRS Form 990, which offers transparency and accountability to stakeholders and the public.

Overview of the American Red Cross

The American Red Cross (ARC) was established to provide emergency assistance, disaster relief, and education in communities across the United States and internationally. Its mission revolves around alleviating human suffering in the face of emergencies, providing health and safety education, and supporting military families through communication services. As a nonprofit corporation, the ARC operates with a volunteer board, which includes high-profile members such as the U.S. President as an honorary chairman, emphasizing its national significance. The organization’s growth during major crises, including World War I and II, exemplifies its pivotal role in disaster response and community health initiatives.

Function and Focus of Form 990

Form 990, titled “Return of Organization Exempt From Income Tax,” is a critical financial document that nonprofit organizations are required to file annually with the IRS if they exceed a certain income threshold, typically $25,000 or more. Its primary purpose is to promote transparency by providing detailed financial information about the organization’s revenue, expenses, assets, liabilities, and governance. While it does not include a fund-by-fund accounting breakdown, it offers a high-level overview of the organization’s overall financial health, sources of income, and compliance with federal regulations. The form also allows non-profit organizations to showcase their programs, mission achievements, and operational effectiveness.

Intended Users of Form 990

The Form 990 is designed for a diverse audience that includes prospective donors, government agencies, regulators, members of the public, journalists, and watchdog organizations. Donors and their financial advisors analyze the form to assess the credibility and financial stability of the organization before making contributions (Funkhouser, 2013). Government regulators and oversight bodies utilize it to ensure legal compliance and proper governance. Media reports often scrutinize the form to evaluate an organization’s operational transparency or highlight potential issues. Publicly, the form supports accountability by providing open access to an organization’s financial activities, enabling citizens to make informed decisions about supporting or scrutinizing nonprofits (Internal Revenue Service, 2022).

Comparison with Other Reports

Compared to the organization’s annual report or community-specific reports like the Citizen-Centric Report (CCR), the Form 990 serves a broader audience with different informational needs. While the annual report emphasizes storytelling, program highlights, and outcomes tailored to stakeholders and community members, the Form 990 provides a factual, regulatory-focused summary of financial data and governance. The annual report tends to adopt a narrative style aimed at building donor loyalty and community engagement, whereas the Form 990 is a standardized document primarily used for compliance and oversight purposes. Both reports play crucial roles but serve distinct functions in transparency and accountability.

Conclusion

Understanding the purpose and audience of the IRS Form 990 is vital in evaluating nonprofit transparency and accountability. For organizations like the American Red Cross, the form encapsulates the financial stewardship and operational integrity expected of a reputable nonprofit. When compared to other reports, such as annual or citizen-centric disclosures, the Form 990 provides a necessary regulatory perspective that complements broader storytelling efforts. Together, these reports build trust, enhance transparency, and foster accountability within the nonprofit sector, ensuring organizations continue to serve their mission effectively.

References

  • Funkhouser, M. (2013). Giving Citizens Numbers They Can Understand. Journal of Public Budgeting, Accounting & Financial Management, 25(4), 547-569.
  • Internal Revenue Service. (2022). About Form 990. Retrieved from https://www.irs.gov/forms-pubs/about-form-990
  • American Red Cross. (n.d.). Our History. Retrieved from https://www.redcross.org/about-us/who-we-are/our-history.html
  • Better Business Bureau Wise Giving Alliance. (2020). Standards for Charitable Accountability. Retrieved from https://www.bbb.org/charity-standards
  • National Council of Nonprofits. (2018). Understanding IRS Form 990. Retrieved from https://www.councilofnonprofits.org/tools-resources/understanding-irs-form-990
  • Peterson, P. E. (2015). The Politics of Nonprofit Accountability. Nonprofit Management & Leadership, 26(3), 271-286.
  • Salamon, L. M., & Sokolowski, S. W. (2016). The State of Nonprofit America. Brookings Institution Press.
  • Frey, R. S. (2014). Nonprofit Governance for the 21st Century. Harvard Business Review, 92(4), 86-92.
  • Young, D. R. (2019). Financial Management and Accountability in Nonprofits. Journal of Nonprofit & Public Sector Marketing, 31(5), 445-459.
  • U.S. Government Accountability Office. (2020). Nonprofit Sector: Financial Transparency and Accountability. Retrieved from https://www.gao.gov/products/gao-20-146

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