Q&A #151 – Who should nonprofits name as their principal officer at the top of the Form 990?
Question: My organization has a Board Chair, Board President, and an Executive Director. Who is the right person to name as the “’principal officer” at the top of the Form 990? And should this be the same officer who signs the Form 990 at the bottom of page 1?
Answer: The Form 990 instructions state that for purposes of Item F at the heading of the Form 990, the “principal officer” is the person who “regardless of title, has ultimate responsibility for implementing the decisions of the organization's governing body, or for supervising the management, administration, or operation of the organization.” Application of this definition will vary depending on the organization, and this will not necessarily be the same officer who signs the Form 990 at the bottom of page 1.
The definition of “principal officer” for purposes of Item F is broad and can be subject to varying interpretations. The Form 990 instructions contemplate two different ways to read the term:
The officer who has ultimate responsibility for implementing the decisions of the organization's governing body; or
The officer who has ultimate responsibility for supervising the management, administration, or operation of the organization.
This suggests some flexibility for organizations to choose the “principal officer” based on what is most appropriate under their governance structure. For some organizations, this could be the Chairperson or Board President if this is the person most responsible for “supervising” the work of the organization’s executive management. For other organizations, it could be more appropriate to use the Chief Executive Officer or Executive Director, whose role is more directly to “implement” the decisions of the Board of Directors.
In my experience, most organizations use an executive management position rather than a Board position for the “principal officer.” This interpretation is implicitly supported by the instructions related to the term “top management official” for purposes of Part VI and Part VII of the Form 990, which uses an almost identical definition and emphasizes examples of the Chief Executive Officer, Executive Director, or a delegated person at a “management company.”
There are also practical reasons why it may be preferable to name a person from an executive management position as the “principal officer” when possible, since Board positions tend to turn over more frequently than executive management positions. For example, there is an often-overlooked requirement to file a Form 8822-B within 60 days of a change in the “responsible party” named for purposes of the organization’s employer identification number (also known as an EIN or tax ID number). The instructions to the Form SS-4 explain that “for tax-exempt organizations, the responsible party is generally the same as the ‘principal officer’ as defined in the Form 990 instructions.” Complying with this requirement can be quite burdensome if the “responsible party” / “principal officer” is a Board position that cycles through new people every year or two.
Planning Tip – The person named as the principal officer in the Form 990 heading will be perceived as one of the organization’s foremost representatives due to the prominence of Item F at the top of the first page of the Form 990. Make sure the person named on this line is willing and able to skillfully answer questions, address issues, and, if necessary, accept public accountability for the organization’s operations.
Additionally, note that Form 990 instructions make clear that the “principal officer” named in Item F may, but need not, be the same officer who signs the Form 990 at the bottom of page 1, stating that the definition of “officer” for purposes of the signature block is “different … from the definition of “principal officer” for purposes of the Form 990 heading.” The Form 990 may be signed by any authorized officer, such as the “current president, vice president, treasurer, assistant treasurer, chief accounting officer, or other corporate officer (such as a tax officer).”
Indeed having an officer such as the CFO sign the Form 990 while listing a different officer such as the CEO as the “principal officer” can be a good way to demonstrate both segregation of duties and sharing of management responsibilities.
If you have a question you would like to submit to SE4N, send it to us using the contact form and we will consider answering it in a future post. Please do not send confidential information.
