Part VI, Section A of the Form 990 Shines a Light on Your Board and Governance Practices

Part VI, Section A of the Form 990 asks many probing questions related to a nonprofit organization’s “Governing Body and Management.” How an organization chooses to respond to these questions will directly impact perceptions of the quality of its management systems and the integrity of its governance practices, so be thoughtful and complete with your responses.

Treat Part VI, Section A as your opportunity to put the best light on your governance practices and certain special circumstances that the governing body might have had to address during the past tax year. To bring some clarity and help you navigate and craft your responses, R. Michael Sorrells (CPA) and I jointly authored a guide sheet highlighting key elements of this portion of the Form 990.

Responses to Part VI, Section A of the Form 990 are highly visible and are often used to assess an organization’s commitment to best practices, transparency, and ethical conduct. To emphasize this high visibility point of view, notice that Lines 1a and 1b from Part VI roll up for prominent disclosure on Page 1 of the Form 990 (Part 1, Lines 3 and 4). You cannot get more front and center than this grab for attention. For this reason, Lines 1a and 1b provide an excellent case in point on the prominence and importance of Part VI, Section A in general.

Line 1a directs you to “[e]nter the number of voting members of the governing body at the end of the tax year, while Line 1b asks you to "[e]nter the number of voting members included on line 1a, above, who are independent.” Consider how a response on line 1a of 15 total Board members looks related to a response of 13 “independent” Board members on line 1b. The initial reaction might be there are negative circumstances causing the independence impairment of two Board members. The reality could be the opposite, where two Board members are providing significant services to the organization at reduced cost.

In these types of situations, it is particularly beneficial to use the opportunity to provide a thoughtful narrative in Schedule O, offering insight and encouraging feelings of trust for a response related to Board member independence that, on the surface might be considered negative.

Planning Tip – Add a separate procedure to thoroughly review all Form 990, Schedule O content each year before filing. Schedule O was designed as an open platform to provide both required and optional information. Often the information disclosed will be influenced by changing circumstances both expected and unexpected. For these reasons, assume almost all Schedule O responses and inclusions will need to be changed, updated, or edited each year. Do not rely on plugging in comments from the preceding year as adequate disclosure.

Refer to the Part VI, Section A Guide Sheet for insights and tips for the remaining lines of this portion of the Form 990. Stay tuned for additional guide sheets on the Form 990 to be posted in the future. In particular look for separate companion Guide Sheets on Part VI, Section B (Policies) and Section C (Disclosures).