Form 990 Preparation Checklist
Gathering documents is the easy half of a 990. The two questions no document answers are what cost you three weeks.
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Every Form 990 preparation checklist you can find is a list of documents to gather. Trial balance, bank statements, board roster, minutes, contribution records, W-9s, prior year return. Gathering those is the easy half of the job and it is the half every checklist covers, which is why they all read alike. The hard half is that two of the organiser's questions cannot be answered from any document the organisation already has, and those two are what turn a two-day job into three weeks of follow-up email.
The first is the functional expense split. Part IX divides every natural expense across programme services, management and general, and fundraising, and the instructions permit any reasonable method while requiring you to document the method in your records. Almost nobody does. So this pack scores each line on whether a record produces its split, then re-bases the ones that fail onto a basis that a record can produce, and reports what moved. An inherited basis counts as exposed, because payroll taxes are only as documented as the salaries they follow.
In the worked example 12.2% of expense dollars have a documented basis. A one-week time study and a measured floor plan take programme services from $1,395,723 to $1,225,126, so 70.3% down to 61.7%. That is 8.6 points of a public ratio, found in August for 36 hours of work rather than argued about in November. The second question is the interested-person threshold, and it is a computation nobody performs.
What is in the pack
Functional Expense Allocation
Every Part IX line with the record that produces its split named, or the absence named instead.
Four scores, applied strictly
Documented, partial, inherits or undocumented, where square footage nobody measured is undocumented rather than a method.
The re-based ratio
What a time study and a measured floor plan do to the programme expense percentage, in points and in dollars.
A computed Schedule L threshold
One percent of your own total revenue, worked out before any transaction is looked at rather than after.
Related Party Register
Roster joined to vendor ledger joined to disclosure forms, with exclusions kept and the deciding test written down.
Does not exist as a bucket
The organiser sorted three ways, with the hours and the dollars each missing document governs.
How it works
- 1
Send the trial balance
And the organiser if your accountant has sent it. Scoring the allocation bases is the answer with the longest lead time, so it goes first.
- 2
Score, do not re-base
Two separate passes on purpose. The moment you are looking for a defensible number you stop noticing that there is not one.
- 3
Send three lists
Board roster, vendor payments over $5,000, signed conflict of interest forms. The forms are the ones people forget, because they live with the secretary.
- 4
Do the fieldwork once
A one-week time study and a tape measure. Then the methodology memo, which is why none of it has to be repeated next year.
Frequently asked questions
Does the IRS actually require a documented allocation method?
The instructions say an organisation whose accounting system does not allocate expenses may use any reasonable method, and that it must report amounts accurately and document the method of allocation in its records. So an undocumented split is not necessarily wrong. It is unsupported, and that decides what work follows.
Why does an 8.6 point swing matter?
The programme expense ratio is public. Donors, funders and rating sites read it straight off the return, and the prior year was filed on the old basis, so the comparative moves too. Finding that in August with a memo behind it is a different conversation from finding it in November.
Is a time study really necessary?
One week across everyone is usually enough, and it was 26 hours here. What is not enough is a manager estimating other people's time, because that produces the same kind of number the 2021 percentage already is. The study also fixes pension, benefits and payroll taxes for free.
Why compute the Schedule L threshold?
Because one test is the greater of $10,000 or 1% of total revenue for a single transaction, so it differs by organisation and by year. At $1,914,000 of revenue it is $19,140, which is what makes a $31,200 IT contract reportable and no generic checklist can tell you.
What if someone disclosed a conflict but we still missed it?
That is the normal case. A form asking whether you have a conflict, without asking for entity names, cannot be reconciled against a vendor ledger. The fix is a form design change plus an annual reconciliation, not a reprimand, and it belongs on a board agenda with a date.
Can we write up minutes we never took?
No, and the pack will not draft them. The governance answer becomes No, the practice gets explained on the supplemental schedule with dates, and the substantive decisions get ratified going forward. A document created now and dated then is not a record, it is a different problem.
How does this connect to grant reporting?
The programme narrative uses the same counts your funders see, so the return and the award reports stop disagreeing. Where an outcome indicator has no data behind it, the narrative says so rather than approximating a percentage.
Find out what your split is standing on
Send the trial balance and the organiser. The first thing back is the share of your expense dollars with no documented basis behind them.
Score my allocation