Depending on the legal status of a nonprofit organization, it must make its annual tax filing available not only to its members but also to the general public. Whether or not it must release other financial documents to its members, such as budgets, its balance sheet or bank statements, is up to its board of directors or is specified in the organizational bylaws.
Nonprofit Organizations Types
The type of organization a nonprofit is has bearing on what financial information it must release. Nonprofits incorporate at the state level, and different states have different requirements for financial reporting. Some nonprofits obtain federal tax-exempt status, requesting a 501(c) designation from the U.S. Internal Revenue Service, depending on their mission.
Advertisem*nt
Article continues below this ad
Reporting Requirements
Nonprofits that gain federal tax-exempt status file an annual Form 990 with the IRS. Similar to an income tax return, this document is available to the public, which can access the information in a variety of ways. You can write to the IRS for a copy, paying a small fee to cover printing and mailing costs. You can visit the office of the nonprofit to review the document or request a copy, either printed or electronic. Some websites, such as Guidestar and the Foundation Center, provide free copies for download. If a nonprofit is only incorporated at the state level and does not have federal tax-exempt status, visit the website of your secretary of state to learn the financial reporting rules for nonprofits and what information you can access.
Bylaws Requirements
Nonprofit organizations have bylaws, which are guidelines for how an organization must be run and policies and procedures it must follow. Some nonprofits require specific financial disclosures to the members in its bylaws, while others don't address this. Check the bylaws of the nonprofit you belong to or serve as a board of director member to determine what access the membership has to financial records.
Advertisem*nt
Article continues below this ad
Common Practices
Nonprofits generally provide their members with at least a broad overview of the association's finances. This might include the beginning and ending bank balances for the fiscal year, a copy of the organization's balance sheet or a breakdown of how the organization's money was generated and spent. This might include creating a pie chart that shows the percentage of the organization's spending that went to office administration, fundraising expenses and charitable work. The organization might provide another bar or pie chart that shows where its funds came from, such as membership dues, education and training fees, sponsorships and donations.
References
- The Center for Nonprofits: IRS Public Inspection/Disclosure Rules for Non-Profit Form 990 and Applications for Tax Exemption
- Nolo: Are a Nonprofit's Finances Public Information?
- IRS.gov: Public Disclosure and Availability of Exempt Organizations Returns and Applications -- Documents Subject to Public Disclosure
Advertisem*nt
Article continues below this ad
