Nonprofit leaders may soon see increased scrutiny — and potentially new reporting expectations — when it comes to federal Form 990.
The U.S. Department of the Treasury recently announced that the IRS is considering revisions to Form 990 aimed at improving transparency around key areas, including government grants, contracts and fiscal sponsorship arrangements. While no changes have been finalized, the message is clear: regulators are placing greater emphasis on how nonprofits receive, manage and report funds.
At this stage, nothing has changed from a compliance standpoint. The IRS has indicated that proposed regulations will be issued before any updates to Form 990 are implemented.
However, nonprofits should view this development as an early signal — not something to ignore. Historically, when the Department of the Treasury highlights a reporting concern, more detailed disclosure requirements often follow.
Taking proactive steps now can help your organization avoid scrambling later.
One area that could see expanded reporting is fiscal sponsorship.
Fiscal sponsorship can be an effective way for established 501(c)(3) organizations to support new charitable initiatives. But from a regulatory perspective, these arrangements can sometimes blur the lines around:
Who is actually operating the project
Who has control over the funds
How those funds are ultimately used
If Form 990 is revised, nonprofits engaged in fiscal sponsorship may be required to provide more detailed disclosures related to governance, oversight and financial activity tied to those projects.
In addition to fiscal sponsorship, the IRS is signaling interest in more detailed reporting surrounding:
Government grants
Government contracts
The flow of public funds through nonprofit organizations
This aligns with a broader push for accountability, especially as nonprofits continue to play a significant role in administering federally funded programs.
There’s no need to make immediate changes to your filing approach — but this is a good time to evaluate your current processes.
Review how you track government funding — make sure grants and contracts are clearly documented and easily traceable in your financial records
Revisit fiscal sponsorship agreements — confirm that roles, responsibilities and control of funds are clearly defined and documented
Assess governance and oversight practices — ensure your organization can clearly demonstrate who is responsible for financial and operational oversight
Strengthen documentation now — having thorough, well-organized records will make it easier to adapt if new reporting requirements are introduced
Organizations that take time now to strengthen documentation, clarify oversight and improve reporting practices will be in a much better position to respond when new requirements are introduced.
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