Shake Rag Alley’s Form 990: A Board Case Study

Form 990 is an annual public information return, not an audit opinion, budget, or complete management statement ¹. It is still one of a director’s most useful orientation documents.

Public snapshot

The public filings summarized by ProPublica show ²:

FY2024 details:

• assets: $1,272,717;
• liabilities: $279,184;
• wages: $182,203, 36.1% of total expense;
• investment income: $12,989;
• net rental income reported: $32,275;
• net fundraising-event income reported: $1,411;
• net gain on asset sales: $24,119;
• current filing reports $0 compensation to directors.

Calculate before interpreting

Contributions share

$408,835 / $678,006 = 60.3%

FY2023:

$182,050 / $497,144 = 36.6%

Program-service share

$186,667 / $678,006 = 27.5%

FY2023:

$247,907 / $497,144 = 49.9%

Liability-to-asset snapshot

$279,184 / $1,272,717 = 21.9%

Expense growth

($504,699 − $471,523) / $471,523 = 7.0%

These calculations create questions, not verdicts.

The board questions

Contribution spike

• What gifts or grants explain the $226,785 increase?
• How much was donor-restricted by purpose or time?
• Was any amount capital, planned, one-time, multiyear, or in-kind?
• Did a campaign or accounting-timing event occur?
• Which portion should not support recurring expense?
• Is donor concentration higher?

Program-service decline

• Which program families changed?
• Is this volume, price, mix, cancellation, scholarship, timing, or classification?
• Did the prior year include an unusual program?
• Did contributed funding intentionally expand access?
• What do current enrollment and forward bookings show?

Surplus and net assets

• How much increased unrestricted liquid resources?
• What portion is restricted or invested in property?
• Did receivables, deferred revenue, debt, or capital assets move?
• What is the recurring operating result excluding one-time/restricted/capital items?
• How does the internal statement reconcile to the return?

Asset sale gain

• What was sold, who authorized it, and was it mission/property related?
• Is the $24,119 gain distinct from cash proceeds?
• Were donor, preservation, or board restrictions involved?
• Is this excluded from operating trend analysis?

Read the whole return

Do not stop at Part I. Inspect:

• Part III: mission and program accomplishments—does narrative communicate public value?
• Part IV: schedules required;
• Part VI: governance, policies, board independence, return review, availability;
• Part VII: officers/directors/key employees and compensation;
• Part VIII: revenue classification;
• Part IX: functional expense;
• Part X: balance sheet;
• Part XI/XII: reconciliation and accounting/reporting;
• Schedules A/B/D/G/L/O when present: public support, contributions, supplemental financial data, fundraising/gaming, interested transactions, explanation.

The public version generally omits donor-identifying Schedule B information.

Board review process

The IRS asks whether a complete copy was provided to governing-body members before filing and requests a description of the review process; federal tax law does not itself require board review ³. Good practice:

1. finance/management and preparer reconcile to approved records;
2. finance/audit committee reviews numbers, classifications, governance answers, and narrative;
3. every director receives the complete board-review copy securely in time;
4. questions and corrections go to named owners;
5. authorized filer approves/signs;
6. final public and confidential copies are stored correctly;
7. governance or control gaps become action items.

Focus on:

• mission description and program narrative;
• officer names/terms/time/compensation;
• conflict and related-party answers;
• board-review description;
• fundraising/event/gaming reporting;
• revenue/expense classification;
• significant changes and Schedule O explanations;
• reconciliation to audited/reviewed/internal statements.

Write a board memo

Prepare one page:

Three facts: exact filing figures
Three hypotheses: clearly labeled, not asserted
Five internal documents needed: restriction schedule, recurring bridge, cash forecast, program revenue detail, asset transaction record
Two decisions/monitoring needs: what belongs on a future agenda

The discipline is crucial: public fact → tentative interpretation → internal verification → governance action.