Is Form 990 Changing? | Meaden & Moore

Earlier this year, the Treasury Department announced a new transparency initiative that’s going to affect certain nonprofits. To better identify misuse of public funds, the Treasury department plans to update the reporting requirements for entities that engage in government contracts, government grants, and fiscal sponsorship arrangements. Let’s review what’s happening.

What is the transparency initiative?

Earlier this year, the Treasury issued a press release that announced its intent to change nonprofit reporting requirements on Form 990. As a result, many nonprofits will be asked to provide additional information about some of the activities they engage in.

The Treasury is aiming for clearer reporting, strengthened tax administration, and greater accountability for entities that use government funds. They want to understand how public funds are used and how they are classified on the financial statement, with the goal of reducing “the risk of fraud, abuse, and misuse of taxpayer dollars,” and holding wrongdoers accountable.

What entities will be affected?

The press release pointed out three scenarios that are the focus of the expanded reporting requirements:

1. Government Grants
   A government grant is funding by a government agency to support a specific program or project carried out by a nonprofit in a manner outlined in the grant agreement.
2. Government Contracts
   A government contract is an agreement in which a government agency pays a nonprofit for goods or services to be delivered on a predetermined timeline, just as a for-profit business would engage in such an agreement. This differs from a grant because the government is purchasing goods or services from the nonprofit at a fair and reasonable price rather than funding a charitable program.
3. Fiscal Sponsorship Arrangements
   A fiscal sponsorship arrangement is when a tax-exempt nonprofit (the “fiscal sponsor”) provides financial and administrative support to a charitable project that doesn’t have its own 501(c) tax-exempt status. The fiscal sponsor may or may not use government funds for these kinds of agreements.

What should nonprofits do to prepare?

As of September 2026, the specific modifications to Form 990 haven’t been announced. The Treasury will need to release proposed regulations and hold a public comment period before financial reporting will have to change. But nonprofits who engage in these types of activities may want to start preparing early. For example, nonprofits should make a complete list of all the government grants and contracts they have, then ensure that they’re able to:

• Trace every dollar received to every dollar spent;
• Track when funds are received and when funds are used;
• Ensure their use of the funds is in alignment with the grant agreement or contract; and
• Separately classify which revenue came from government sources on their financial statement.

For entities that are fiscal sponsors, be careful with how public funds are being used in your arrangements. The terms of your award may allow it, but you’ll be expected to maintain tight control over those funds. All financial support allocated to or intermingled with the sponsored organization should be well-documented and traceable. And as a failsafe, you may want to consider establishing a committee that oversees these arrangements. Oversight activities can show the Treasury that you’re maintaining strict vigilance over the money you’ve been awarded and can serve as a second tier of protection against misuse of those funds.

This could be a significant change for nonprofits accepting federal funds and could increase the burden on CFOs and their teams come tax time, but our nonprofit team will be prepared and ready to make the transition as easy as possible.

Prepare Your Nonprofit for Potential Reporting Changes

Does your organization receive government grants, hold government contracts, or serve as a fiscal sponsor? Meaden & Moore’s nonprofit team can help you review your documentation and reporting processes and prepare for potential changes to Form 990. Contact us to discuss your organization’s needs and how we can help.

Coauthored by Cory Isler-Manzo and Andrea Hoban