What Part VI of Your 990 Quietly Tells Donors and Funders

Most of a Form 990 is about money — what came in, what went out, what the organisation holds. Part VI is different. It asks about how the organisation is governed: who sits on the board, how independent they are, which policies are in place, and whether anyone actually reviewed the return before it was filed. Almost none of it is about dollars. (This piece is about the full Form 990; organisations small enough to file the 990-EZ answer a lighter set of governance questions.)

It is also, increasingly, the section that funders and watchdogs read most closely. An organisation can have clean numbers and still send the wrong signal here — or have modest numbers and signal that it is genuinely well run. This piece is about what Part VI communicates to the people deciding whether to trust you, and why a thin or careless answer costs more than it looks like it should.

Why this section carries so much weight

Part VI was added in the 2008 redesign of the Form 990, after a period of serious concern about governance and abuse of nonprofit status, and its purpose is to give the public a window into how an organisation actually governs itself. That purpose has stuck. Charity watchdogs pay close attention to this section, and so do the IRS, state attorneys general, and prospective donors.

Here is the part that surprises people: most of what Part VI asks about is not legally required. There is no law compelling a small nonprofit to have a whistleblower policy. But the disclosure of whether you have one is what signals a well-run organisation — and the rating agencies that donors consult build their scores partly on these answers. So the questions sit in an unusual place: optional in law, close to mandatory in the court of funder opinion.

What the section actually asks

Part VI moves through three areas, and each one tells a reader something specific.

The governing body. It asks how many voting members your board has, and how many are independent. Independence matters because independent directors are the foundation of credible governance. A board stacked with insiders, family members, or people with financial ties to the organisation reads as a body that cannot truly hold management to account. There is no legal minimum, but watchdog groups often look for a substantial majority of independent members. The section also asks about family and business ties among officers, directors, and key employees — because those ties are exactly where conflicts hide.

The policies. This is the heart of the section. It asks whether the organisation has adopted a conflict-of-interest policy, a whistleblower policy, and a document-retention policy. For the conflict-of-interest policy it goes a step further, asking whether the organisation actually monitors and enforces it — a pointed question, because a policy that exists on paper but is never applied is exactly the gap that causes trouble. It asks how executive compensation is set. And it asks, pointedly, whether the governing body reviewed the Form 990 before it was filed. Each “yes” reassures funders and regulators that internal controls exist. Each “no” raises a question the organisation then has to answer.

Disclosure. Finally, it asks how the organisation makes its governing documents and financial information available to the public. Transparency about transparency, in effect.

The risk most boards don’t see

There’s a trap in this section that’s worth naming directly, because it catches well-meaning organisations. The risk isn’t only failing to adopt these policies. It’s adopting them on paper and not following them.

Here’s why that matters more than it used to. Regulators and funders increasingly check what an organisation says in its 990 against its actual board minutes, internal policies, and public statements — especially when a concern arises. Picture an organisation that answers “yes, we have a conflict-of-interest policy” but can’t show it was ever applied. It has created a gap between its filing and its reality. When something goes wrong — an allegation of misused funds, a board that failed to oversee — that gap becomes evidence. Recent enforcement actions against nonprofits have framed the alleged wrongdoing as exactly this: a failure of the oversight and controls Part VI asks about. The answer on the form set an expectation the organisation couldn’t meet.

So Part VI is not a box-ticking exercise where more “yes” answers are simply better. A “yes” is a claim. The organisation has to be able to stand behind it.

The line that funders read first

One question deserves singling out, because it’s the one most directly tied to credibility: did the board review the 990 before it was filed?

A “yes” here tells a funder that the people ultimately responsible for the organisation actually looked at its most important public document before it went out. A “no” tells them the return may have been filed without the board ever seeing it — which raises a fair question about what else the board isn’t seeing. It costs nothing to do. It isn’t legally required. And it moves an organisation’s credibility more than almost any other answer in the section. An organisation that can’t say yes to this should treat it not as a filing problem but as a governance one to fix.

Where the money connection becomes direct

Part VI also reaches into the one financial area where governance and exposure meet: executive compensation. It asks whether the process for setting top compensation involved review by independent people, used comparability data, and was documented at the time.

This isn’t an idle question. Those three steps — independent review, comparability data, documentation made at the time — are the established way an organisation protects itself if the IRS ever questions whether its pay was reasonable. Follow them, and you have a strong defence. Skip them, and you have exposure. Part VI is where a funder, or a regulator, sees at a glance which of the two you are.

The program descriptions that sit alongside it

Worth a brief word, because it’s read in the same breath as governance: the program-accomplishment narratives elsewhere in the form. Funders and watchdogs read these carefully, and the language matters. Vague phrasing — “provided services to the community” — reads as a red flag, a sign the organisation either can’t or won’t show its work. Specific language — numbers served, outcomes achieved, money spent per program — signals an organisation that knows its own impact. Governance answers and program specifics together form the picture a funder builds before deciding whether to give.

The point underneath all of it

Part VI rewards organisations that are genuinely well governed and quietly penalises those that aren’t — not through IRS penalties, but through the slower cost of funders and watchdogs reading the signals and deciding accordingly. The organisations that present well here aren’t gaming anything. They have independent boards, real policies they actually follow, a board that reviews the return, and a pay process that would survive scrutiny. Part VI simply lets them show it.

That’s why this section repays a careful review before filing. Not to manufacture better answers, but to see your 990 the way a funder will: to catch the “yes” you can’t yet stand behind, the policy that exists but isn’t followed, the board-review line still sitting at “no.” The filing is a signal whether you intend it to be one or not. The only choice is whether you’ve read it the way your funders will.

The short version

Part VI asks how your organisation is governed — board independence, conflict-of-interest and whistleblower and retention policies, how compensation is set, and whether the board reviewed the 990. Most of it isn’t legally required, but funders, watchdogs, and rating agencies read it closely, and a “yes” you can’t back up can become a liability if anything is ever questioned. The board-review question and the compensation process carry particular weight. Reviewed well, Part VI is where a well-run organisation gets to prove it.

Reading a 990 the way a funder will is exactly what The EdiQual Review Standard™ does. EdiQual Systems reviews your filing for the governance signals that shape funder and regulator trust — the policies, the disclosures, the board-review line — and tells you where you stand in plain language. Independent assurance, not tax preparation, working alongside your existing preparer. Make an enquiry to discuss a review.