Schedule B and the Part VI governance questions an auditor reads

• Apply the Schedule B general rule and the 2% special rule
• Use Schedule B to test contribution completeness and concentration
• Interpret the Part VI governance and policy questions
• Compare Part VI answers with audit evidence and raise inconsistencies

Schedule B in brief

Form 990, Part IV, line 2 asks whether the organization must complete Schedule B, Schedule of Contributors. The instructions (revised December 2024) set the rules.

• General rule. Report each person who contributed $5,000 or more, in money or other property, during the tax year. A "person" includes individuals, fiduciaries, partnerships, corporations, associations, trusts and exempt organizations.
• Special rule for 501(c)(3) organizations that meet the 33 1/3% support test under the regulations for sections 509(a)(1) and 170(b)(1)(A)(vi). Report only contributors whose gifts exceed the greater of $5,000 or 2% of the amount on Form 990, Part VIII, line 1h.
• Special rules for 501(c)(7), (8) and (10) organizations receiving gifts for exclusively religious, charitable, scientific, literary or educational purposes, with a threshold of more than $1,000 in total for the year.

Under the general rule and the 2% special rule, total a contributor's gifts by including each separate gift of $1,000 or more; smaller gifts can be disregarded. Section 501(c)(7), (8) and (10) organizations total all of a contributor's gifts regardless of amount. Only section 501(c)(3) organizations and section 527 political organizations report contributor names and addresses; other filers enter "N/A" but keep the information in their records. Part I lists contributors and amounts, with the type of contribution (person, payroll or noncash). Part II describes noncash property and its fair market value. Part III covers exclusively religious, charitable and similar gifts for the organizations under the special rules.

Public inspection. For most Form 990 filers, contributor names and addresses are not required to be made public. Schedule B is open to public inspection for Form 990-PF filers and section 527 political organizations. Treat client Schedule B data as confidential in your files.

How an auditor uses Schedule B

• Completeness. Large donors on Schedule B should appear in the donor database and in contribution revenue. A Schedule B donor missing from the books is a red flag.
• Concentration. A few donors giving most of the revenue is a going concern and liquidity factor.
• Noncash gifts. Part II noncash items should agree to the gifts in kind recognized under ASU 2020-07. Explain any difference in recognition or valuation as a reconciling item.
• Related parties. Board members and their companies often appear as major donors.

Schedule B reflects the tax year and tax rules, so differences from GAAP timing (for example, a pledge recognized in the books before cash is received) are expected. Reconcile them rather than assume an error.

Part VI: governance, management and disclosure

Part VI has three sections. Section A asks about the governing body and management, Section B about policies, and Section C about disclosure. The instructions note that the policies in Section B generally are not required under the Internal Revenue Code, but the IRS considers them to improve tax compliance. For the auditor they are evidence about the control environment.

Questions worth reading closely:

• Lines 1a and 1b: the number of voting board members and how many are independent.
• Line 2: family or business relationships among officers, directors, trustees and key employees. Cross-check to your related party inquiries.
• Line 3: whether management duties were delegated to a management company.
• Line 4: significant changes to governing documents.
• Line 5: significant diversion of assets (see the audit risks lesson).
• Lines 8a and 8b: contemporaneous documentation of board and committee meetings. The instructions treat documentation as contemporaneous if made by the later of the next meeting or 60 days after the meeting or action.
• Lines 11a and 11b: whether the board received the Form 990 before filing and the review process.
• Lines 12a to 12c: a written conflict of interest policy, annual disclosure of interests, and regular monitoring and enforcement.
• Lines 13 and 14: whistleblower and document retention policies.
• Line 15: whether compensation of the top official and other officers was set with review by independent persons, comparability data and contemporaneous documentation.

Turning answers into audit evidence

Compare each answer with what you saw. If line 8a says Yes but minutes for two board meetings were never written, that is an inconsistency. If line 12c says the conflict policy is monitored but no annual disclosure forms exist, raise it. Material inconsistencies in other information you read are matters for those charged with governance. The related party questionnaire maps to several of these questions.

Schedule B threshold at Greenway Watershed Council