The 2026 Form 990 Transparency Overhaul: What Nonprofits Must Disclose About Government Grants and Fiscal Sponsorships

Your nonprofit filed a clean Form 990 last year. Government grants on Schedule I, related organizations on Schedule R, fiscal sponsorship tucked into a footnote. This year Treasury wants all of that out in the open — searchable, structured, and line-item visible.

On April 23, 2026, Treasury announced proposed revisions to Form 990 aimed at what it called "fraud, abuse, misuse" and undisclosed flows of public money through the tax-exempt sector. BDO's summary of the proposal put it bluntly: tax-exempt status is not immunity from scrutiny. The message is that leadership can be held responsible for how charitable vehicles are used — and the form is about to ask much more pointed questions.

The proposal is not final. Treasury and the IRS must issue proposed regulations and a public comment period before any line item changes. But the direction is clear enough that every 501(c)(3) with government funding or a fiscal sponsorship should be preparing now. Here's what the overhaul is targeting and how to get ahead of it.

What Form 990 Is — And Why Treasury Is Rewriting It​

Form 990 is the annual information return most tax-exempt organizations file (the 990-N postcard, 990-EZ, and full 990 depend on gross receipts and assets). It is public. Journalists, donors, watchdogs, and the IRS itself pull it from Candid/GuideStar, ProPublica Nonprofit Explorer, and the IRS Tax Exempt Organization Search.

That public-by-design nature is why Treasury is using it as the lever. Rather than a new statute, the proposal expands disclosure on an already-public form — then layers structured data and automated review on top so the IRS can flag high-risk returns at machine speed, not audit speed.

Three structural shifts matter before the substance:

1. From PDF narrative to structured data. The IRS plans to require more fields as machine-readable, structured data rather than free-text attachments. Automated screening will surface grant concentration, related-party markers, and sponsorship language far faster than a manual desk review.
2. From sampling to screening. The IRS has signaled it will use those structured fields to triage which returns get deeper review — similar to how financial-institution filings are triaged. A thin narrative that once passed quietly may now be flagged before a human ever opens it.
3. Public disclosure stays public. Anything added to the 990 is generally disclosable (the major exception is Schedule B donor names for 501(c)(3) public charities, withheld from public inspection under §6104). Assume a new government-grant or sponsorship table will be as visible as Part VII compensation is today.

Shift 1: Government Contracts and Grants — From Aggregate to Granular​

What is changing​

Today, government grants and contracts appear in a few places:

• Part VIII, Line 1e — aggregate Government grants (contributions) as a single number.
• Schedule I — grants you made to others (not grants you received).
• Part IX / audited financials — functional expense allocation.

That aggregation hides most of what Treasury says it wants to see. The proposal points toward clearer, more granular reporting of where public money originated and how it was applied — closer to a grant-level schedule than a single roll-up line.

While the exact new schedule and line numbers have not been published, the questions Treasury is asking point to three new disclosure layers:

• Source identification: Agency, program, and award identification (e.g., federal agency and Assistance Listing/CFDA number for federal awards, plus state/local agency and contract number for direct government contracts). Expect linkage to Single Audit (Uniform Guidance, 2 CFR 200) identifiers where applicable.
• Amount and relation to revenue recognition: For each award — amount awarded, amount recognized as revenue in the tax year, deferred revenue balance, and whether conditions (performance barriers, right of return) remain unmet. This is where ASC 958 conditional-contribution logic meets the 990: a grant that is conditional is not revenue until the barrier is overcome.
• Use and sub-recipients: Brief purpose description, whether funds were sub-awarded, and to whom — tying to Schedule I where those sub-awards are already disclosed but without the upstream source link.

Why it matters now — two enforcement threads converging​

• Uniform Guidance scrutiny. A nonprofit spending $1M+ in federal awards in a fiscal year triggers a Single Audit. The 990 sits outside the Single Audit, but auditors and the IRS cross-read them. A gap between "federal revenue on the 990" and "federal expenditures on the SEFA" has always been a reconciliation risk; granular 990 reporting will make that gap machine-detectable.
• Whistleblower and referral pipeline. The proposal followed a public call for tips on misuse of federal funds, self-dealing, and improper insider transactions. Structured grant data gives that pipeline something to join against.

What to do before the lines go live​

• Build a grant register the 990 can read. One row per government award: Award ID | Agency & program | Period of performance | Total award | Conditions/barriers | Amount recognized (current year) | Deferred balance | Sub-awards issued | SEFA linkage. Your accounting system may already hold most of this; the 990 will want it in one place.
• Tag every government dollar at receipt. In your chart of accounts, distinguish Government contribution (unconditional) vs Government conditional contribution — deferred vs Exchange transaction — government contract (ASC 606) vs Cost-reimbursement advance. Lumping a cost-reimbursement grant and an unconditional contribution into the same revenue account guarantees a disclosure error.
• Reconcile 990 Part VIII ↔ SEFA ↔ audited statements now. If Part VIII government grants plus government contract service revenue does not foot to the federal expenditures on your SEFA (adjusted for timing and non-federal government awards), find out why before the IRS does. Document the bridge.
• Prepare the narrative. Treasury's framing is about how public money is used. Keep a one-paragraph per-award "use of funds" description that is true to the grant agreement, the budget, and the financials — identical language in all three.

Shift 2: Fiscal Sponsorship — The Model Treasury Wants in the Light​

What fiscal sponsorship is (and why it draws scrutiny)​

In a fiscal sponsorship, a 501(c)(3) sponsor receives tax-deductible contributions and government awards on behalf of a sponsored project that is not itself a 501(c)(3), then oversees their use for charitable purposes. Legitimate uses are everywhere — artist collectives, documentary films, mutual-aid funds, testing a new program before it spins out.

There are two dominant structures, and Treasury appears interested in distinguishing them:

• Model A (comprehensive / direct project): The project is a program of the sponsor. The sponsor employs the staff, owns the assets, and bears legal and fiscal responsibility. There is no separate entity.
• Model C (pre-approved grant relationship): The project is a separate entity (often unincorporated or a disregarded LLC). The sponsor makes grants to the project and exercises variance power and oversight but does not operate it.

Model C is the higher-risk vector in the proposal's framing because money moves to a legally distinct project with its own governance. When documentation is thin — no written sponsorship agreement, no variance power, no expenditure responsibility — the arrangement can look like a conduit for deductible dollars or public funds with limited oversight.

What the new disclosure likely asks​

BDO's summary says the proposal would require sponsors to name sponsored initiatives, state who controls the funds, and explain how the money is used. In form terms, that maps to:

• A dedicated schedule or expanded Schedule R. Today, Schedule R captures related and controlled organizations, but many Model C projects are not "related organizations" — they are grantees with a special agreement. Expect a new table or a new part of Schedule R/O that captures every active sponsorship, not just those that meet the current related-organization definition.
• Per-project fields: Project legal name (or DBA if unincorporated), EIN or other identifier, model (A vs C), purpose, date sponsorship began, total funds received for the project in the tax year (split between contributions and government awards), total disbursed, balance held at year-end, and fees retained by the sponsor.
• Governance and control attestations: Does the sponsor have written sponsorship agreements for each project? Does it maintain variance power (the right to redirect funds if the project ceases to further charitable purposes)? Who authorizes disbursements? Is the project notified in writing of the charitable-purpose restriction? These questions already appear in the IRS's informal fiscal-sponsorship guidance; the proposal would make the answers auditable on the face of the return.
• Cross-link to government grants. If a sponsored project received government funds through the sponsor, that amount likely appears in both the new sponsorship table and the granular government-grant schedule — a join the IRS clearly wants.

Why this is more than a form change for sponsors and projects​

• Conduit risk is now explicit. An arrangement where a sponsor passes through government funds to a project with minimal discretion or oversight has been on the IRS's "bad facts" list for years. A form that forces disclosure of who controlled the money converts that factual question into a check-the-box attestation problem.
• Spin-out timing matters. Many sponsorships contemplate a spin-out into a new 501(c)(3). A trail of large, multi-year government awards flowing through a sponsorship on the eve of a spin-out filing (Form 1023) will be trivially joinable once both are structured.
• State charity regulators are watching. AG offices that already regulate fiscal sponsorship under charitable solicitation and trust law will ingest the same public data.

A sponsorship checklist to run this quarter​

Whether you are a sponsor or a sponsored project, align around one packet:

• Written Model A vs Model C agreement — signed, dated, and specific: charitable purpose, variance power (Model C), discretion and control language, reporting cadence, asset ownership, insurance, and what happens on termination or spin-out. One template for all projects is not enough if the models differ.
• Funds flow that proves control. Contributions and government payments for the project land in the sponsor's bank, are recorded as sponsor revenue (contribution vs conditional vs exchange, as above), and disbursements are sponsor-approved expenses or grants — not just a pass-through journal entry. The project should not hold its own bank account for sponsor-received funds in a Model A, and should not co-mingle in Model C without sponsor approval gates.
• Per-project books. A separate class, department, or segment in your ledger per project: revenue in, expenses out, year-end balance. If you cannot produce a project P&L from your GL today, you cannot fill out the new table accurately tomorrow.
• Board minutes that match the paper. Board (or committee) approval of new sponsorships, annual review of active ones, conflict-of-interest handling where the project's leaders overlap the sponsor's, and — for government-funded projects — compliance with OMB Uniform Guidance subrecipient vs contractor determination where relevant.

Shift 3: Compensation, Related Parties, and Insider Transactions — A Sharper Lens​

The BDO summary ties the overhaul to scrutiny of self-dealing and insider payments. That points beyond the two headline schedules to the parts of the 990 that already carry the heaviest transparency load:

• Part VII / Schedule J — officers, directors, trustees, key employees, and highest-compensated employees. Compensation, related compensation, and the rebuttable presumption of reasonableness (independent board, comparability data, contemporaneous documentation).
• Schedule L — excess benefit transactions (§4958), loans to insiders, grants or assistance to insiders, and business transactions with interested persons.
• Schedule R — related organizations and disregarded entities, including control and financial ties.

A theme to expect: those sections become more structured and more joined to the two new ones. A grant that flows to a sponsored project whose director is also a board member of the sponsor — reported in isolation on Schedules I, R, or L — becomes a single flagged pattern once the tables are linked.

Clean mechanics matter here more than narrative:

• Independence is documented, not assumed. If compensation decisions rely on comparability data, keep the comparability file and the minutes where it was reviewed.
• Loans to insiders should be rare and disclosed as such. Even a short-term advance that is repaid within the year may be reportable.
• Shared staff and back-office services among related orgs — management fees, payroll recharges, shared leases — need contemporaneous allocations, not post-hoc percentages that shift with the budget.

How to Prepare — A 30 / 60 / 90-Day Plan​

First 30 days: Inventory and gap-check​

• Pull your last three 990s, audited financials (if any), SEFA, chart of accounts, and — if you sponsor projects — every sponsorship agreement. List what you actually disclosed vs what the proposal says will be required.
• Run the five-file drill: for your three largest government awards and your two largest sponsored projects, assemble in one folder: the award/agreement, the ledger postings (receipt, deferral, recognition, disbursements), the footnote disclosure, the 990 line where it was reported, and — for federal awards — the SEFA line. If those five do not tell the same story, fix the outlier before May.
• Walk fiscal sponsorship agreements with counsel: model (A vs C), variance power, discretion/control language, and termination/spin-out terms. Unsigned or template-only agreements are now a disclosed fact, not a fix-later item.

Next 60 days: Make the data structured​

• Extend your grant register to capture the disclosure fields above (agency/program/award ID, recognition vs deferral, sub-awards, purpose). Make Award ID the join key between your GL, your SEFA, and your draft 990 schedule.
• Extend your project ledger: one segment per sponsored project, with opening balance, receipts (split by contributions vs government awards), disbursements, fees retained, and closing balance. Your 990 table should be a report, not manual re-entry.
• Add controls where disclosure meets accounting judgment: ASC 958 conditional-contribution memos for each significant government award, and ASC 606 vs ASC 958 position papers where a government agreement could be either.

Next 90 days: Governance and public-readiness​

• Read your next 990 as a critic would: search it for the project names and government programs that a reporter will search. The day the return is filed it appears on public indexes — write every description assuming the funding agency's program officer is the reader.
• Brief the board and the audit committee: what will be more visible, what might require restatement of presentation (not of net assets), and what conflicts or related-party facts will now be machine-joinable.
• Respond when Treasury opens comments. The proposal's shape will improve if practitioners specify the burden: character limits, exact identifiers (CFDA vs internal grant number), what belongs on the face of the form vs Schedule O, and how the compliance-submission format (IRS e-filing / XBRL / 990-online) will work. Your next filing depends on the details Treasury has not yet published.

The Bookkeeping Connection​

The 990 overhaul rewards what plain-text accounting already does well: make every meaningful fact an explicit, version-controlled entry with a source trail. A government grant that arrives as conditional, sits as deferred revenue, is recognized when a barrier is met, and funds a sponsored project's disbursements is not four separate stories — it is one ledger history, from receipt to recognition to spend, linked by award ID and project class.

That lineage is also what automated IRS review wants to test: does the grant on the SEFA match government revenue recognized on the 990, does the project balance tie to the GL segment, does Schedule I tie to the sponsor's disbursement ledger? When the answer is a query away — not a re-reconciliation away — the new transparency is an unremarkable proof rather than a scramble.

Simplify Your Financial Management​

Form 990 is becoming less an annual form and more a public, structured data record of how a nonprofit raises, stewards, and deploys money — especially public money and funds held for sponsored projects. Beancount.io gives you plain-text, version-controlled accounting where award, project, and general ledger stay explicitly linked and auditable: one grant register, one project segment per sponsorship, one history a reviewer can follow. No black boxes, no vendor lock-in, and AI-ready when you want help turning the next Treasury draft into a report — not a project. Get started for free and make your next 990 a lookup, not a scramble.