The Form 990 that a nonprofit uses to tell the public where its money came from and where it went just got more specific — and more public — about government money.
What Treasury Changed
The 2026 Form 990 overhaul, announced via Treasury SB0470, rewrites how nonprofits report government grants and fiscal sponsorship arrangements. Two schedules carry the change:
- Schedule I: Government grants now require grantor, award number, period of performance, and whether the funds are expendable or reimbursement, plus the accounting method for revenue recognition.
- Schedule R: Fiscal sponsorship — where a 501(c)(3) sponsors a project that is not yet exempt — now requires the sponsored project's purpose, the fiscal sponsor's variance power, and the amount of funds held for the project as a liability, not as the sponsor's revenue.
Government Grants: From One Line to Many
Before, a $200,000 city contract could be one line: government grants $200,000. Now it is many:
- Donor restriction: Government grants that are conditional (reimbursement) vs. unconditional (entitlement) are reported differently under ASC 958-605. Treasury now wants the 990 to mirror that.
- Period of performance: A grant awarded in 2026 for services in 2026–2027 must show the deferral. The portion not yet earned is
Deferred Revenue — Government Grants, notContribution Revenue. - Subrecipient tracking: If the nonprofit re-grants government money, Schedule I now mirrors the subrecipient disclosure that Schedule R requires for related organizations.
Bookkeeping: Tag each government award by grantor, award number, condition type (conditional/unconditional), and period. The ledger should produce Schedule I, not a year-end spreadsheet that reconstructs it.
Fiscal Sponsorship: Whose Revenue Is It?
Treasury's rewrite closes the gap where fiscal sponsor revenue was inflated by funds held for sponsored projects.
- If the sponsor has variance power and the sponsored project is not a separate legal entity, the sponsorship is often reported as the sponsor's activity with appropriate disclosure. The funds are the sponsor's revenue when the condition is met.
- If the sponsor is a custodian without variance power, the funds are a liability —
Dr Cash/Cr Fiscal Sponsorship Liability — Project— not revenue. Treasury now requires that liability to be disclosed on Schedule R, with the project's purpose and the amount held.
Many small arts and startup nonprofits that acted as fiscal sponsors without understanding variance power will see their 2023–2025 990s restated.
Keep Your Finances Organized From Day One
A Form 990 that mirrors the ledger is a public confidence tool; one that hides government grants in one line is an audit flag. Tag each government dollar by condition and period, and each sponsored dollar by variance power, and the new schedules become a report.
Beancount.io keeps each government grant and each fiscally sponsored project as a separate liability and revenue stream, version-controlled and 990-ready. Get started for free and make the transparency that Treasury now requires also the bookkeeping that proves it.