Knowledgebase

Negative numbers for financial variables (Technical Note)


It is always possible that negative numbers are the result of typos on the part of the person completing the Form 990 or of people who are entering the numbers into our databases. However, for most values in most fields, there appear to be plausible explanations for negative values, although accountants may differ about the merits of validity of those explanations.

NCCS recommends that if a negative value is having a significant impact on your analysis, you should check the underlying return for that record to verify it. If that investigation is inconclusive, you may wish to contact the organization directly. If you do find errors in our files, we would appreciate it if you would let us know.

Some variables probably should NEVER be negative. For example, we have found that the most common reason why a negative number is reported for special event expenses (line 9b on the 990, which is subtracted from gross special event income,line 9a) is that the person completing the 990 wrote out the number as a negative because they were going to subtract it from line 9a.

The following presents some of the reasons why organizations may have negative values in various financial variables.

Total assets

If there is a bank overdraft in a checking account and no other assets to compensate, then an organization can either report their financial position as showing negative assets or enter the overdraft as an account payable, which is a liability.

Liabilities

Although we are not sure if this is consistent with GAAP, there are examples of negative liabilities being reported. For example, the Kamehameha Activities Association (EIN 510190227) reported a large negative liability on an attached schedule for "income taxes payable" at the begnning of the year implying that a tax refund was due. For end-of-year reporting, they shifted the refund to the asset "income taxes receivable."

However, Cheryl Chasin with the IRS states that "a negative number is not a valid entry for total liabilities. If, for example, an organization overpaid a bill and was therefore owed money, that would be properly reported as an asset, not as a negative liability." (E-mail correspondence, 11/2003)

Net assets

Approximately 7% of organizations reported negative net assets (see, e.g., NCCS Core 2000 file).

Total revenue

It is highly unusual but not impossible. For example, The Old Bath Customs House (2000), reported 99% of its gross receipts, more than $80,000, as coming from rentals (line 6a on the 990). However, its rental expenses of $85,000 left it with a negative value for NET rental income, the only item included in the total revenue number. Thus, it reported a negative value overall for total revenue.

Another organization reported a major loss when it sold securities. Like rental income, only the NET is included in total revenue, so this organization also reported negative total revenue.

Program service revenue

Some organizations do report negative program service revenues. There are a number of possible reasons. For example, the Lancaster Health Alliance (1998-1999 return) recorded "equity in net earnings of subsidiaries or affiliates" as a category of program service revenue in Part VII of the Form 990. For that year, its losses totalled more than 4.5 million.

Expenses

There were 51 organizations in the Core 2000 file reporting negative expenses. One, of the several reviewed, reported an "administrative credit" as a negative expense. The others appeared to reflect various errors, although virtually all of them were "internally consistent" (revenue minus expenses equalled net income) so one can't simply assume that they were entered as typos.


Added 08/21/2002 by tpollak, Modified 05/25/2006 by jauer

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