How to Find More Information on a Nonprofit
Posted on Wednesday, June 22, 2022
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As a donor or volunteer, you may want to find out more about a certain nonprofit. Reviewing Form 990, a nonprofit’s annual information return filed with the IRS, is one of the best ways to obtain information about a nonprofit. Form 990 is open to public inspection, which means anyone can get access to an organization’s return (excluding parts of Schedule B). In order to comply with this requirement, most nonprofit organizations post their 990 on their website. The following are other sources that provide Form 990s to the public, as well as additional information on nonprofits.
IRS
The IRS website also provides information about nonprofit organizations registered with the IRS. The Exempt Organizations Business Master File Extract (EOB MF) lists exempt organizations by state. Information contained in this database includes the organization’s EIN, name, in care of name, address, group exemption number, subsection code, ruling date, deductibility code, filing requirement code, tax period, and other important data. It also has been available Form 990 for the past 5 years.
GuideStar
GuideStar gathers information about every IRS-registered nonprofit organization. Information is provided about the organization’s mission, finances, programs, etc. By signing up for a free account, you can access the last 3 years’ Form 990 for any IRS-registered nonprofit organization.
Candid
Candid was formed in 2019 when GuideStar and Foundation center merged. Candid combines GuideStar’s tools on nonprofits and Foundation Center’s tools on foundations with new resources to offer more comprehensive, real-time information about the social sector.
Better Business Bureau
BBB’s Charity Report Program assists donors in making informed giving decisions. Charities are evaluated based on the 20 BBB Standards for Charity Accountability that address four charity areas: governance, results reporting, finances, and truthful and transparent communications.
Reviewing Form 990
Once you have obtained an organization's Form 990, it may seem overwhelming. An organization’s Form 990 provides a wealth of information about the organization’s activities, finances, and governance structure. The following are some key areas to look at when evaluating an organization.
Header
This provides basic information about the organization and the tax period covered by the 990.
Part I: Summary
Mission statement (Line 1): This provides the mission or significant activities of the organization. A clearly defined mission is key to a successful organization.
Number of individuals (Line 5) and volunteers (Line 6): This tells you the size of the organization. Some organization may carry out their activities using independent contractors which are not included in the number of employees. Most organizations also utilize volunteers to carry out their work. The number of volunteers also shows support from the community for the organization’s work.
Total revenue (Line 12), total expenses (Line 18), and revenue-less expenses (Line 19): Each line shows the current year and prior year totals so that you can compare the current year to the prior year. Ideally, an organization should have a positive revenue-less expenses amount.
Part II: Mission and Programs
Mission statement (Line 1): Provides the mission statement approved by the board. The purpose for the organization’s existence.
Program service accomplishments (Line 4): This provides a description of the organization’s largest programs. It describes what was accomplished, who it served, its impact on the community, etc.
Part VI: Governance, Management and Disclosure
The IRS considers this section the crown jewel of the Form. It provides information on the organization's governing activities, as well as policies and procedures.
Related board members (Line 2): The IRS believes it is important to have an independent board of directors and not be dominated by employees or who are not independent because of their family or business relationships. The board should represent the broad public interest.
Diversion of assets (Line 5): If the organization is aware of any embezzlement or theft that exceeds the lesser of (1) 5% of the organization’s gross receipts for its tax year, (2) 5% of the organization’s total assets as of the end of its tax year, or (3) $250,000. Fraud in less than this amount is not required to be reported.
Part VI: Governance, Management and Disclosure - Section B. Policies
This section asks if the organization has various policies in place. Although these policies are not required by the Internal Revenue Code to be in place, it is best practices to have these in place.
Part VII: Compensation
List of officers and trustees: These are the individuals ultimately responsible for the strategic direction and oversight of the organization, so it may be worth researching more about them. Often times an organization will include information about its board members on its website.
Part VIII: Revenue
It is important for an organization to have a diverse source of revenue so that it cannot withstand the loss from one course while still maintaining its mission.
Part IX: Expenses
This shows how the organization is using its resources. Salaries are normally the highest expense for a nonprofit organization. Be aware of other expenses that stand out as being higher than expected. Nonprofits are also required to allocate expenses between 3 functions – (1) program, (2) management and general, and (3) fundraising. Most funders expect 65%-75% of total expenses allocated to program. This means most of the organization’s funds are being used for their programs. Of course, the organization should have some management and general expenses which are necessary to run the organization, regardless of its programming. Normally, if an organization receives grants and contributions, it should have some fundraising expenses which are expenses incurred in getting these donations.
Part X: Balance Sheet
Assets: Assets can be a key sign of organizational strength but if the organization has little or no cash, then it can be difficult to cover its daily operational expenses.
Liabilities: Most organizations have some amounts that they owe to others, whether it be accounts payable or loans. A significant amount of debt could be a sign of concern.
Net assets without donor restrictions (Line 27) and with donor restrictions (Line 28): Net assets is basically the cumulative net income of the organization. Net assets without donor restrictions is the amount available that can be used for the organization’s general operations. Net assets with donor restrictions are amounts that have been received that must be used for a specific purpose restricted by the donor. It is important that an organization have a positive net assets without donor restrictions balance. A negative balance means the organization has used donor restricted funds for operations (a purpose which they were not meant to be used for).
Contributed by Carrie Minnich, MAcct, CPA | Partner | DWD CPAs & Advisors
Posted in Mission Minded Nonprofits
Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.