While you may have filed your taxes by April 15 and moved forward, nonprofits are still on the clock. May 15 is their red-letter day, the deadline to file Form 990, a public document that offers a detailed look at how an organization operates.
When deciding to support an organization, many donors focus on mission statements, events or community presence, but the 990 provides something different: a behind-the-scenes view of how a nonprofit is structured, governed and funded. The form answers key questions: Who is overseeing the organization? How is money being spent? How much is going toward programs versus administration?
For those who give, these are important questions.
“A Form 990 is one of the most accessible tools the public has to understand how a nonprofit functions,” said Courtney Davis, owner of Davis Professional, a tax, bookkeeping and financial services company. “It provides insight into governance, compensation and spending priorities — things donors should feel comfortable reviewing.”
But beyond simply locating the document, knowing what to look for makes all the difference. Davis says to start with program versus administrative expenses.
“While there is no perfect ratio, this section can give donors a general sense of how much of the organization’s budget is directed toward its mission compared to operations,” she explains.
Next, review leadership and governance. “The 990 lists board members and key staff, which will offer donors a glimpse into who is making decisions and whether there is a strong, engaged governing body,” Davis added.
She advises donors to take a look at executive compensation. This is often one of the most discussed elements, but it should be viewed in context — considering the size, scope and complexity of the organization.
Finally, pay attention to revenue sources. “Is the organization primarily grant-funded? Does it rely on individual donations? Is it generating income through programs? These details can reveal both stability and vulnerability,” said Davis.
She cautions that although these are critical details, the numbers don’t tell the whole story. Impact, relationships and community trust are vital aspects not easily captured in a financial document. But the 990 offers a level of transparency that should be taken into account when making philanthropic decisions.
“The obvious may not always reflect the full picture,” says Davis. “An organization with lower revenue may still be delivering meaningful work. A larger organization with more funding may also have the resources to hire professionals who can more effectively present their financial story. Understanding these nuances is essential when reviewing a 990.”
In a time when individuals are more intentional about where they give, the 990 can serve as a valuable tool for becoming better acquainted with the organizations they support. It allows donors to move beyond assumptions and gain a clearer understanding of where their money is going and who is responsible for stewarding it.
Nonprofits are required to make this information available. The opportunity lies in whether the public chooses to use it.
— Judith Black Moore is a nonprofit consultant and the founder of Taking Back the Future, a youth-focused nonprofit.
