Individuals who donate to charity often do so in support of a cause they feel strongly about. Many prospective donors first recognize a desire to give back and then seek organizations they can support. In such instances, it’s imperative that prospective donors learn to vet charitable organizations so they can ensure their donations are utilized properly.
Nonprofit organizations are monitored by watchdogs such as Charity Navigator, which evaluates hundreds of thousands of charitable organizations in the United States. Watchdog organizations can be invaluable resources for donors, who also can do some of their own research prior to donating to a charity. One way individuals can begin to form a clear picture of a charity is via a Form 990.
What is a Form 990?
Form 990 is a form filed with the Internal Revenue Service. Any nonprofit organization that takes in $50,000 or more in a year must file a Form 990 with the IRS. The form includes financial information about a nonprofit organization and is accessible to the public. Various watchdog organizations analyze Form 990 when assessing nonprofit organizations.
What to look form on Form 990
A significant amount of information is included on a Form 990, and that information can help donors get an idea of how an organization operates.
· Programs: Seasoned donors want to know how much nonprofit organizations spend on the programs designed to meet their missions. A Form 990 includes information about program spending, which may indicate how much of every dollar goes to programs. Information about the programs themselves, including a description of the programs and their costs, also is included on a Form 990, providing a glimpse into how a given organization is attempting to meet its mission.
· Fundraising: A common concern among prospective donors is how much money nonprofit organizations spend on fundraising efforts. Fundraising efforts help many nonprofit organizations, but some charities may be spending too much on fundraising and not enough on their programs. Form 990 includes information about fundraising fees, and prospective donors can study this data when vetting a charity.
· Compensation: Executive compensation of an organization’s most highly paid employees must be included on Form 990. Compensation figures can raise eyebrows, but high salaries among top executives should not necessarily prevent donors from supporting a given charity. Donors can consider executive salaries and compare those to other financial figures on Form 990, ultimately drawing their own conclusions about how well an organization is allocating its funds.
Form 990 can help donors as they look to vet nonprofit organizations they may want to support.