By: Michele Borucki, Director of Research and Consulting
Michele Borucki
A form 990 is a United States IRS form that provides the public with information about nonprofit organizations. Most nonprofits file 990s, but all private foundations and nonprofits with gross receipts totaling greater than $50,000 are required to file them. The 990 can be used by the government to prevent organizations from abusing their tax-exempt status, but prospect development professionals use it to gain as much insight about our prospects as possible.
For prospect researchers, the form 990 is a treasure trove of insights, one that can help assess a donor’s philanthropic capacity, inclination, and affiliations, but with over 12 pages (and even more with schedules), it’s easy to get overwhelmed. To make the most of your time and effort, here’s a guide on some pieces to focus on in the 990 when researching for your organization.
Type of Nonprofit
Line 1 on the header of the form identifies which type of nonprofit you’re looking at. Form 990-PF, which includes a more detailed breakdown of grantmaking, investment income, and net assets, is filed by a private foundation. A private foundation will be identified at the top of the 990 forms as the “Return of Private Foundation.”
Public nonprofit entities will file a Form 990, which includes more operational data and less information on investments. These types of charities will have, “Return of Organization Exempt from Income Tax,” at the top, with the specific type of tax-exempt status shown below in Box I.
Contact Information and Fiscal/Filing Year
The full name of the nonprofit is listed at the top of the 990 form along with the mailing address, principal officer’s name and address, and the telephone number.
The filing year will be listed in bold in the top right margin, and underneath you’ll see a beginning and end date indicating the nonprofit’s fiscal year (which may be different from the calendar year.) It’s useful to know the fiscal year as a nonprofit is required to file an annual 990 five months and fifteen days after the end of the organization’s fiscal year.
Mission Statement and Grantmaking Guidelines
Under Part I, line 1, or Part III, line 1, you’ll usually find a mission statement for nonprofits that may not have a website or any type of social media presence. Under Part XV, private foundations may include whether grants are given only to preselected organizations. Sometimes you’ll find a description of grant application guidelines and on occasion even directions for sending grant applications and letters of inquiry. This section isn’t always consistent in what is included, but it is worth a look especially for those nonprofits without a public presence.
Foundation Assets
Many of us in prospect development use aggregators to find foundation grantmaking and asset information (Kindsight, ProPublica, Foundation Director Online, etc.) While this can be an easy and time saving way to capture relevant snapshots of information we may need on a foundation, I always make sure to double check the most recent form 990 as well.
Box I on page one lists the fair market value of all assets and it’s important to know that private foundations donate at least five percent of assets annually. The five percent total payout includes any qualifying charitable activities such as grant awards, as well as the money needed to run the foundation. If your organization assigns capacity ratings to foundations, you could use the five percent of the total assets listed in Box I as the basis for an estimate of the foundation’s giving capacity.
Who’s Who: Leadership, Board Connections, and Compensation
Understanding who is involved in a foundation or nonprofit is crucial. Part VII lists the organization’s officers, directors, trustees, and key employees, along with some of their compensation! For prospect researchers, this section can be the absolute shining gem of our treasure hunt.
Contributions TO the Foundation
Contributions of money or other types of noncash assets of $5,000 or more from a single contributor to a private foundation are listed on Schedule B (this is a supplemental form to the 990.) The name of the contributor, address, and their total contributions are listed in this section. Contributors can be trusts, companies, associations, or my favorite, people! Contributions from individuals are usually made by members of the foundation’s board/trustees or family members, and may even be the largest gift you’re able to find from them.
It’s About the Story, Not Just the Numbers
Form 990s offer more than just unimaginative figures; they reveal philanthropic behavior, affiliations, and giving priorities. When analyzed alongside our favorite wealth screening tools, news alerts, and social networks, they help form a fuller picture of a donor’s potential. For the savvy prospect development professional, a form 990 isn’t just any old tax form, it’s a helpful piece of a larger narrative and learning to read between the lines can make all the difference in crafting a donor’s story.
