What does a good Form 990 look like?

Tax Day is coming. Sadly, that dreaded IRS Form 990 isn’t going to fill itself out. You’ll send it off along with virtually every grant request, and many people interested in volunteering for you, working for you, or even just writing you a $50 check will track down the information on it. But what are they looking for, anyway?


The IRS Form 990

The IRS Form 990, window to a nonprofit organization’s soul.


If you think that the only thing that matters is that your organization isn’t in the red, you might be surprised that current financial health is only one of the many bits of important information to be gleaned. A good Form 990 will also hint at your genuine interest in cultivating donor relationships, and can directly reveal your trustworthiness, efficacy, and long-term potential.

Think of your 990 is an opportunity to turn a skeptic into a supporter. You know that they’ll see it, they know that you’ll see it, so why not use it to communicate all that rocks about your organization?

First and foremost, it’s important to fill in your mission statement and relevant program service accomplishments. Charity Navigator and similar services often lift their nonprofit summaries directly from 990s, without consulting websites or other outside sources, and if you (or your accountant) skips these sections it leaves the impression that you don’t really care if people understand your work or not. Be concise about your mission and include major program achievements and updates. Although interested parties will probably come across the same information (or even much more detailed versions) on your website, Facebook page, or Twitter feed, having it appear on the official IRS Form 990 or on Charity Navigator imbues it with authority that “self-generated” content lacks.

An appealing 990 is also one that instills trust in an organization. At least 75% of your expenses should go directly toward programs. As a rule, no one likes to see board members raking in over $100,000. Depending on the work they do they may not even be technically “overpaid” at that salary, but if someone is considering donating money – or even applying for a $40,000-a-year job – they want to be sure that those at the helm aren’t profiteering from their goodwill and generosity.  Likewise, unless your nonprofit’s explicitly in the lobbying game, donors tend to be turned off by excessive lobbying costs. In part this is because nonprofits pay a penalty if lobbying costs make up 5% of their total operations. Savvy donors realize that part of their contributions will go right back to Uncle Sam, not to the cause they’re trying to support.



Not everyone wants to feed the fat cats.


The Form 990 also requires nonprofits to share information on outside grant writers, event organizers, and other fundraisers. This information provides critical insight into small- to mid-sized organizations. Many of them save oodles in personnel costs by not retaining full-time grant writers or event organizers on staff. The public can therefore see the grant writer’s (or gala planner’s) compensation and compare it to the amount of grants received (or money raised at a gala). Is the nonprofit brilliantly reinvesting its resources, or frittering funds away with poor results? An experienced, flexible outside grant writer who takes the time to get to truly know your organization and craft high-quality requests can help your return signal competence, efficacy, and respect for donors and constituents.

Finally, a good Form 990 should demonstrate growth. This can be seen most obviously in the change in total revenue and total expenses over the last few years. A shrinking charity that doesn’t even keep up with inflation isn’t a good choice for philanthropy because it’ll fizzle away before long. If you undertook a project such as building a larger and better-equipped facility that caused short-term shrinkage, consider addressing its importance among your program service accomplishments. Another item of interest is the itemized Statement of Revenue. It breaks down how much support your nonprofit received from foundations, the Federal government, the state government, private donors, and other sources. A fundraiser worth his or her salt is knowledgeable about all types of funding and strategically pursues diversity and long-term sustainability. Being able to prove to potential donors, volunteers, and employees that you’re ascendant boosts their confidence in you immensely. If you want to turn supporters into more avid supporters, invest in your Facebook page. But if you want to turn skeptics into supporters, invest in a good Form 990!

Wild Fundraising is dedicated to the “big picture” – helping our clients achieve their mission every step of the way. If you need assistance creating a knock-out 990 please refer to the IRS instructions here or contact us at 619-436-7161.