For thirteen years I signed my nonprofit’s annual filings, and I confess that in the early years I treated the exercise as paperwork. I was wrong. In the US, that paperwork is the Form 990, the single most information-dense public document about any charity, and almost nobody outside the field knows how to read one. Whether you are a donor deciding on a gift, a journalist, a job seeker, or someone asked to join a board, twenty minutes with a 990 will tell you more than the organization’s entire website. Here is the map, plainly.
What it is and where to get it
Nearly every tax-exempt organization above a small size must file an annual Form 990 with the IRS, and the filings are public by law. The IRS runs a free search tool, and several nonprofit-sector databases make years of filings browsable at no cost. Search the organization’s name or EIN and pull the three most recent years, because the story is in the trend, not the snapshot. (Small organizations file abbreviated versions with less detail; private foundations file the 990-PF, a different form with the same public status.)
The fast pass: five stops
Stop 1: Part I, the summary page. Revenue, expenses, net assets, employee count, volunteer count, all in one column with the prior year beside it. Two numbers deserve immediate attention: whether expenses exceed revenue (once is normal; three years running is a question), and net assets, the closest thing to the organization’s cushion.
Stop 2: Part VII, compensation. Every officer, director, key employee, and the highest-paid staff, with pay listed. You are not looking for a number that offends you; nonprofit executives can and should be paid market rates, a point the fiduciary duties post covers. You are looking for pay wildly out of scale with the budget, multiple family members on the payroll, or the highest-paid person being a vendor rather than an employee.
Stop 3: Part IX, the expense breakdown. Expenses split across program, management, and fundraising columns. A caution from someone who has drawn these lines in his own organization’s budget: the famous “overhead ratio” is a blunt instrument. Allocation involves judgment, thin admin spending can signal an organization starving its own infrastructure, and the ratios vary legitimately by field. Use this page to understand the organization’s shape, not to grade it against an arbitrary threshold.
Stop 4: The Schedule L question. Schedule L reports transactions between the organization and its insiders: loans, business dealings, family relationships. Its mere presence is not scandal; small-community nonprofits have unavoidable overlaps, and the whole point of disclosure is daylight. What you want to see is modest scale and evidence of process. Loans to officers are the classic flag worth a direct question.
Stop 5: Schedule O, the narratives. The overflow schedule where organizations explain themselves: governance practices, program descriptions, changes. It is where you learn whether the board reviews the 990 before filing, whether there is a conflict-of-interest policy, and how the organization describes its own work when writing for a regulator rather than a donor.
Red flags worth the name
Most 990 “gotchas” circulating online are noise. The signals that genuinely warrant follow-up: consecutive significant deficits with shrinking net assets; loans to insiders; large related-party transactions without explanation; a revolving door in officer positions; and, above all, missing filings. An organization that fails to file for three consecutive years loses its tax-exempt status automatically, and a gap in the public record is itself information.
What the 990 cannot tell you
The form measures money and governance hygiene, not impact. A charity can file immaculate 990s while accomplishing little, and a scrappy, world-changing organization can have messy-looking allocations. The 990 answers “is this organization managed responsibly?” It cannot answer “is this organization good at its mission?” For that, you still have to look at the work.
But here is why the reading skill matters anyway: the people with power over nonprofits, funders, regulators, journalists, board members, all read these forms, and the sector’s accountability runs through them, a point I made in the public charity post. Learning to read a 990 is learning to see a charity the way its overseers do. Every donor deserves that view, and every board member is obligated to have it.
Further reading
- What Is a Public Charity? Nonprofit Status, Plainly
- Donor-Advised Fund vs Private Foundation, Plainly
- Nonprofit Law: all posts
I am a law student, not a lawyer. Nothing on this site is legal advice. If you are facing a legal issue, talk to a licensed attorney in your state.
