As a nonprofit professional, you understand the importance of filing Form 990 in a timely and accurate manner. After all, your status as a tax-exempt 501(c)(3) organization depends on it.
However, did you know that you can gain valuable insights about your nonprofit from your Form 990 that can help you obtain donors? You just need to know where to look!
It can be challenging to decipher the numbers on your Form 990, much less glean actionable insights from them. But, by looking out for certain trends and data, you can make your Form 990 valuable to you in more ways than one. Let’s dive into some key takeaways!
What information is reported on Form 990?
The answer depends on a number of factors specific to your nonprofit. For instance, if you’re a smaller nonprofit, you can fill out a shorter form, whereas if you have more gross receipts, you need to provide more information. According to File 990, The types of Form 990 you should know are as follows:
- Form 990-N, which is meant for nonprofits with gross receipts less than $50,000
- Form 990-EZ, which is meant for nonprofits with gross receipts between $50,000 and $200,000
- Form 990, which is meant for nonprofits with gross receipts more than $200,000
- Form 990-PF, which is filed by private foundations regardless of financial status
As the nonprofit filer grows in size and gross receipts, the more financial records they have to provide to the IRS, so the information required at each tier varies. That said, the IRS requires information about your nonprofit’s:
- Name, address, and Employer Identification Number
- Mission statement
- Governing documents, such as the Bylaws and Articles of Incorporation
- Financial information, such as your total expenses, assets, and budgetary breakdown
- Compensation of key officers
- Program accomplishments and setbacks
- Grants and other major contribution information
- Fundraising activities
- External contractor information, such as accountants or consultants
With these key details in mind, let’s explore the areas your nonprofit can improve with information found on Form 990.
1. Financial Health
Perhaps the most straightforward area your nonprofit can gauge using Form 990 is your financial stability. After all, Form 990 is at its core a document that verifies your organization’s tax exempt status. Here are the main places you can look for information on your nonprofit’s financial health:
- Revenue streams. Simply having enough fundraising revenue isn’t enough to gauge if your nonprofit’s financially healthy. You should also take a look at your revenue streams to see if you’re overly reliant on one or the other. For instance, if 75% of your fundraising revenue comes from one-time donors, you should probably look into expanding other revenue streams such as corporate partnerships to build a more reliable support base.
- Cash and noncash assets. Having liquid assets is important for managing your nonprofit’s cash flow, correcting for unforeseen circumstances, capitalizing on unexpected opportunities, and demonstrating financial responsibility to donors. Analyze your assets and discuss whether you have enough or if you need to liquidate more funds.
- Expense efficiency. As important as fundraising is for your nonprofit, keep in mind that mitigating wasted expenses is crucial. Compare your reported expenses with those of previous years and determine if there’s room for future improvement given your current programming.
Financial health, while one of the most important indicators you can gauge using Form 990, is far from the only one. Let’s explore some others.
2. Program Effectiveness
Another area your nonprofit should focus on is the efficiency of your initiatives. Check out the following metrics to ascertain how effective your programs are in supporting your mission:
- Program descriptions. Your team knows your programs better than anyone else. Review the descriptions you provided for your programs and evaluate if they’re still accurate, comprehensive, and mission-oriented. If not, you should get your team on the same page while you modify your definitions.
- Measurable outcomes. Let’s say your nonprofit focuses on providing free tutoring for neurodivergent teenagers. Have your programs led to higher test scores? How about an influx in beneficiaries? What are your online reviews like? Information like this should be present in your “program accomplishments” section.
- Fund allocation. Using both of the metrics above and relevant financial data, evaluate whether enough funding has been allotted for your initiatives. For example, if your nonprofit’s math tutoring programs have especially strong outcomes but are underfunded compared to the other subjects, you might allocate more funds to it to expand its potential.
Keeping your initiatives in line with your mission is the best way for your nonprofit to play to your your strengths and reduce your weaknesses. These data fields help you identify if your programs are mission-oriented, effective, and worth your time and money to execute.
3. Transparency and Accountability
Form 990 is an effective instrument for establishing for trust and transparency with supporters, leading to donor retention. However, it’s up to you to make sure the following aspects of your form have enough data to keep supporters informed:
- Independent auditor’s report. Working with an external auditor indicates that your nonprofit cares about working with an external, unbiased party to present financial records. This speaks to your organization’s credibility and shows your commitment to using funds for the right purposes.
- Collaborations. Transparency in partnerships and marketing is crucial for maintaining your donors’ trust in your nonprofit. Clearly outline any formal partnerships you have with companies, government organizations, and other nonprofits so your supporters can understand your alliances.
- Compensation disclosures. Remember, your nonprofit must be organized purely to aid your beneficiaries and pursue your mission, meaning no internal party can benefit from nonprofit funds. Ensure you have detailed records about your officers’ compensation, including if they’ve received raises and how long they’ve been working at your nonprofit so your supporters know their salaries are fair.
By filling any of these gaps with useful facts in your Form 990, you can rest assured that your nonprofit is giving supporters the information they need to support your organization.
Whether you’re filing the full Form 990 or just the 990-N postcard, you can decide the strongest way forward for your nonprofit. As long as you maintain proper data hygiene practices and file your information accurately, Form 990 is a treasure trove of information that, used correctly, can secure your nonprofit’s place in your community.
About the Author
Melissa Geitgey
Melissa Geitgey, APR, is the director of marketing for Togetherwork’s higher education product group. Togetherwork is a Saas company that provides integrated software and financial solutions that help organizations and membership groups manage, grow, and engage with their communities.
Melissa has extensive experience leading marketing and communications departments to advance strategic initiatives, managing events and corporate brands for Saas, higher education, athletics, professional services, and nonprofit organizations. She graduated from Valparaiso University with a B.A. in Communications and received her Accreditation in Public Relations (APR) by the Universal Accreditation Board in 2011.
She’s a past president of the Public Relations Society of America Hoosier Chapter and former chapter Ethics Chair. When she’s not geeking out about marketing communications strategy and the creative process, Melissa loves spending time with her family, listening to live music, visiting art museums, restoring vintage handbags and subversive cross stitch.
