How to read a U.S. nonprofit’s Form 990

A charity says it spent most of its budget on programs. A reader looking for detail can start with the organization’s Form 990, if it files one. The return organizes spending by function and describes program work. It also records a particular reporting year. A fresh-looking download can still describe activities from several years earlier.

Find the right organization and year

Use the IRS Tax Exempt Organization Search and choose the Form 990 series returns database. Search for the employer identification number, or EIN, when it is available. A national organization and a similarly named local affiliate can be separate filers. Confirm the organization name and EIN on the return, then check the tax-year dates and whether the return says it was amended.

Some organizations use a different filing in the Form 990 series, and filing requirements vary. The search tool keeps Form 990-N notices and returns in different search categories. An empty search in one category gives you a reason to check the name, EIN and filing type before drawing a conclusion.

Read the activity and expense sections together

On the full Form 990, Part III describes program services. Start there if you want to know what the organization says it did. Part IX gives functional expenses. Its columns can distinguish program services, management and general expenses, and fundraising. The IRS instructions describe how a filer allocates shared costs across functions.

Consider an invented food organization reporting $600,000 in program expenses and $800,000 in total expenses. Dividing the first number by the second gives a 75% program expense share. That tells you how the organization classified its reported spending. The program descriptions can add context about which activities the expense supported. If the return mentions deliveries, check how it defines the figure before assuming deliveries and people served are the same measure.

Compare like with like over time

When comparing two years, keep the totals and their allocation beside the ratio. A growing program budget can coincide with a falling program share if overall costs grow faster. A one-year move can also reflect a change in the mix of activities. Read the accompanying notes and relevant schedules for context before interpreting the change.

If your question is about whether an activity improved people’s lives, look for a study, outcome data or another record that measures the result. A financial filing can help establish the scale and classification of spending. Outcome evidence answers the next question.

• Check the EIN, tax year and form type.
• Read the program descriptions before quoting an expense share.
• Compare figures from the same columns across periods.