How to Read a Form 990: 8 Things To Look For

The 990 Form that nonprofits of all kinds need to submit each year to the IRS is a treasure trove of information about nonprofit organizations.

Although during the turbulence of 2020-22, 990 filings and releases by the IRS slowed significantly, they’re slowly getting back up to date.

If you’re a nonprofit pursuing funding through grants, 990 data will give you an edge. The Form 990 serves as an open book, revealing the financial actions, mission, and management of funders.

This article will guide you through the different sections of Form 990s, highlighting how to read and interpret the information so that you have what you need to be more competitive in your grant applications.

By the end of this article, you will:

• Understand the key sections of the 990 Form.
• Know how to use 990 data to make your nonprofit more competitive for funding.
• How to quickly review 990 data using Instrumentl’s insights on funders.

Let’s dive in!

We get it, 990s are dense, dry, and lengthy documents. They’re definitely not something you’d curl up on the couch with for some light reading.

But if you want to win grant funding, knowing how to read a potential funder’s 990 submissions is critical.

If you’re on the fence, here’s why you should take the time to learn how to review a 990 form.

Understand The Causes A Potential Funder Supports

Reviewing a potential funder's Form 990 will give you insights into their financial allocations and spending patterns.

This will help you see clearly if you align with their priorities and areas of interest.

For example, sometimes a funder may seem like a fit, but then you review where most of their money flows to and you learn it’s not worth the effort to submit a proposal.

See The Locations They Support The Most

A funder’s 990 will reveal what kind of nonprofits they support. This will show you the states or counties where their funding goes.

Learn If They Accept New Grantees Or Only Renew Existing Recipients

If a foundation directs most of their yearly giving to new nonprofit that they haven’t supported before that’s a great sign for you. If your missions align and they support nonprofits in your location, they may be a great opportunity to pursue.

Bonus: Funders Can Review YOUR Nonprofit

Foundations and grant-making entities can use Form 990s that you have to submit to evaluate you. If they did, what would they learn?

Would you look like an ideal potential grantee? Reviewing your own 990s will reveal the financial health of your organization and program spending.

Understanding Form 990 isn't just about compliance - it's about making more informed decisions, driving transparency, and, ultimately, fostering a stronger, more effective nonprofit sector.

Form 990 is a treasure trove of information, but it's essential to know what to look for and where to find it. In the following sections, we will take an in-depth look at the most critical line items on Form 990.

Step 1: Uncover the Organization's Basics

Part 1 of Form 990 is the 'Summary' section, giving a high-level overview of the organization's financial health and operations.

Here are some key points to look for:

• Line 1-6: Basic information about the organization, including the current tax year and legal name.
• Line 7-8: The organization's mission statement and primary exempt purpose.
• Line 9-10: Total revenue and total expenses for the year, providing insight into the organization's financial performance.
• Line 11: The organization's net income or loss for the year.
• Line 12: The total assets at the end of the year.
• Line 13-19: The total liabilities at the end of the year.
• Line 20-22: The organization's net assets or fund balances at the end of the year.

This part of the form provides a quick snapshot of the organization's operations and financial health, making it a good starting point for understanding a nonprofit's 990 Form.

Step 2: Dive into Organizational Activities and Leadership

Part 2 of the Form 990 gives you valuable insights into the governance and management of the nonprofit. Here, you'll find information about the organization's governing body, its policies, and the disclosure practices of the nonprofit. Key insights from this section include:

• The number of voting members on the board.
• The processes for making decisions and managing conflicts of interest.
• The level of transparency of the organization, including whether it makes its Form 990, conflict of interest policy, and financial statements readily available to the public.

Part 2 paints a picture of the organization's leadership, its decision-making processes, and its commitment to transparency and good governance.

Step 3: Analyze Program Achievements

Part 3 of the Form 990 presents a detailed overview of the organization's program service accomplishments. This section reveals the various programs run by the organization and the expenses allocated to each of these initiatives.

 
It also outlines the specific activities undertaken to fulfill the organization's mission and the number of individuals served or benefited. Key insights from this part include:

• A brief description of each program, including its goals and strategies.
• The expenses incurred on each program, offering a view into how resources are distributed.
• The level of impact achieved by each program, usually indicated by the number of individuals served or other quantifiable measurements of success.

By analyzing Part 3 of the Form 990, you can grasp the scale and scope of the organization's operations and measure the direct impact of their work in the community. This helps to evaluate the effectiveness of the nonprofit's programs and its commitment to its mission.

Step 4: Decode Financial Streams

Part 4 of Form 990 provides detailed information about the organization's revenues and expenses, respectively.

Here, you will uncover the different income streams supporting the nonprofit and where the organization is allocating its resources. Important insights to glean include:

• The major sources of revenue for the organization, such as public support, program service revenue, and investment income.
• The distribution of expenses across program services, administration, and fundraising efforts.
• A comparison of revenue and expenses over the year, providing a sense of the organization's financial balance and long-term sustainability.

Step 5: Appraise the Asset Landscape

Part 5 of Form 990 details the organization's assets and liabilities. By examining this section, you can gain valuable insights into the organization's financial stability and how effectively it manages its resources.

Key points to note include:

• The types and total amounts of assets held by the organization, such as cash, securities, land, buildings, and equipment.
• The total liabilities of the organization, including loans, mortgages, and other debts.
• The organization's net assets or fund balances, which represent the difference between total assets and total liabilities.

Step 6: Investigate Previous Grant Allocations

Schedule I, Part 6 of Form 990 provides a detailed account of the grants and other assistance provided by the organization. This section lists each recipient, the amount granted, the purpose of the grant, and whether the recipient is a repeat beneficiary. Key information to look for includes:

• The range and amounts of grants provided.
• The types of organizations or individuals receiving grants.
• The purpose of these grants and how they align with the nonprofit's mission.

By investigating the grant allocations detailed in this part, you can gain insight into the organization's philanthropic strategy, its chosen areas of impact, and the scale of its grant-making activities.

Step 7: Scrutinize Organizational Governance

Part VII of Form 990 discloses the organization's officers, directors, trustees, and key employees. It provides information about their compensation and the organization's governance practices.

Critical insights to glean from this part include:

• The compensation of key employees, which can provide insight into the organization's compensation policies and practices.
• The organization's governance and management policies, including conflict of interest policies, whistleblower policies, and document retention policies.
• The voting process, including board meeting attendance and the decision-making process.

By scrutinizing the organizational governance detailed in Part VII, you can assess the leadership's integrity and the organization's commitment to ethical practices. This is crucial for understanding how the nonprofit is being run and the level of oversight it maintains.

Step 8: Delve into Additional Data Layers

The supplementary schedules of Form 990, such as Schedule A, Schedule B, and Schedule O, provide more detailed information about the organization's public support, funding sources, and clarification for certain parts of the form, respectively.

Key insights to glean from these schedules include:

• The organization's public charity status and public support (detailed in Schedule A), which can provide insight into the breadth and diversity of the organization's support base.
• The contributions received by the organization, including the names and addresses of substantial contributors over $5,000 (provided in Schedule B), which can help in understanding the organization's major funding sources.
• Additional information or explanations for any part of the form (provided in Schedule O), which can offer insights into the organization's operations, policies, or changes from the previous year.

By delving into the additional data layers provided by these schedules, you can gain a more comprehensive understanding of the nonprofit's operations, its financial health, and its compliance with tax and other legal requirements. This is crucial for a holistic understanding of the nonprofit, its work, and its impact on the community.

At Instrumentl, we know that you have a million things on your plate. You don’t have time to dig through a potential funder’s 990 Forms, one-by-one.

What you need is a fast way to evaluate funders.

That’s why, at Instrumentl, we automatically draw out the main insights from a funder’s historical 990 filings. By doing so, we present you with the insights you need to decide whether or not a funder is right for you.

We cut down your grant prospecting from weeks to minutes.

Here’s how you can get started.

Use Instrumentl's Foundation Directory

Visit Instrumentl's free foundation directory to explore over 400,000 funders.

Narrow your search by filtering by your location. If you have a specific funder in mind, use the search bar to find it.

Review Potential Funders and Their 990s

Instrumentl provides a user-friendly interface that makes accessing and reading 990 forms easy. The information is conveniently organized, enabling you to quickly get the data you need.

How Instrumentl Distills Complex 990 Data So It’s Easy To Read

Instrumentl's platform takes the complexity out of 990 forms by distilling the data into an easily digestible format.

You’ll see links to their filed 990s, key leaders in the organization, and other basic info such as their website and address.

Next, you’ll get a deeper look into the funder’s finances. You’ll find the organization’s total assets, grant support, and total giving.

You can also see their past grantees and where they’re located.

If you want to dig into even more funder insights, sign up for Insturmentl’s free 14-day free trial.

Doing so will reveal exclusive Funder Insights like their common grant sizes, what causes they support the most, and their openness to new grantees.

As you can see. we break down the data into key sections such as revenues, expenses, and net assets, enabling users to comprehend the financial health of a nonprofit at a glance.

Furthermore, we extract and highlight important data from Form 990, eliminating the need for manual scrutiny of the document.

Using Instrumentl, users can leverage the wealth of information in 990 forms to identify promising prospects and make informed decisions. If any of this interests you, you can give Instrumentl a try by creating a 14-day account here.

Form 990s provide a lot of value if you know how to decipher them. But there aren’t enough hours in the day to comb through all the historical 990s of different potential funders. If you need to find good-fit funders fast, try Instrumentl for free for 14 days.

Get matched with relevant grants and funders within a couple of clicks, rather than manually searching. Instrumentl is the most comprehensive database of opportunities with over 400,000 opportunities and over 15,000 active RFPs.

Instrumentl reduces the time and stress it may take to read and interpret the information on 990s. We can help you determine if an organization truly is a desirable funding partner.

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