How to read a charity's Form 990 in Ten Minutes.

Before writing a check to an organization you do not know well, you can read what it told the federal government about itself last year. Tax-exempt organizations of meaningful size file Form 990 annually, and the returns are public. The IRS Tax Exempt Organization Search tool and ProPublica's Nonprofit Explorer both let you find them by name at no cost.

The full return can run to dozens of pages with schedules. You do not need all of it. Ten minutes spent on a few sections will tell you most of what a careful donor wants to know.

Start on page one

Part I is a summary. It shows the organization's mission as stated by the organization, the number of voting board members and how many are independent, the number of employees and volunteers, and two years of revenue, expenses, and net assets side by side.

Look at the trend. Revenue that swings wildly from one year to the next is not a warning in itself, since a single large grant can do that, but it is a question worth asking. Net assets that decline year after year mean the organization is spending more than it takes in.

Read what they say they did

Part III describes the organization's three largest programs, with expenses for each. This is the closest thing on the form to an account of the actual work. Vague descriptions deserve skepticism. Good ones name what was delivered, to whom, and in what quantity.

Check the governance answers

Part VI asks a series of yes or no questions. Does the organization have a written conflict of interest policy? A whistleblower policy? Did the board review the return before filing? Does it document its meetings? A small organization answering no to several of these is not necessarily doing anything wrong, but these are the practices that protect donor money.

See who is paid

Part VII lists officers, directors, key employees, and the highest-paid staff, along with their compensation. Compare it to the size of the organization. The IRS expects compensation to be reasonable for comparable work, and independent directors are supposed to approve it.

Follow the money out

Part IX, the statement of functional expenses, divides spending into program services, management and general, and fundraising. It is the source of the overhead ratios many donors look for. Treat that number with care. As we explain in a separate piece, a low ratio does not guarantee effective work, and a higher one is often a sign of sound infrastructure.

Glance at Schedule O

Schedule O holds the organization's explanations of other answers. It is where you learn why a policy is missing or how compensation was set. It is often the most candid part of the return.

What the 990 cannot tell you

The form reports finances and governance. It does not measure whether a program works. For that you need the organization's own reporting, independent evaluations where they exist, and ideally a conversation with someone who runs the program. Use the 990 to decide which questions to ask, not as the final answer.

Smaller organizations with gross receipts normally of $50,000 or less file only an electronic postcard, the 990-N, which contains almost no financial detail. For those, the best source is the organization itself. Ask for a budget and a recent financial statement. A well-run small nonprofit will send them.