There is information in the Form 990 that you may find interesting and helpful for learning about the nonprofit organization that filed the Form 990. But you need to know where to find this information and how to interpret it. To help you do this, we offer a list of the ten most significant pieces of information that can be found in the Form 990 and show you exactly where you can find the information.
Of course, your particular interest in the organization whose Form 990 you are reviewing will influence what information you may consider significant. For example, if you are thinking of contributing to a nonprofit, you may want to know what it does and how strong it is financially (its ability to attract resources, its level of reserves, etc.). If you are a board member, you may be interested in reviewing your own nonprofits Form 990 for information that might prove embarrassing upon inspection by the public. Some believe that board members have a responsibility to review their organizations Form 990 before it is filed.
Immediately below we list the ten most important items we address along with where they can be found on the Form 990. You can go directly to any particular item by clicking on its line. (In some cases an item refers to more than one part of the Form 990. We indicate just the most important part below.)
#10 Does the Filer Lobby? Schedule A, Part VI, page 5
Before discussing the ten most significant facts that can be found in the Form 990, we first provide some background information on how to use this guide and then on the Form 990 itself.
During the course of discussing each of the ten items, there are several links to more detailed explanations for those who want to learn more about the subject. The point for which further elaboration is provided is underlined in blue. All the reader needs to do to access the expanded material is to click on the blue line. (We refer to these instances of expanded material as the expansions.) Having considered the more detailed discussion provided in an expansion, the reader can click on "Back" at the top left hand corner of her screen and she will be taken back to the main text.
Now we provide a little background information on the Form 990. The Form 990, entitled Return of Organization Exempt From Income Tax, is a report that must be filed each year with the Internal Revenue Service (IRS) by organizations exempt from Federal income taxes under section 501 of the Internal Revenue Code, and whose annual receipts are "normally" more than $25,000 a year. It is an information return and not an income tax return since the organizations that file it do not pay income taxes (except, as explained below, in certain cases an organization may have to pay an unrelated business income tax).
There are many different kinds of nonprofit organizations that are exempt under section 501 of the Code. Charitable organizations are the principal focus of this guide. They are exempt from income taxation under section 501(c)(3) of the Code and, in addition to being required to file the Form 990 itself, must also file Schedule A to Form 990. (Schedule A need not be filed by most other organizations exempt under section 501, such as trade associations, social clubs and the like.) Generally, organizations are exempt under section 501(c)(3) if they pursue charitable, educational or religious purposes.
An organization "normally" receives more than $25,000 a year if its gross receipts for the immediately preceding three tax years average $25,000 per year or more. Organizations with gross receipts of less than $100,000 and total assets less than $25,000 at the end of the year may file a short-form Form 990 called Form 990-EZ. Organizations that are classified as private foundations (generally organizations that receive funding from a very few sources) are required to file a Form 990-PF. Generally churches are not required to file a Form 990 (although some churches file voluntarily).
Today the Form 990, in addition to being the main IRS reporting form for nonprofits, is the basic component of the annual report that must be filed with a large number of state offices that regulate charitable solicitation. Many states require supplemental reports as well as the Form 990.
The Form 990 serves two essential purposes. First, it provides information that helps government agencies (the IRS and state charity regulators) enforce the laws that govern nonprofits. For example, it helps government regulators learn whether groups have been spending their funds in a way that might cause them to lose their charitable and tax-exempt status. Second, the Form 990 provides a great deal of financial information about the filing organizations financial condition, about its financial strength or weakness and about such things as the sources of its income.
The Form 990 is a very public document and it is becoming more public. Today an organizations Forms 990 for the past three years must be shown to anyone who wants to see them. In addition, copies of these forms must be given to anyone who requests them (either in person or in writing) and who pays a reasonable fee -- $1 for the first page and 15 cents for every page thereafter and postage, if applicable. Furthermore, most Forms 990 beginning with the year 1997 are being posted on the Internet by the National Center for Charitable Statistics and Guidestar, two nonprofit groups in the Washington D.C. area. Finally, it is only a matter of time before all charities will be required to file their Forms 990 electronically. Thus, virtually every Form 990 is or soon will be accessible by anyone in the world.
We conclude this introduction with three final points. First, while much can be found out by examining an organizations Form 990 for one year, a great deal more can be learned from looking at its Forms 990 for three years. For example, if an organization reports the receipt of a considerable amount of income for three years from a particular source, such as program service revenue, it may be considered likely that the organization will continue to receive funds from this source in the future. This conclusion could not be made with as much confidence on the basis of one Form 990. (As noted above, an organizations Forms 990 for the past three years must be shown to anyone who wants to see them.)
Second, a great deal of very valuable information about the Form 990 can be found in the IRSs Instructions for Form 990 and Form 990-EZ and Instructions for Schedule A (Form 990). These instructions, which provide general information and elucidate what each line means, are clear and very well done. They can be found, along with the current Form 990 and Schedule A, on the Web at http://www.irs.gov (run a search for Form 990 under the "Search Forms & Publications" search feature).
Finally, we will be offering suggestions on how information reported on the Form 990 might be interpreted. These suggestions should be taken as just that suggestions. In many cases there will be other ways the data might be interpreted. An interpretation of each particular Form 990s data will depend on the myriad of particular facts reported in each Form 990 and on facts not reported for that year (e.g. fundraising costs incurred in one year to raise funds in the year in question). Our suggestions are offered to help you develop an aptitude for thinking about the various ways the information contained in the Form 990 might be interpreted.
For a more detailed exploration on the IRS Form 990, download Form 990: A Detailed Examination at NPCC's website at www.npccny.org//More_990/990.htm.
The 10 Most Significant Items of Information
We now canvass the ten most significant items of information that can be found on the Form 990 and show where they can be found. (In the text that follows we refer to each item as Item #1, Item # 2, etc.)
Identity and Tax Status
At the top of page 1 of the Form 990 there is a section of about seven lines that elicits the name of the filing organization and certain other information.
Item A shows whether the filer is on a calendar fiscal year or some other fiscal year. This can be important since generally a Form 990 must be filed five and a half months after the end of the filers fiscal year and as you review a form you may wish to know whether you have access to the most current form.
Item B elicits whether the filer has changed its address (discussed below) and whether the return is its initial or final return. If the return is a filers initial return, one will be on notice that it has a very short track record; if it is the final return one will be on notice that the filer is terminating operations.
Fundamental to your examination of a Form 990 is to make sure you are looking at the Form 990 that you set out to look at. By looking at the address information in the box (item C), you learn the name and address of the filer. As there may be more than one organization with the same name, you have to make sure you have the Form 990 of the organization you are interested in. There is usually only one organization with a particular name in a state, so the filers address may provide the assurance you need. If the filer has changed its address, it must check the first box under item B. If you still have doubts, item E reports the telephone number of the filer and a call to it will almost certainly clear the question up.
Item J shows what paragraph of section 501(c) the filer is exempt under. You may believe that the filer is exempt under section 501(c)(3) (the paragraph that exempts charitable, educational and religious organizations), when in fact it may be exempt under some other paragraph, such as section 501(c)(6) (which exempts trade associations). There are 27 paragraphs under subsection section 501(c), all indicating different types of organizations that are exempt under section 501(a). If you were considering making a contribution to the filer for whom you would expect to claim a charitable contribution deduction under section 170 of the Code, this information would be important to you, since, with few exceptions, only contributions to section 501(c)(3) organizations are eligible for the charitable-contribution deduction.
Sometimes one nonprofit will file a group return for itself and its affiliates. Item H provides information on this subject.
Item F indicates what accounting method the filer uses. In virtually every case it will either be the cash or accrual method. It will be important for you in interpreting a Form 990 to know what accounting method a filer used. For example, if a filer used the cash method, it will not include accounts receivable and other accrual items of income in Part I as income or accounts payable and other accrual items of expenses in Parts I and II as expenses, while these items would be included in income and expenses if the filer used the accrual method.
Regarding item M, filers who receive during the year $5,000 or more (in money or property) from any one contributor must attach Schedule B (Schedule of Contributors) to their Form 990. This schedule includes information as to the identity of such contributors and how much they gave. It is NOT open to the public and thus cannot be accessed. However, item M at the top of page 1 of the Form 990 asks the filer to check a box if it is not required to attach Schedule B. Thus, if the box is checked, it means that the filer received no contribution from any one contributor of $5,000 or more. This information may be considered relevant in understanding a filer's capacity to raise money from individuals.
(Check the Instructions for information on items D, F, K and L.)
How Much Income Did the Filer Receive and From What Sources?
Part I (Revenue, Expenses and Changes in Net Assets) on page 1 is divided into three sub-parts: Revenue, Expenses, and Net Assets. The Revenue sub-part reports a filers total revenue broken down among some 13 different sources (e.g. contributions, fees for services (called program service revenue on the Form 990), etc.). The sum of these lines is totaled at Line 12 (Total revenue) at the bottom of the Revenue subpart By going directly to Line 12, you can find out how much total income the filer received during the year. This will give you some idea of the size of the filers operation. This may be misleading since in a banner year a filer may have received a greater amount of income than it needed to defray expenses for that year, or, as we shall see below, it may have received income that is not attributable to the year. Thus, in many cases the dimension of a filers activities may be better reflected by considering its total expenses for the year. This amount can be found at Line 17 (Total expenses) in the Expenses subpart near the bottom of page 1. You might also look at Line 90b on page 5, which indicates how many employees the filer engages. Below is an example of Part I. We have highlighted Line 17.
As a preliminary point, we believe a principal value of studying the financial information found in the Form 990 is to help you arrive at informed conclusions about the filers ability to garner financial support in the future and thus to be able to continue its operations. Part I contains much financial information that can help you with this effort.
Generally Line 12 may give you an overall idea of the level of the filers income generating potential for the year being reported on. If you have access to the filers Forms 990 for the past three years and you observe that for each year its Line 12 is about at the same level, you might conclude that it will be able to generate a similar amount in the immediately ensuing period. If the filer reports increasing amounts of revenue for the three years, you might conclude its ability to generate income is growing stronger. A contrary conclusion may be reached if its total revenue decreases across the three years. As noted in the Introduction, these possible interpretations may or may not be appropriate to the actual situation of a particular filer. You would need to know a great deal more about the filers circumstances to be able to draw firm conclusions.
Above we pointed out that the Revenue section of Part 1 is broken down among 11 different sources of income (e.g. contributions, fees for services, dividends, etc.) You may be able to reach some interesting conclusions about the nature of a filer from examining the sources of its income and their relative amounts. For example, some nonprofits may receive most of their funds from gifts. This income would be reported on Line 1 (Contributions, gifts, grants and similar amounts received). In contrast, some nonprofits may receive most of their funds from charging fees for services. This income would be reported on Line 2 (Program service revenue). If the distinction between what may be called donative nonprofits (those that rely primarily on contributions) and what might be called entrepreneurial nonprofits (those that rely primarily on charging for their services) is important to you, learning about the relative amounts of the income that the filer receives from these different sources will be significant.
Below is an example of a Part I which shows that the filer received most of its income from program services (Line 2) (viz. 70%). Note in contrast in Example 1, above, the filer received most of its income from contributions (Line 1) (i.e. over 90% of its total revenue came from contributions).
Program service revenue (Line 2) income may include income from an unrelated business activity, that is, an activity that is not related to the filers exempt purposes (other than in providing income to support such purposes). A considerable amount of unrelated business activity may be thought to reflect on the character of the filer. A reader of the filers Form 990 can find out about unrelated business income that the filer may have generated by examining Part VII (Analysis of Income-Producing Activities) on page 6 of the Form 990. Click here for an Expansion that explains Part VII.
Line 2 income also includes income from government contracts. (You need to turn to Part VII on page 6 to learn about the type of a filers program service revenue.) A fair number of nonprofits get nearly all their support from government contracts. If this fact is important to you, you can learn this from reviewing Part I (and Part VII) of the Form 990.
Below, Example 3 shows a Part VII reporting receipts of government contracts. (Example 3 is based on the figures reported in Part I of Example 2 above.)
Finally, it may be significant that a filer gets most of its income from membership dues reported at Line 3 (Membership dues and assessments). Income reported on Line 3 is for dues that members pay in return for benefits they receive from the filer. If the filer gets most of its income from Line 3 membership dues, that may shed some light on the nature of the filer.
In the preceding paragraphs, we have suggested that by looking at the sources of income a filer receives, something may be learned about its character. Also of importance is finding out about the filers capacity to generate income. (As suggested above, here it is important that you have Forms 990 covering more than one year.) To begin with, it may be thought significant that the filer acquires its income from a variety of sources as this may suggest it is not particularly dependent on any one source. On the other hand, a steady flow of income for several years from one particular source (say, contributions or program service revenue) may support an assumption that such income may continue to be received in the future. Similarly a steady source of income for several years from dividends or rents may suggest considerable investment assets and a stable source of revenue. Finally, special events income reported on Line 9 (Special events and activities) may suggest the ability to bring in a singular source of income to help support the filers activities. Some may wish to develop ratios showing the proportion of total support provided by various particular sources of support, such as the percent of total revenues made up by contributions.
In addition to supporting conclusions about a filers nature and capacity to raise income, continued strong support from contributions, program service revenue and/or membership dues may be taken as suggesting that there are those who believe that the filer does important work and this may be significant for you.
How Did the Filers Total Expenses Break Down Among Program, Management, and Fundraising Expenses?
Lines 13-17 of Part I on page 1 constitute the Expenses section of Part I. Line 17 reports total expenses. Except in the rare case that a filer reports payments to affiliates (Line 16), total expenses are the sum of program expenses (Line 13 (Program services)), management expenses (Line 14 (Management and general)) and fundraising expenses (Line 15 (Fundraising)).
We have already suggested that the total expenses reported at Line 17 is a good way to get a quick idea of how extensive a filers activities are. In addition, the Expenses section of Part I permits the reader of the Form 990 to quickly find out what proportions of total expenses are made up by the three functional categories of expenses that are elicited by the form, namely, program (Line 13), management (Line 14) and fundraising (Line 15) expenses. Readers of the Form 990 may want to assure themselves that the filer is spending most of its resources on program matters and not on management or fundraising. By simply dividing a particular functional expense total (say, program services) by total expenses, one can learn what percent of total expenses have been spent on that function. For example, in the example from a Form 990 set out below, program expenses make up 60% of total expenses ($1,200,000/$2,000,000 = 60%).
Program services expenses are those incurred to carry out the organizations mission. Thus, expenses incurred by a social services organization in paying its social workers for delivering services to its clients would be program services expenses. By like token, payments made by a performing arts organization to produce a play would be program services expenses. For a 501(c)(3) group, the activities that these expenses support are usually the basis of the organizations tax exemption.
Management and general expenses are those incurred in connection with providing overall administration to an organization. The IRSs "Instructions For Form 990" (Instructions) note as management and general activities such things as preparing for and holding board meetings, working on office management and personnel problems, and accounting and investment activities. The Instructions also make clear that, for example, the expenses incurred in carrying out activities such as the supervision of program services or fundraising are included under those categories and are not included under management and general. Thus, for example, expenses incurred in preparing for and attending a staff meeting called to plan for a future program initiative or to assess present program activities would be part of the program services category (Line 13) and not the management and general category (Line 14). For many small organizations with small staffs, it is likely that management and general expenses will be low as most of managements time of these groups is spent on supervising the program and fundraising and relatively little on overall management activities.
Fundraising expenses are pretty much self-defining. The Instructions define this category as the total expenses incurred in soliciting contributions, gifts, grants, etc.
Many believe that nonprofits should not spend an overly large part of their resources on fundraising. If a reader of the Form 990 is of this view, she might look to see what percent of total expenses is made up of fundraising expenses (Line 15 divided by Line 17). For example, in Example 4 from a Form 990 set out above, fundraising expenses make up 30% of total expenses ($600,000/$2,000,000 = 30%). We suggest, however, that care should be taken in interpreting this fundraising ratio. If, for instance, a group is new or advancing an unpopular cause, it may need to spend more on fundraising than a group that has been around for some time or is doing something recognized by all as useful. These kinds of qualitative differences are not elicited by the Form 990. Furthermore, a group which spends a fair amount on fundraising (and has a high fundraising ratio) may, as a result of the increased revenue resulting from such efforts, be able to do a lot more than a group which spends very little on fundraising (and has a low fundraising ratio) and consequently generates less income.
The amounts reported at Lines 13, 14, 15 and 17 are taken from Part II on page 2 of the Form 990. Part II consists of 23 lines (Lines 22 44), which list various object expenses and four columns of functional expenses. Object expenses include such things as compensation paid to staff, amounts paid for telephone and travel, etc. The four columns consist of the three functional expense categories discussed above, that is, program services (column (B)), management and general (column (C)) and fundraising (column (D)), and total expenses (column (A)). Each amount reported as an object expense is, depending on what it is spent on, allocated amongst the three functional expense columns ((except for Lines 22 (grants), 23 (assistance to individuals) and 24 (benefits to members) which are to be reported only as a program expenses). A reader may find it useful to review the types of expenditures a filer made during the year and what functional expense category they were spent on. This can be done by examining Part II.
A note on Line 16 (Payments to affiliates). Certain kinds of payments made to affiliated organizations, such as dues paid by a local charity solely to support its state or national parent, are reported at Line 16. As suggested above, this line is only rarely applicable and usually shows zero.
What Can You Tell From Net Assets?
We now come to the bottom of page 1, the four lines that make up the Net Assets section of Part I. The first line, Line 18 (Excess or deficit for the year), indicates whether the filer operated at a surplus or deficit for the year being reported on and the size of such surplus or deficit. This is of obvious interest since on the face of it a surplus and its size may suggest future financial health while a deficit and its size may suggest future financial difficulty. We emphasize may suggest since either a surplus or a deficit may reflect something unusual for the year being reported on and have little bearing on the future. Nevertheless, many will want to know whether the filer ended the year in the red or the black. Of course, if you have access to three or more years of the filers Forms 990 and they indicate a trend of surpluses or deficits, this may be more significant as a predictor of the filers future financial condition. (We return to this point below.)
Line 19 (Net assets at the beginning of year) and Line 21 (Net assets at end of year) are of obvious interest as they indicate the amount of assets over all liabilities (i.e. net assets) that the filer holds or what the filers net worth is at the beginning (Line 19) and end (Line 21) of the year. (We discuss Line 20 at the end of this Item.) In the usual case where Line 20 reports zero, Line 21, logically enough, is the combination of Lines 19 and 18, i.e. the net assets on hand at the beginning of the year plus the surplus reported at Line 18 (or less the deficit reported at Line 18) equals the net assets on hand at the end of the year. This can be seen below in the excerpt of the Net Assets section. The amount reported at Line 21 is the same as the amount reported at Line 73(B) on Part IV. Below we set out an example of the Net Assets section of a Form 990 based on the figures shown in Example 1 above.
Net assets provide some indication of the level of resources the filer has to help support its activities in the future. Very generally it might be expected that a filer with a small amount of net assets at the end of the year would be quite dependent on a reliable and timely receipt of income in the ensuing period to be able to continue activities. Likewise, in a very general sense, it might be expected that a filer with a large amount of net assets at the end of the year, relative to its expenditures for the year being reported on, would begin the next period in a strong financial position and be able to endure a time of income shortfalls and still continue its activities.
What has just been suggested should, as noted, be taken as a very general first approach. It is often the case that some of the net assets on hand at the end of the year may not be easily drawn down to meet a filers needs or obligations. For example, some assets may consist of restricted endowments or if the filer owns a building that is central to its operations (e.g. a school building), it may not, as suggested, be possible to sell the building to produce cash to meet needs without virtually destroying the ability of the filer to carry out its (educational) goals. Consequently, as discussed below, net assets need to be analyzed to determine what portion of such assets are practically available to help the filer meet its future needs.
In making reference to meeting the filers needs, we primarily refer to its near-term needs and by this we have in mind its needs for the next year or so. Obviously, in the longer-term future, if the filer became financially destitute and needed to liquidate any assets to satisfy its creditors, most of the assets that we are suggesting are not available to meet near-term needs might well be accessible to satisfy creditor demands.
To conduct the analysis just suggested, it is necessary to turn to Part IV (Balance Sheets) of the filers Form 990. Part IV is found on page 3 and constitutes the filers balance sheet. It is divided into three sections: Assets (Lines 45 59), Liabilities (Lines 60 66) and Net Assets (Lines 67 74). Line 73 reports net assets; Line 73(A) reports net assets on hand at the beginning of the year and Line 73(B) (as noted above) those on hand at the end of the year. Line 73(B) (as also noted above) is identical to Line 21. The amount reported at Lines 21 and 73(B), the filers net assets on hand at the end of the year, is the amount we want to analyze to determine how much of this amount might be available to meet the needs of the filer in the near-term future.
To begin, we suggest that you should find out how much the filer reports on Line 69(B) as permanently restricted net assets held at the end of the year. Permanently restricted assets are assets that have been given with restrictions that they be preserved and not sold. One example would be an endowment gift that stipulates that the principal of the gift is to be permanently held and that only the income that the principal generates may be currently used. Another example would be a gift of a work of art or real estate with a restriction that it be held permanently and not sold. These permanently restricted assets therefore cannot be used to meet the general near-term needs of the filer. They should therefore be subtracted from Line 21 (and line 73(B)) to get a more reliable sense of how much of total net assets are available to meet near-term needs.
Next, it might be instructive to look at the amount of net assets that are reported on Line 68(B) (temporarily restricted [net assets]). These are assets that have been given with restrictions that they be used in a later period, or for a specified purpose or both. A typical example might be a grant from a foundation with a stipulation that the funds be used over several years (a multi-year grant) to support a particular program. A careful reader of the Form 990 might decide to take the amount reported at Line 68(B) into account in evaluating how much of total net assets are available to meet the filers near-term needs. For example, some part of the amount listed at Line 68(B) may not be available for spending until some time in the future or might be restricted to a particular program which might not be part of the filers core or general program. As to the later type of restriction, if the reader of the filers Form 990 was primarily interested in the filers ability to continue its core program, these assets would not be available for such needs. Thus, as just mentioned, it might be decided not to take the amounts listed at Line 68(B) into account in assessing how much of a filers total net assets are available to meet near-term needs.
If one subtracts the sum of permanently restricted and temporarily restricted net assets, from total net assets, you are left with unrestricted net assets which is the amount reported at Line 67 (unrestricted [net assets]). Line 67(A) reports the unrestricted net assets on hand at the beginning of the year and Line 67(B) those on hand at the end of the year. Line 67(B), unrestricted net assets on hand at the end of the year, is a good place to look to get a general idea of the level of assets available to the filer to meet near-term needs. Of course, as suggested above, some or all of a filers temporarily restricted net assets may be available for near-term use, although the exact amount of such assets available for these purposes may not be known.
Below is an example (based on Example 1) of the Net Assets section of Part IV reporting unrestricted, temporarily restricted and permanently restricted net assets. (The example assumes the filer reported no liabilities.) Note that it is the amount reported at Line 67(B), namely, $580,000, that would be the amount that one should consider as likely to be available to meet the filers near-term needs and not the total net assets of $1,680,000 reported at Line 73(B) and Line 21.
Finally, as mentioned above, a careful reader of the Form 990 will also want to look at the Assets section of Part IV to find out whether any of the assets held by the filer might be difficult to readily convert to cash (i.e. might not be easily liquidated). The Assets section of Part IV lists assets roughly in order (Lines 45 58) of their relative availability for use. For example, Line 45 reports cash and Line 57 reports the value of buildings and similar assets held by the filer. A building, whether it is a permanently restricted asset or an unrestricted asset, may as a practical matter be difficult to liquidate. The same may be said about certain investments the filer holds, such as investments in land or buildings (reported at Line 55). So in assessing a filers net assets to determine their availability to meet near-term needs, it may be desirable to review the kinds and relative amounts of assets that the filer reports in the Assets section (Lines 45 - 59) of Part IV.
We conclude our discussion of the Net Assets section of Part I by returning to a point made above and briefly consider the effect that recurring deficits may have on a filers net asset position. In most cases repeated deficits will cause a reduction in unrestricted net assets. This reduction may not be reflected in total net assets since, for example, in some instances a filer may have received a contribution to its permanently restricted net assets (Line 69) (such as a gift to an endowment fund) so that its total net assets (Lines 21 and 73(B)) may not decrease or may even increase. Often, however, this will not be an issue since many filers will have only unrestricted net assets (i.e. they will not have any temporarily or permanently restricted net assets). In any event, as suggested above, a reader of the Form 990 can learn about the impact of a deficit on the filers ability to meet the near-term needs of its core program by going directly to Line 67 unrestricted net assets -- and calculating the reduction in unrestricted net assets from the beginning of the year to the end of the year (Line 67(B) Line 67(A) = reduction in unrestricted net assets). If it is observed that, as a result of the recurring deficits, the level of a filers unrestricted net assets is declining in a significant way, it may reasonably be concluded that the filers financial position is weakening, and, depending on the relationship between the most recent yearly deficits and the amount of the filers unrestricted net assets, it may be weakening significantly. For example, if a reader of three consecutive Forms 990 of a filer observes that the filer had $750,000 of unrestricted net assets at the start of the period being examined (Line 67(A) of the first years Form 990) and sustained deficits in the neighborhood of $200,000 for each of the three years, so that the filers unrestricted net assets had diminished to about $150,000 at the end of the period being examined (Line 67(B) of the last years Form 990), there would be reason for serious concern about the filers future financial health. On the other hand, if the deficits ran at about the level of $50,000 a year, while this may be taken as an indication of some problems, they would clearly not be as serious as in the first case.
A note on Line 20 (Other changes in net assets or fund balances). In some instances, there will be changes between an organizations net assets at the start and end of the year that cannot be accounted for by the amount on Line 18. They would include such items as adjustments of earlier years activities and, not uncommonly for those groups that hold securities as assets, unrealized gains or losses on investments carried at market value. The net of these changes is entered at Line 20. If a filer reports on Line 20, it must attach a schedule.
What Kinds of Programs Does the Filer Run and
How Much Does It Spend on Them?
Part III on page 2 of the Form 990 elicits information on what a filer does. The filer is required to state the organizations primary purpose on a very short line near the top of this part. Then for each program it conducts the filer is to describe, on several lines provided for this, each such programs purpose, stating the outputs of the program, such as number of clients served, publications issued, and students taught. In a column to the right of this description, the filer is to list the total of program expenses for each such program. Four subparts (a-d) are provided for four programs. A fifth subpart or line (e) instructs the filer to attach a schedule for other programs. A final subpart or line (f) requires the filer to report the total of program expenses, the sum of the expenses for each of the particular programs reported above, which should be identical to the amount reported at Lines 13 and 44(B). The 2005 Form 990 now asks whether the amount spent includes foreign grants. Here is Part III.