Not-for-Profit & Government

Not-for-Profits Government BKD Insights Articles BKD Webinar Series

BKD Not-for-Profit & Government Webcast Series

To learn more about these informative one-hour webcasts, see our Not-for-Profit & Government webcasts page.

Qualified, experienced BKD client service professionals write the contents of these articles. We urge you to carefully consider all of the facts and circumstances of your situation before applying specific information in our articles. Consult your BKD advisor before acting on any matter covered in these articles.

July 2010

A Form 990 Tax Return Is More Than Numbers

Insights Archive

Webinars

Nicole Beverly

The Form 990 is prepared by not-for-profit organizations to comply with IRS annual filing requirements. Your Form 990 also may be used to rank your organization against other organizations in your area and throughout the United States, comparing such items as spending on your mission, fundraising efficiency and organizational efficiency. A study of 30 metropolitan markets across the United States was just released, which ranked Pittsburgh, Pennsylvania as the most charitable conscious city with a median score of 59.38. Baltimore, Maryland was ranked the least charitable conscious with a median score of 51.89. The national average was 55.68, with 70 being the highest possible score.

There are several organizations that evaluate charities, including the Better Business Bureau and Charity Watch, but the largest is Charity Navigator, a not-for-profit organization that evaluates charities and rates them based on organizational efficiency and growth capacity. These services are usually free to the public to view; all you need to do is sign up for an account.

The study of the most charitable conscious cities was conducted by Charity Navigator and used data from the most recent tax filing to weigh how much money charities raise and spend on their mission. Sixteen factors were used to rank not-for-profits:

Fundraising efficiency
Fundraising expenses
Program expenses
Administrative expenses
Primary revenue growth
Program expense growth
Working capital ratio
Total revenue
Total expenses
Excess (or deficit)
Total assets
Total contributions
CEO compensation
Total liabilities
Total net assets
Overall score

The results of these factors were then used to give an organization a rating between zero and four stars. The results of this study and organizational rankings can be found at their website.

Charity Navigator, founded in 2001, evaluates 501(c)(3) organizations that file Form 990s, receive public support of more than $500,000 and have total revenue of more than $1 million. An organization that is not listed on Charity Navigator but meets the requirements can make a request to be added if it meets a few additional requirements.

Organizations listed on Charity Navigator and other rating sites should take time to review their rankings, which can affect donations, volunteerism and public perception. A poor ranking by one of the rating organizations can spark an article in a local newspaper and bring bad publicity for an organization. Organizations also may use the reports to compare themselves to similar organizations in their area or throughout the United States.

Before filing the Form 990, organizations should review their return using some of the rating factors to see how they compare for the current year. Some quick areas to review are:

Allocation of expenses among the categories of program service, fundraising and management and general

Amount of charitable contributions received compared to fundraising expenses
CEO compensation

For more information on this issue or related matters, please consult your BKD advisor.

This article is property of BKD, LLP and is copyright protected. It may not be republished or reproduced without permission. To view BKD’s Terms of Use, click here. To inquire further about reusing this article, contact Matt Wagner at 417.831.7283 or mpwagner@bkd.com.