As a donor, it’s important to ensure that your contributions make a meaningful impact. By understanding how to read a charity's Form 990, you can verify the effectiveness and financial health of organizations like Revive Ride. This page guides you through the essential components of Form 990, allowing you to make informed decisions before donating.
Form 990 is the annual tax return for nonprofits, providing a wealth of information about their finances and operations. From program expenses to executive compensation, this document can reveal a charity's commitment to its mission. Follow along as we break down the key sections of Form 990 and empower you to evaluate Revive Ride or any charity you consider supporting.
Step-by-step walkthrough
Access Form 990
Retrieve the charity's Form 990 from reliable sources like ProPublica Nonprofit Explorer, Candid GuideStar, or the charity's own website. These forms are publicly available and provide crucial insights.
Review Part I Summary
Start with Part I of Form 990, which summarizes the charity’s mission, programs, and key financial data. This gives you an overview of the organization's objectives and financial health.
Analyze Part IX: Functional Expenses
Look closely at Part IX to understand how the charity allocates its expenses across programs, administration, and fundraising. Aim for a program-expense ratio of 75% or more, indicating that most funds support the mission.
Examine Schedule J: Executive Compensation
Check Schedule J to see how much executives are compensated. Compare these salaries to the charity’s size and revenue to ensure that compensation is reasonable relative to its mission accomplishments.
Check Schedule L: Related-Party Transactions
Review Schedule L for any related-party transactions, which could indicate potential conflicts of interest. Flag any concerning transactions and research them further to ensure transparent operations.
Positive signals (green flags)
✓ High Program Expense Ratio
A program-expense ratio of 75% or more is a strong indicator that the charity is effectively using its funds to fulfill its mission.
✓ Reasonable Executive Compensation
Executive salaries that are in line with industry standards for similar-sized organizations suggest responsible governance and accountability.
✓ Strong Year-over-Year Growth
Consistent revenue growth and increased program spending year-over-year indicate a healthy and expanding organization focused on its mission.
✓ Clear Governance Structure
A well-defined board governance structure in Form 990 suggests strong oversight, increasing confidence in the charity's operations and decision-making.
Warning signals (red flags)
⚠ High Administrative Costs
If the program-expense ratio is below 75%, it may suggest that the charity spends too much on administration or fundraising, potentially signaling inefficiency.
⚠ Excessive Executive Compensation
High salaries for executives compared to the charity's size and revenue can be a red flag, indicating misalignment between compensation and mission impact.
⚠ Related-Party Transactions
Frequent or large transactions involving board members or executives may indicate self-dealing, which can compromise the charity's integrity.
⚠ Lack of Transparency
If the charity's Form 990 is incomplete or hard to find, it raises questions about the organization’s commitment to transparency and accountability.
Tools + resources
- https://projects.propublica.org/nonprofits
- https://www.guidestar.org
- https://www.charitynavigator.org
- https://www.bbb.org/charity-reviews
- https://apps.irs.gov/app/eos
Missouri state-level oversight
In Missouri, you can also check the state Attorney General’s charitable registry for additional transparency and information regarding local charities like Revive Ride. The Better Business Bureau offers insights on charity practices, while state nonprofit associations provide resources for donors. Engaging with these local resources enhances your ability to make informed donations.