How to Read a Nonprofit Form 990 (With Examples)

IRS Form 990 is the most powerful tool donors have for evaluating a charity. Every tax-exempt organization with more than $200,000 in revenue must file one annually, and unlike individual tax returns, 990s are fully public. This guide walks you through the key sections so you can make informed giving decisions.

What Is Form 990?

Form 990 is a nonprofit’s annual financial report to the IRS. It discloses revenue, expenses, assets, executive compensation, governance practices, and how the organization spends its money. Think of it as a nonprofit’s financial X-ray — it shows what’s happening under the surface.

There are three versions: the full Form 990 (for organizations with revenue over $200K or assets over $500K), Form 990-EZ (simplified, for smaller organizations), and the 990-N postcard (for tiny organizations under $50K). Religious organizations are generally exempt.

The 5 Numbers That Matter Most

You don’t need to read all 12 parts and 16 schedules. Focus on these five data points:

1. Total Revenue (Part I, Line 12)

This is the organization’s total income from all sources — donations, grants, investment income, program service revenue, and other income. It tells you the scale of the organization. A hospital system with $10 billion in revenue operates very differently from a local food bank with $500,000.

What to look for: Compare year-over-year. Is revenue growing, flat, or declining? Consistent growth suggests a healthy, sustainable organization. Sharp declines may indicate donor fatigue or loss of major funding.

2. Program Service Expenses (Part IX, Line 25 Column B)

This is the amount spent directly on the organization’s mission — the programs and services that benefit the public. This is where your donation is supposed to go.

The key ratio: Divide program expenses by total expenses (Part IX, Line 25 Column A) to get the program expense ratio. This tells you what percentage of every dollar goes to the mission versus overhead. The widely accepted benchmark is at least 75%. Top charities hit 85-95%.

3. Management & General Expenses (Part IX, Line 25 Column C)

Administrative overhead — office rent, accounting, legal fees, IT systems, and other costs of running the organization. Some overhead is necessary and even healthy, but it shouldn’t dominate the budget.

What to look for: Management expenses above 15-20% of total expenses may warrant scrutiny. But context matters — organizations going through mergers, building new systems, or in highly regulated fields may have legitimately higher admin costs.

4. CEO/Executive Compensation (Part VII, Section A)

This section lists compensation for officers, directors, trustees, and key employees. Look for the highest-paid individual — usually the CEO or executive director.

What to look for: Compare CEO pay to total revenue. A CEO earning $500,000 at an organization with $500 million in revenue (0.1% ratio) is very different from one earning $500,000 at a $5 million organization (10% ratio). Our CEO salary rankings contextualize pay with organization size.

5. Net Assets / Fund Balance (Part X, Line 32)

The organization’s total assets minus total liabilities — essentially its savings. Some reserves are healthy (typically 3-6 months of operating expenses). But excessive reserves can mean the organization is hoarding donations rather than deploying them.

What to look for: Divide net assets by monthly expenses to get “months of reserves.” Under 3 months is risky (the organization could face a cash crisis). Over 36 months means the organization may be sitting on too much money. The sweet spot is 3-12 months.

Red Flags to Watch For

• Program spending below 65%: More than a third of expenses going to overhead and fundraising is a warning sign.
• CEO pay exceeding 2% of revenue: Executive compensation should be proportionate to the organization’s size.
• No independent board members: Part VI asks about governance. Family-controlled boards with no independent oversight are risky.
• Revenue declining 3+ years: A sustained decline suggests the organization may be struggling to attract support.
• Related party transactions: Schedule L discloses transactions between the nonprofit and its officers or major donors. These aren’t always bad, but they require scrutiny.
• Late filing: Organizations that consistently file late may have governance or management issues.

Green Flags That Indicate Health

• Program spending above 80%: The organization prioritizes its mission over overhead.
• Consistent revenue growth: 3-5 years of steady growth indicates donor confidence and organizational stability.
• Reasonable reserves (3-12 months): The organization is financially stable without hoarding donations.
• Diverse revenue sources: Not overly dependent on a single donor or grant.
• Independent board: A majority of board members are independent of staff and major donors.

How NonprofitTruth Uses 990 Data

Our Efficiency Score distills 990 data into a single 0-100 score with four factors: program spending ratio (50% weight), revenue growth consistency (20%), fund reserves (20%), and CEO compensation ratio (10%). We grade over 1,200 nonprofits from A to F so you can quickly assess financial health without reading the raw filing.

Browse our most efficient charities, check CEO salary data, or search for a specific organization on our homepage.

Where to Find 990s for Free

• ProPublica Nonprofit Explorer (projects.propublica.org/nonprofits) — The most user-friendly option. Search by name, EIN, city, or state. Full-text e-filed returns.
• IRS Tax Exempt Organization Search (apps.irs.gov/app/eos) — Official IRS tool. Confirms tax-exempt status and links to filed returns.
• Candid / GuideStar (guidestar.org) — Free basic access with account. Premium features require paid subscription.
• The nonprofit’s own website — Many organizations post their 990 directly. If they don’t, they’re required to provide a copy on request.

Frequently Asked Questions