An Introduction to the Form 990PF



Within the Form 990-PF there is information that is of the utmost importance to the serious prospect researcher. However you need to know where to find this information and how to interpret it. To help you do this, we have provided a list of the ten most significant pieces of information that can be found in the Form 990-PF and show you precisely where you can find the information.

What is the IRS Form 990-PF?


As a preliminary to discussing the ten most significant facts that can be found in the Form 990-PF, we will first provide some background information on the Form itself.

The Form 990-PF, entitled "Return of Private Foundation" 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 taxes.

There are many different kinds of nonprofit organizations that are exempt under section 501 of the Code. Generally, organizations are exempt under section 501(c)(3) if they pursue charitable, educational or religious purposes. Organizations that are classified as private foundations are required to file a Form 990-PF.

The Form 990-PF 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-PF provides a great deal of financial information about the filing organization's financial condition, about its financial strength or weakness and about such things as the sources of its income and its mandate or funding interests.

While much can be found out by examining an organization's Form 990-PF for one year, a great deal more can be learned from looking at its Form 990-PF for two or more 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-PF.

Finally, we will be offering suggestions on how information reported on the Form 990-PF 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 990-PF's data will depend on the abundance of particular facts reported in each Form 990-PF. Our suggestions are offered to help you develop an aptitude for thinking about the various ways the information contained in the Form 990-PF might be interpreted.

Immediately below we address the ten most important items along with details of where they can be found on the Form 990-PF. You can go directly to any particular item by clicking on the link.

The 10 Most Significant Items of Information


Below, we describe the ten most significant items of information that can be found on the Form 990-PF, their importance to the prospect researcher and where they can be found on the form.

Item 1 - Identity and Tax Status

Item 2 - How Much Income Did the Organization Receive and From What Sources?

Item 3 - What Were the Foundation's Operating and Administrative Expenses?

Item 4 - What can the Prospect Researcher Determine From Net Assets?

Item 5 - Who are the Board Members and Why is This Relevant to the Prospect Researcher?

Item 6 - What Kinds of Programs Does the Foundation Run and How Much Does It Spend on Them?

Item 7 - Where Can I Locate Information about Specific Funding Recipients, either Individuals or Groups?

Item 8 - How can I Locate New Foundations by Using the Form 990-PF?

Item 9 - How do I Determine the Tax Year or Fiscal Year for the Form 990-PF I am viewing?

Item 10 - Does the Organization Lobby Special Interests?

Item 1: Identity and Tax Status


The section at the top of page 1 of the Form 990-PF contains the name of the filing organization and other useful information such as contact information, the Foundation's "Employer Identification Number" and the State &/or City that where the Foundation is based.

Example 1:




The first line to be filled in shows whether the filer is on a calendar fiscal year or a different fiscal year. This can be important since generally a Form 990-PF must be filed five and a half months after the end of the organization's fiscal year and as you review a form you may wish to know whether you have access to current information.

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Item 2 - How Much Income Did the Foundation Receive and From What Sources?


By going directly to Line 12, you can find out how much total income the organization received during the year. This will give you some idea of the size of the foundation's operations.

Example 2:



It is important to note, the value of studying the financial information found in the Form 990-PF is to help the prospect researcher arrive at informed conclusions about the foundation's ability to garner financial support in the future and thus to be able to continue to support it's mandate. Part I contains important financial information that can help you with this effort.

Item 3 - What Were the Foundation's Operating and Administrative Expenses?


The total expenses and disbursements reported at Line 26 are a good way to get a quick idea of how extensive a foundation's activities are. In addition, this section of Part I permits the prospect researcher to quickly find out what proportions of total expenses are made up according to the categories that are elicited by the form, namely, compensation & benefits (Lines 13, 14 & 15), operating expenses (Lines 16-23) and contributions and grants paid (Line 25). Readers of the Form may want to assure themselves that the foundation is spending most of its resources on supporting its programs or mandate and not on operating or administrative expenses.

Example 3:



Item 4: What can the Prospect Researcher Determine From Net Assets?


Page 2, Part II summarizes the foundations assets and liabilities. Net assets provide some indication of the level of resources the foundation 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 foundation 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.

Example 4:

Item 5 - Who are the Board Members and Why is this Relevant to the Prospect Researcher?


Part VIII (List of Officers, Directors, Trustees, and Key Employees) on page 6 of the Form 990-PF contains information of considerable interest. The name of each board member is listed. (The address of each board member is also given, but in many cases the address will be the same as the address of the foundation). If the board member receives any compensation for her or his duties, the amounts are reported here. Of course, most board members do not receive compensation for their work as board members.

Example 5:



If the prospect researcher knows something about some or all of an organization's board members, their identity can provide significant information, since the quality of its board members may reflect on the foundation itself. Even if the reader knows little about the board members, if it appears from their last names for instance that several or many board members are from the same family, this may be significant to the prospect researcher. For example, a group which is essentially directed by a single family may be of a different nature than one that has broad public representation. Finally, the number of people on the board of the foundation may also be of some interest.

Item 6 - What Types of Programs Does the Foundation Run and How Much Does It Spend on Them?


Part IX-A on page 6 of the Form 990-PF describes the foundation's interests. The foundation is required to state its four direct charitable activities. Then for each program it conducts, it must describe each such program's purpose.

Example 6:



In describing its programs, a foundation should be able to provide a fairly good overview of its activities. By comparing the amounts spent on each program, the prospect researcher may derive some sense of their relative importance to their cause. This is the only part of the Form 990-PF where you can pick up descriptive data about a foundation's activities and this qualitative information can be helpful for putting all the numbers in the Form 990-PF in context.

Item 7 - Where Can I Locate Information about Specific Funding Recipients, either Individuals or Groups?


Part XV - Line 3 ("Grants and Contributions Paid During the Year or Approved for Future Payment") This section is one of the most valuable sources of information available in the Form 990-PF. This is extremely useful information for the prospect researcher as it pinpoints the interests of the foundation by naming the actual funding recipients.

Example 7:

Item 8 - How can I Locate New Foundations by Using the Form 990-PF?


Making connections early in the funding cycle of a foundation can help to establish your organization as a recipient. When a Foundation submits its first Form 990-PF to the IRS, it indicates on Line G at the top of page one, that this is it's initial (or first) Form 990-PF submission.

Example 8:

Item 9 - How do I Determine the Tax Year or Fiscal Year for the Form 990-PF I am viewing?


Knowing when a new year of granting begins or capitalizing on what remains left in a budget near the end of a fiscal year is relevant prospect research information. In the Form 990-PF, the calendar or fiscal year can be found at the top of page one directly over the "Contact Information" section. A fiscal year is the 12 months covered by the foundation's financial statements. Many foundations have a fiscal period that matches the calendar year (January 1 through December 31). Others may have selected a different fiscal period, (September 1 to August 31, or April 1 to March 31).

Example 9:

Item 10 - Does the Organization Lobby Special Interests?


A number of nonprofit groups advocate for changes in public policy and as part of their advocacy efforts engage in lobbying. The term "lobbying" refers to attempts to influence legislators (or those who work with them) to support or oppose the enactment of some legislation. It may be done by directly contacting legislators (direct lobbying) or by asking others to contact them (grass roots lobbying). Organizations exempt under section 501(c)(3) are permitted to engage in some lobbying, but if they do too much they may jeopardize their tax-exemption. Line 1a of Part VII-A (Statements Regarding Activities), asks whether the filer attempted to influence national, state or local legislation (i.e., did it attempt to lobby). If the filer answers "Yes," it must report the total of expenses incurred in connection with its lobbying activities and complete the relevant section of Part VII-A.

Thus, if the prospect researcher wanted to know whether the filer engaged in any lobbying, they could find this out by reviewing these parts of Schedule A. There are several reasons why a prospect researcher may be interested in learning whether an organization has engaged in lobbying activity. The researcher may think, for example, that groups like the organization being reviewed ought to not only help people, but in addition should advocate for changes that will address the problems that caused its beneficiaries to need help. Or a reader might have different ideas and believe that groups like the filer ought to stay completely clear of the political process and thus not engage in lobbying activity. In some cases an organization may be a group that advocates for a position or positions with which the reader disagrees.

Example 10: