Make the most of your 990
“Before you ask for a rating from somebody,” Neustedter advised, “make sure it’s good.”
Generally, he said, if 80 percent or above of your expense is for programs, 15 percent or below is on operations, and 10 percent or below is for fundraising, you’ll get a good rating from both Charity Navigator and BBB Wise Giving Alliance. (Whether you’re actually an effective organization is another matter, he added.)
The data on Charity Navigator is all pulled from your 990 form, Neustedter said, and donors know to check your 990, too. Neustedter believes organizations should be transparent by posting their 990s on their websites rather than saying they’re available on request.
That being the case, he said, it’s important that your 990 helps you put your best foot forward. But doesn’t your 990 just convey facts that are what they are? Actually, no, Neustedter said: For one thing, inaccuracies abound. In a recent review of 220,000 such forms, 37 percent reported no fundraising expense, and 13 percent reported no management and general expenses.
“That can’t be true,” Neustedter said, and similar inaccuracies may be hiding on your 990, where they could raise a red flag that you’re being intentionally dishonest. What often happens, he added, is that the organization’s tax preparer also fills out the 990, and then the executives or board members give it only a cursory review.
The problem, Neustedter said, is that tax preparers almost speak an entirely different language, and “lots of inaccuracy comes from translation.”
Do look closely at your 990, he advised, not only for inaccuracies, but also for things that could be changed to your advantage while still being truthful. For example, he said, the tax preparer will often list the executive director’s salary under administration, which will count toward your overhead costs. But some executive directors spend most of their time working directly with the organization’s programs—so that salary might actually qualify as a program expense, which could help you earn a better rating.
But don’t pin all your hopes on those ratings, Neustedter stressed: You still need a strong website (he praised the Philadelphia Bar Foundation and its case for support) and marketing materials.
“You can’t depend on organizations [such as Charity Navigator] to represent you as well as you can,” he said.
(Note: This workshop was the first in a pair; the second portion featured Barbara O’Reilly, CFRE, principal at Windmill Hill Consulting, on the topic “Talk Impact, Not Overhead: Strategies to End the Nonprofit Starvation Cycle.” A synopsis of that presentation will appear in the next issue.)