The IRS analyzes Form 990 data to ensure tax-exempt organizations comply with laws and regulations.
Donors often look at Form 990 before giving to the organization. The most common areas donors review include:
Mission statements and major programs activities. The return provides a description of major program activities and accomplishments as well as related expenditures, grants, and revenues.
Financial sections. This allows donors to verify the organization’s financial viability.
Compensation to board members, executives, and management. Donors want to know that compensation is reasonable and that their gifts benefit the mission of the organization.
Individuals internal to the organization may look at its Form 990 to see the compensation of their boss or colleagues or other related party transactions.
Other tax-exempt organizations with similar missions and of similar size may look to the return to benchmark industry standards such as executive compensation.
Occasionally members of the media will review an organization’s Form 990. Their main focus is usually compensation and percent of total expenditures related to further the mission.