Your Secret Nonprofit Fundraising Weapon: IRS Form 990

May 2, 2019

By Richard J. Locastro, CPA, JD | Partner and Director of Nonprofit Tax

In today’s rough-and-tumble political climate, economic pressures are mounting, fewer people are giving to charity¹, and nonprofits are feeling the squeeze.

Federal budget cuts have reduced government grants and other resources available to nonprofit organizations². Perhaps more significantly, the Tax Cuts and Jobs Act of 2017 has created new barriers to individual philanthropy. An increased standard deduction and decreased marginal tax rates disincentivize charitable giving. The American Enterprise Institute estimated that these factors shrank charitable donations by up to $17 billion last year. All of this forces nonprofit fundraising efforts to be more efficient, effective and broader than ever. Fortunately, there is plenty nonprofits can do to keep donations flowing. Taking a detailed look at its Federal Form 990 (990) and the story it tells is a smart place for an organization to start.

Expanding Your Donor Base

While associations focus on broadening products and services to generate revenue, charitable organizations are seeking to expand their donor pools to remain viable and grow. Proactive charities are already experimenting with a variety of tactics to reach new and different funding sources.

Perhaps most important is getting to know your donors, both current and prospective. Conducting donor research helps nonprofits glean a more nuanced understanding of donor demographics, and the factors that motivate various groups and individuals to give. Details on socioeconomic status, social media use, and event participation can help nonprofits tailor fundraising appeals to reach donors where they are and when they are listening. Deeper knowledge of donors can then help shape an organization’s communications strategy, so the right messages are delivered through the right channels to the right audiences.

What about prospective donors to your charity who fall outside of these research and direct engagement efforts? Many may be referencing websites like Charity Navigator or GuideStar when conducting their research to make giving decisions. With both of these sites including information directly from the 990, charities should ask, What does our 990 say about our organization?

Form 990: Your Storytelling Tool

Do not overlook the 990 as an essential tool to help your organization reach a larger donor pool. These publicly disclosed Internal Revenue Service filings must include required information about tax-exempt entities such as executive compensation, conflicts of interest, and board meeting minutes to demonstrate compliance. But the 990 is also a key way to highlight your organization’s mission and motivate potential donors.

How the 990 Can Advance Your Mission

The 990 communicates a deeper story beyond the balance sheet. Nonprofit leaders owe it to their organizational bottom lines to focus on what the critical Part III conveys about your work. While it might appear in an IRS filing, Part III also functions as a public relations piece — so carefully consider how you can use it to shine a light on your accomplishments.

This descriptive section provides an opportunity to educate influential readers about your organization, including new programs and initiatives. Part III allows your nonprofit to demonstrate transparency and tell a clear, compelling story about outstanding financial stewardship and measurable donor impact. Every donor, large or small, wants to know their money is making a difference, being spent on programs and services rather than overhead. The Form 990 provides an invaluable opportunity to demonstrate organizational efficiency, boosting donor satisfaction and loyalty. And the more comprehensive your Part III, the more easily your organization can be found by those searching the IRS archives.

Include the Board of Directors in a review of the 990: This will not only provide fresh insights into this important document, but also ensure members carry a consistent message forward to potential donors, sponsors, and partners. A certified public accountant (CPA), can offer expert guidance to board members on how best to interpret and understand these documents.

Your 990 Checklist

Think of your 990 as much more than a tax form — it is an indispensable chance to connect with donors and tell your story.

Comb through your organization’s most recently filed 990 looking for places to improve it. That could mean simplifying and strengthening language, adding essential information, correcting errors or inconsistencies, or adjusting messaging to better align with organizational priorities. Use insights gleaned from donor diversification research and engagement efforts to customize information to appeal to key donor constituencies. Seek informed input from board members and other nonprofit leaders.

Spending extra time on Part III of the 990 can pay major dividends as you refine your entity’s message to resonate with and enlarge your donor base. A CPA’s review of your most recent 990 can maximize its effectiveness and take your fundraising to the next level.

For more information or to request a complimentary review of your organization’s 990, contact Richard J. Locastro, CPA, JD, Director of Nonprofit Tax at 301-951-9090 or rlocastro@grfcpa.com.

¹ Alexander, Antoinette. “New Challenges for Nonprofits.” Special Report: Nonprofits in Need. Accounting Today, February 2019: 10.
² Alexander, “New Challenges for Nonprofits,” 10.