When applying for grant funding, nonprofits often encounter a variety of application requirements aimed at providing grantors with a thorough understanding of their operations, finances, and impact. One of these key requirements is the submission of the organization’s most recent IRS Form 990. While many nonprofits wonder why grantors like Believe in Me request this form even though it’s publicly accessible on platforms like Candid (formerly GuideStar), the answer lies in the importance of accurate, up-to-date information and the insights the Form 990 provides.
At Believe in Me, we believe in transparency, accountability, and a deep understanding of the organizations we support. Reviewing the latest Form 990 is one way we gain this understanding. Here’s an in-depth look at why we and other grantors request this document, what it reveals about your organization, and how it impacts the grant application process.
The Importance of IRS Form 990
The IRS Form 990 is a public financial document that tax-exempt organizations are required to file annually. It provides a detailed account of a nonprofit’s financial activities, governance practices, and programmatic impact. The form is a crucial tool for both regulatory agencies and funders to assess a nonprofit’s accountability, transparency, and financial health.
For grantors, the Form 990 serves as a valuable resource, offering insight into various aspects of a nonprofit’s operations:
Financial Health: The form details revenues, expenses, assets, and liabilities, providing a snapshot of an organization’s financial position.
Program Expenditures: The Form 990 shows how much is allocated toward specific programs versus administrative or fundraising expenses, allowing grantors to assess financial priorities.
Governance and Compliance: Information on board members, policies, and compliance practices helps funders understand the organization’s governance standards.
Mission and Impact: The form includes a section where nonprofits can describe their mission and key programs, giving funders insight into their purpose and impact.
While this information is available on platforms like Candid, there are several reasons why funders still request a copy of the latest Form 990 directly from the nonprofit.
Ensuring the Information is Accurate and Up-to-Date
One primary reason Believe in Me and other grantors request the latest Form 990 is to ensure they are reviewing the most accurate and current information. Platforms like Candid provide a valuable repository of nonprofit data, but there can sometimes be delays in updates, leading to outdated or incomplete information.
By requesting the most recent Form 990 directly, funders can ensure they are evaluating the latest financial data and organizational details. This is particularly important when considering nonprofits that may have experienced recent changes in leadership, finances, or program priorities. Reviewing the latest form helps grantors make informed funding decisions based on the current state of the organization, rather than relying on potentially outdated data.
Building Trust and Transparency
For Believe in Me, transparency and trust are at the heart of our grant-making process. By providing a copy of the most recent Form 990 directly, nonprofits demonstrate their commitment to openness and accountability. This direct exchange fosters trust and assures grantors that the organization is prepared to be transparent about its operations, even when financial challenges or governance issues may be present.
When a nonprofit willingly submits their Form 990, it shows that they are confident in their financial health and governance practices, and that they are willing to share this information proactively. This level of transparency is especially important for grantors who are investing significant resources in supporting these organizations. It reassures them that their funds will be managed responsibly and that the organization prioritizes ethical practices and financial integrity.
Gaining Insight into Financial Stability and Sustainability
For any grantor, financial stability is a critical factor in funding decisions. The Form 990 provides a comprehensive look at an organization’s financial status, including its revenue sources, expense ratios, and net assets. Grantors want to ensure that the organizations they fund have the stability to sustain their programs and make a lasting impact. By reviewing the latest Form 990, Believe in Me can gauge whether an organization has the financial resilience necessary to execute its programs effectively and handle potential funding gaps.
Additionally, the Form 990 reveals trends in revenue and expenses, which can indicate an organization’s ability to manage finances over time. Grantors look for signs of diversified funding streams, responsible spending, and prudent asset management. These factors are essential in determining whether a nonprofit is financially sound and capable of using the grant funds to create meaningful, lasting impact.
Reviewing Programmatic Spending vs. Overhead Costs
One of the areas that Believe in Me and other grantors carefully examine is the distribution of expenses between program services and overhead costs. The Form 990 breaks down how much of an organization’s budget goes toward programs, management, and fundraising. For many grantors, a higher percentage of expenses directed toward program services is preferable, as it suggests that the organization is prioritizing mission-driven activities over administrative or fundraising costs.
While every nonprofit has unique operational needs, grantors generally prefer to see a strong commitment to programmatic spending. The Form 990 offers an objective view of how funds are allocated, helping Believe in Me assess whether the organization aligns with our own priorities of responsible spending and maximizing impact.
Verifying Compliance and Ethical Practices
The Form 990 includes sections that outline the organization’s governance practices, such as its policies on conflicts of interest, executive compensation, and board oversight. These sections are crucial for grantors who want to ensure that the nonprofits they support adhere to ethical standards and are governed responsibly.
For example, the form discloses whether the organization has a whistleblower policy, which protects employees who report unethical behavior. It also provides details on executive salaries, allowing funders to determine whether compensation is reasonable given the organization’s size and budget. These governance indicators give Believe in Me confidence that the organizations we fund have a robust and ethical structure in place to manage resources effectively and uphold their mission.
Understanding Program Impact and Alignment with Mission
The Form 990 also includes narrative sections where organizations can describe their mission and the impact of their programs. These descriptions offer insight into how well the organization’s work aligns with Believe in Me’s mission to support marginalized youth through our Five Pillars of Caring. By reviewing these sections, we gain a better understanding of the organization’s goals, programmatic focus, and overall mission alignment.
This qualitative information complements the quantitative data, helping us form a well-rounded picture of the nonprofit’s impact and how it serves its community. This alignment is a key factor in our funding decisions, as we aim to partner with organizations whose values and goals reflect our commitment to empowering youth.
Why Submitting the Form 990 is Worth the Effort
While submitting an additional document may seem burdensome, providing the most recent Form 990 directly can ultimately strengthen an organization’s application. This gesture demonstrates a nonprofit’s willingness to be transparent and to share its story, including both its successes and its challenges. It shows grantors that the organization is committed to open communication, a trait that is essential for building strong, lasting partnerships.
By submitting the Form 990, nonprofits have the chance to proactively address any financial or governance concerns. If there are areas where the organization has faced challenges, the application provides a platform to explain those issues and outline how they are being addressed. This honesty and openness can be an asset, as it shows the organization’s dedication to improvement and accountability.
A Step Toward Stronger Partnerships
For Believe in Me, the request for an organization’s latest Form 990 is more than a procedural step—it’s a critical part of our effort to build transparent, trusting relationships with the nonprofits we support. Reviewing this document helps us understand each organization’s financial health, governance, and alignment with our mission. It gives us confidence that the funds we provide will be used effectively, responsibly, and in ways that make a meaningful difference in the lives of marginalized youth.
In a world where grant funding is highly competitive, submitting the latest Form 990 is a way for nonprofits to set themselves apart. By demonstrating their commitment to transparency, accountability, and ethical practices, they strengthen their case for funding and open the door to a deeper, more collaborative partnership with Believe in Me and other grantors.
If you’re a nonprofit applying for a grant, remember that the Form 990 isn’t just a requirement—it’s an opportunity to showcase your organization’s dedication to integrity, your financial stability, and your commitment to making a positive impact. It’s a document that speaks volumes about who you are, what you stand for, and why your work matters. So, embrace it as a tool that can help you build trust, inspire confidence, and ultimately, secure the support you need to achieve your mission.
