How to Gauge a Nonprofit's Integrity Using Public Information

A recent Minnesota state audit revealed that board members of the charitable nonprofit Community Action of Minneapolis were dipping into the organization's coffers. While it's not always easy to spot that sort of corruption, you can do your own quick investigating to determine whether a nonprofit is worth your time and money.

As reported by The Star Tribune, a recent Minnesota state audit revealed that board members of the charitable nonprofit Community Action of Minneapolis were dipping into the organization's coffers to subsidize their own lavish lifestyles. Sadly, stories like these are hardly a rarity as charities around the country take advantage of meager oversight and a non-requirement for accountability.

While it's not always easy to spot that sort of corruption, you can do your own quick sleuthing in order to determine whether a nonprofit is worth your time and money. Every American nonprofit organization is required to file a 990 tax form to the IRS. A 990 is public information and all nonprofits are required to make their three most recent forms available to anyone who requests to see them. You can also make requests through the IRS.

One of the simplest tools you can use is the 990 Finder at Foundation Center. Although the forms available aren't always the most recent, you can get a good idea of where a nonprofit's priorities lie just by way of a quick skim. For example, here's a PDF version of the 2012 990 of everyone's current favorite nonprofit organization, the National Football League. Sure, the NFL isn't exactly what you'd call a "charitable organization," but it's good to use it in a demonstrable manner as it's one of the nation's most popular nonprofits.

Now let's navigate that form. On the first page you get all the basic information such as how the NFL is a tax-exempt 501(c)(6) organization, which means it's seen in the IRS' eyes as akin to a chamber of commerce. The first page gives you a summary of an organization's assets, revenue, and (most importantly) expenses. Rows 13-15 tell you how much an organization spent in contributions to various causes versus how much it spent to compensate its employees.

If you scroll to page 7, you'll see that all nonprofit organizations are required to disclose compensation for their officers and board members. For example, we can see that NFL commissioner Roger Goodell was compensated over $44.1 million during that tax year.

Any organization that gives out grants or assistance to outside groups is required to report any payment over $5,000. If you scroll down to page 20, you'll find the supplemental form listing the NFL's charitable giving. That year, they gave about $1.44 million (or about 0.03% of Goodell's compensation) to various organizations. A large chunk of that was given to the NFL Foundation, listed on page 34 as being among the NFL's related tax-exempt organizations.

So what can we learn from this basic information? If the NFL were actually a charity, it'd look pretty grim if the leadership was making that much money versus what was given out. If it were a small charity, it would be even more disconcerting if part-time officers were using the organization as a personal cash cow. But the NFL isn't those things. It's its own other unique brand of animal.

Of course, that's not the case for the aforementioned Community Action of Minneapolis, whose 990 from 2011 revealed that the amount spent on salaries and benefits outweighed money given away.  Sure, every organization has a degree of overhead, but not every nonprofit needs to spend as much as it does on operating costs, employee compensation, and "awareness."

If you want to support a charity that actually gives most of its money a way, take a quick peek at a recent 990 or visit Charity Navigator before writing that check.

Read more at The Star Tribune

Visit the 990 Finder to start investigating your local nonprofits.

Photo credit: new photo / Shutterstock

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