21. Navigating the Charity World with IRS Form 990: Uses and Limitations

Form 990 is a publicly available tax return that certain federally tax-exempt organizations must file with the IRS. It provides basic information on the mission, programs, and finances of the filing organization, including: what the filer does, who its board members are, whether it is a public charity or private foundation, whether it takes part in lobbying, whether the form was provided to the board of directors before it was filed, if there are any self-dealing transactions or known fiscal abuses, and information about compensation. Popular evaluation sites such as Charity Navigator use IRS Form 990 along with information provided by charities to rate those organizations in terms of their “financial health” and “accountability/ transparency.” Using Form 990 to see a snapshot of an organization’s expenditures at a point in time can be illuminating in some respects. However, Form 990 does not tell the entire story of an organization’s financial picture nor does it provide insight into the organization’s effectiveness.

For example, according to its Form 990 for FY 2010 the National Breast Cancer Foundation (NBCF) based in Frisco, Texas had over $10 million in income last year, up from $7 million in FY 2008. The form reveals that founder Janelle Hail had a salary of $172,000 in 2009 with another $57,000 in “other compensation” while her son Kevin Hail earned a salary of $130,000 and received $55,000 in the “other compensation” category. According to the 2010 Guide Star Nonprofit Compensation Report, which includes data from nearly 100 thousand 990 forms filed by 501(c) nonprofits for FY 2008, the median salary for a charitable organization with a budget of $5 million or more is $157,200. Hail’s is just over that. However, the majority of nonprofits have budgets that are much smaller. Guide Star’s report found that those with budgets of $500,000 or less paid their CEO/Executive Directors a median income of $41,600 to $54,700. It clearly pays to lead a nonprofit with substantial donations.

Reported salaries on Form 990 are only part of the compensation story. The IRS only requires charities to report the salaries of board members, key employees, and those earning more than $100,000. This leaves quite a bit of leeway for nonprofits to hire employees, including friends and family members, at lower salaries and position them throughout the organization. After digging deeper into the family business at the National Breast Cancer Foundation, Marie Claire magazine found that in addition to the salaries paid to Janelle Hail and her son, NBCF also employs Hail’s husband Neal as a “senior consultant” and son Brent as vice president of operations. Nepotism is not illegal, but it does raise questions about accountability and conflicts of interest.

If you want to know if nonprofits funding family salaries, check out their staff rosters and then read their Form 990. You’ll find them at GuideStar. The Nonprofit Coordinating Committee of New York, Inc. produced a guide to walk people through the Form 990 and explain the types of information that can be gleaned.

Although Form 990 and the ratings systems that rely on it can be helpful in learning about some aspects of a charitable organization, it is not useful for evaluating what really matters most, results. An article in the Wall Street Journal investigating the ratings systems stated,

“It may make you feel better to know that your charitable donations are going to organizations that have been highly rated by any number of online charity rankings. But these sites fail to quantify the most-important and most elusive charity measurement: success in achieving its mission.”

Reliance on Form 990 and other self-reported financial information to evaluate a charitable organization is convenient but misleading because it does not reflect the capacity of an organization to achieve its mission efficiently or effectively, nor does it give donors any insight into whether the mission is worth working toward in the first place. Steve Butz, the executive chairman and founder of a performance management software company aimed at tying the efforts of nonprofits to actual outcomes, told The Chronicle of Philanthropy that,

“Right now, you can find information about which organizations are doing the best job of raising money. But you can learn little about which groups are doing the best job for the people they serve.”

The next time you hear a nonprofit leader tout their organization’s Charity Navigator rating, remember that the rating has nothing to do with whether the organization’s efforts lead to outcomes that are viable or worthwhile. Finding that out requires some digging. In the meantime, there are organizations doing great work. We just need to separate the wheat from the chaff.

For more consciousness raising essays, check out “30 Days of Breast Cancer Awareness.”

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"Seeing clearly through the pink haze" Toronto Sun

*Sad face*: Being happy does not help you live longer" New Scientist

How should we address breast cancer when norms continually change? The Guardian

Your Fun 'No Bra Day' Photos Are Overshadowing Terminal Breast Cancer Patients Broadly

Backlash against “pinkwashing” of breast cancer awareness campaigns BMJ

Breast Cancer to Rise 50 Percent by 2030? Hey, Not So Fast! Health News Review

Breast Cancer: The Flaws in the Cause iafrica.com

How to Make the Biggest Impact With Your Breast Cancer Donations Money

The Very Pink, Very Controversial Business of Breast Cancer Awareness Racked

NFL, Pink Ribbons Not Enough to Win over Women CNN

3 Questions We Need to Answer for Breast Cancer Awareness Month Chronicle of Philanthropy

The problem with National Breast Cancer Awareness Month Women's Health Magazine

Pink Ribbon Envy: Living with an Uncool Cancer The Nib

A Year After Bombings, Some Say 'Boston Strong' Has Gone Overboard NPR, All Things Considered

Canadian Mammogram Study KCRW, NPR Affiliate

Time to Debunk the Mammography Myth CNN

Breast Cancer: Awareness, Activism & Pinkwashing NPR Charlotte

Buying Pink Al Jazeera's The Stream Watch »

The Pink Backlash Orlando Sentinel

Why Jolie's Test Costs So Much CNN

Preventative Mastectomies: Disease and Deception BlogTalkRadio

Angelina Jolie and the 'Breast Cancer Gene' KCRW

Our Feel-Good War on Breast Cancer The New York Times Magazine.

The Story Behind the Pink Ribbon Campaign Sisters Talk Radio

WISH Interview Women's International Summit for Health

Making Cancer About The Patient, Not The Body Part CBS Pittsburgh

Sexy breast cancer campaigns anger many patients USA Today

The perils of pink The Daily

Komen pink campaign creates breast-cancer blues for some Dallas Morning News

A yellow flag for the NFL's pink New York Daily

Gayle Sulik named #7 in SharecareNow’s Top 10 Online Influencers in Breast Cancer

Breast cancer cancer causes so easily derailed Philly Inquirer

Komen Charity Under Microscope for Funding, Science Reuters

The Fight Against Cancer - And Abortion? Salon.com

Susan G. Komen For the Cure defunds Planned Parenthood. In Deep with Angie Coiro

Amid Breast Cancer Month, Is there Pink Fatigue? NPR's All Things Considered

How is Breast Cancer Culture Undermining Women's Health? America’s Radio News Network

Pink Ribbon Culture and Breast Cancer The Kojo Nnamdi Show

The Big Business of Breast Cancer
Marie Claire

Does Breast Cancer Awareness Month Crowd Out Other Diseases? Slate

Pink Inc. Has Many Starting to See Red The Sacramento Bee

Get Your Pink Off Ottawa Citizen

Komen Pink Ribbons Raise Green and Questions USA Today