Financial guide
What charity financial records can and cannot tell you
A Form 990 can reveal scale, stability, compensation, fundraising, and unusual changes. It generally cannot tell you whether a program worked.
Revenue and expenses
Compare total revenue and expenses over several years. A deficit can signal trouble or a planned investment. A surplus can build needed reserves or indicate money is accumulating faster than programs grow.
Assets and liabilities
Assets can provide resilience. Liabilities can be ordinary operating obligations or a source of risk. Restricted funds may not be available for everyday expenses, so a large asset number is not the same as spendable cash.
Compensation
Officer compensation is not total payroll. Many missions require skilled employees. Compare compensation with organizations of similar size, geography, and complexity, then look for governance and results rather than assuming lower is always better.
Advertising and fundraising
Advertising can recruit clients, educate the public, or raise funds. Fundraising can be expensive and still produce long-term support. Public filings may classify joint costs differently, making simple comparisons unreliable.
The overhead myth
Program-expense ratios are easy to calculate and easy to misuse. Underinvestment in staff, systems, measurement, and fundraising can weaken a nonprofit. Financial ratios are screening signals, not impact ratings.