It’s no beach reading, but knowing how to read a foundation’s 990 is essential when seeking their support. Consider this article the Cliff Notes of a 990 Form.
Nonprofit development directors know there’s nothing quite like the thrill of sitting back in your favorite reading chair, pouring yourself a good drink, and getting lost in your latest foundation prospect’s IRS form 990…
Okay, so while the “Return of Organization Exempt From Income Tax” (as 990s are officially called) may not make for the most scintillating read, a foundation’s 990 contains a wealth of information that can be helpful in learning more about a potential funder and developing an approach strategy. In fact, for foundations without a website, a 990 will likely be the best source for you to find information on the foundation’s giving interests, the donors and board members behind the giving, and how to apply for support.
Form 990s are publicly available documents that all 501(c)3 tax-exempt grant-making foundations are required to complete on an annual basis. They report on the foundation’s assets and giving over the course of one fiscal year. You can access a foundation’s 990 through a number of sources such as Guidestar or a subscription-based program like Foundation Directory Online. Form 990s can be long (the Gates Foundation’s 2014 form clocks in at 369 pages), but the good news is, most of the form will be irrelevant to your purposes and there’s no test at the end to see if you’ve read the whole thing.
Consider this article the Cliff Notes of a foundation’s 990 to help your fundraising efforts. These are 5 essential things to look for as you seek to secure that next grant.
1) Top Section: Basic contact information. At the top of the 990, you’ll find the foundation’s name and basic contact information. Note how the foundation refers to itself (for example, is it “The Gates Foundation” or “Gates Foundation”) and use that formulation in your correspondence with them. Also, while the foundation’s address is often the place to submit materials, they may request applications be sent to a different one (see Part XV below).
2) Part I: Figuring out the foundation’s size. Part I provides basic financial information on the foundation. Pay particular attention to Lines 1 and 25 in this section. Line 1 shows the amount of money received by the foundation during the fiscal year, while Line 25 shows the amount of grants made during the same time. Line 24 can also be helpful in showing how much the foundation spends on operating and administrative expenses, indicating whether it has professional staff. Knowing how much money is coming into a foundation and how much it gives out is a helpful indicator of the foundation’s size. Knowing the size of the foundation you are dealing with will help you in putting together an appropriate outreach strategy.
3) Part II: Assets. Part II shows the foundation’s assets. Look at Line 16 to find the total assets remaining at the end of the fiscal year (or for a quick view, see section I at the top of the 990). A foundation’s assets are another good indicator of a foundation’s size, but note that not all foundations spend from their assets. Some foundations, especially those that are used as giving vehicles for individuals, choose not to maintain assets. Their giving is dependent upon new contributions made each year.
4) Part VIII: Foundations are people too. In Part VIII, section 1 you’ll find a listing of the foundation’s trustees, the average amount of time they spend each week on foundation-related activities, and the compensation (if any) they receive for serving on the foundation’s board. You’ll definitely want to review this list and identify any connections your nonprofit might have with the foundation’s trustees. These are the people who ultimately approve or reject grant requests, so any connection you might have with one (or more of them) can help to personalize your request and ensure your proposal gets a fair hearing. Another small, but helpful way to use this section—if the 990 doesn’t indicate to whom your request should be addressed and all trustees hold the same title, looking at the average amount of time each trustee spends on foundation work can indicate which trustee is most active. It’s not a bad idea to address your request to that trustee.
Part VIII section 2 lists the five highest-paid staff members of the foundation along with their compensation and the amount of time they spend on foundation-related work each week. Here again, you should review the names and identify any connections you have with staff members. While staff members may not make the final funding decision, these are often the people that will be presenting your proposal to the board, so the connections you have with them can be just as important.
5) Part XV: The heart of the 990. This section is the heart of it all. Here you’ll find the application information for the foundation. Before you jump to line 2 where you’ll find this information, though, take a look at line 1 to see if any of the trustees have contributed to the foundations. For family foundations in particular, this will be the foundation’s primary donor. It’s a good idea to research this individual and find out more about their background and interests. In the absence of any personal connection, finding shared points of interest, background, or history can help in starting a relationship. (Who knows—it may just be your mutual interest in coin collecting that opens the door to your proposal!)
On line 2, you’ll find a box that indicates whether or not the foundation accepts unsolicited proposals. If the box is left blank, the application information should follow in sections A through D. Here you’ll find the contact information for where the proposal should be sent (which may be different from the foundation’s address listed at the top of the 990) along with information on what the proposal should include, deadlines for submission, and any restrictions on funding. Pay close attention to this section and make sure that when submitting a proposal you follow the specific guidelines laid out here. Never give a foundation the option to reject your proposal on a technicality.
If the box on line 2 is checked, don’t be disheartened. There may still be a way of gaining the foundation’s support. Many foundations will check this box to limit the amount of requests they receive, many of which come from nonprofits with no identifiable connection to their giving interests. Checking this box allows them to be more discerning in the requests they consider. So—if the foundation doesn’t accept unsolicited proposals, what’s a nonprofit like you supposed to do? Get solicited.
Instead of sending an unsolicited proposal, send the foundation a request to submit a proposal. This request can take a number of forms, but essentially you’ll want to make the case for why your nonprofit would be a good partner for the foundation as it seeks to achieve its own mission. The more you can establish a case for this partnership, the stronger your request will be and the more likely you’ll be allowed to submit a proposal.
Following the application information, you’ll find a listing of all grants made during the fiscal year. This listing provides a great opportunity to learn about the foundation’s interests and can help inform the size and scope of your request. You’ll first want to look at the nonprofits that received the foundation’s support. What missions do the nonprofits have? Are they located in a specific geographic region or spread out across the country? Has your nonprofit partnered with any of the grantees? These questions will help determine whether you might be a good fit for the foundation. If your nonprofit is an animal shelter in Boise, Idaho, and all of the grantees are high-schools in Miami, it’s unlikely the foundation would support your work.
Next, see what the listing has to say about the type of support given. Not all 990s will include this information, but many will have a brief note on the purpose of the grant. Are grants made for specific projects or general operating support? If it looks like the foundation only funds specific projects, don’t put together a proposal for general support.
Finally, look at the grant amounts. Knowing how much other nonprofits have received can help as you prepare your request amount. If most grants fall between $10,000 and $25,000, it’s unlikely the foundation will take your $150,000 request seriously. And if you see a large number of low-dollar grants ($250 - $2,500), it’s likely the foundation responds to direct mail. If there are no specific application instructions, you might consider sending your request in the form of a letter or adding the foundation to your next prospecting campaign.
We’ve made it through the essential portions of a foundation’s form 990. You now know how to find the key pieces of information for you to look at as you consider reaching out to a new foundation prospect. But just like a Game of Thrones novel, you won’t want to read just one form 990 for your foundation prospects—there’s value in going through at least two or three other recent years to glean more information. Looking across several 990s for a foundation prospect can indicate the trajectory of a foundation (are they gaining in assets, increasing staff, or spending down and phasing out?) as well as the relationships they have with their grantees (is it the same set of grantees year over year or do the grantees change frequently?).
Taking the time to research a foundation prospect will help you put together a stronger proposal showing how your nonprofit’s work matches with their giving interests. And one of the best places to start this research is a foundation’s 990. While it may not be fun reading, going through the key sections outlined above will help you make a stronger case as you prepare your proposal.
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