Time Has Arrived to Step Up Non-Profit Coverage

By Chris Roush
July 19, 2007

Recent changes at the Denver Post brought reporter David Migoya to business news from the human services beat, where he has spent a lot of time examining and reporting on the non-profits in the area.

Some at the paper hope that Migoya will focus its coverage on this sector of business. In fact, now is the time for all business desks to think about improving their non-profit coverage.

Why is that? Non-profits have six months after the end of their fiscal year to file the Form 990 with the Internal Revenue Service. That means that most of the country's non-profits, unless they asked for an extension, filed their Form 990 at the end of June, if not earlier. Form 990s are public records, and a non-profit has to provide it to anyone who requests a copy.

Here are five easy stories that every business desk should consider writing about the non-profits in their area:

1. The salaries of the top executives. Just like proxy statements with public companies, Form 990s disclose the salaries and bonuses of the top executives at non-profits. And just like public companies, non-profits often pay a lot of money to their leaders. A reporter might have to look at the 2005 Form 990 to determine whether the compensation rose or fell because the 2006 document won't have any comparison data.



2. Consultants and contractors. Many non-profits hire out work to outside consultants and contractors. Sometimes, these people are paid millions for not much work. The pay to these outside firms is disclosed every year in the Form 990. Review this pay and determine whether the non-profits could have gotten the same services from someone else for less money. If so, then maybe there's a story lurking.



3. Non-profit programs. Many non-profits, such as local hospitals, nursing homes and YMCAs, compete against for-profit companies operating in the same industry. Take a look at the non-profit spending on their programs, whether it's sports leagues at the Y or emergency room care at the hospital. Are they able to undercut their for-profit brethren with lower prices because of their tax status? If yes, what does that mean for the for-profit competitors?



4. Investment portfolios. If the non-profit is a foundation that gives its money away for local programs, then it's likely investing its money in the markets. But how does its portfolio, which is broken down in the Form 990, compare to other foundations? You'll find some are aggressive investors, while others are conservative. I know of a foundation that recently had to take on another foundation as a partner to fund college scholarships because of the money it lost in the market when the tech bubble burst.



5. Fundraising expenses. How much money do your local non-profits spend on raising additional funds? Non-profit watchdog groups say that no more than about 25 percent of their funds should go to fundraising. The Form 990 details how much money was spent on fundraising. If the number is more than 50 percent of the total money brought in by the non-profit in the past year, then there's an issue.

If you get the Form 990 and don't understand what the numbers mean, take it to a local accountant not affiliated with the non-profit who can explain what's going on.

Copyright © 2008 Donald W. Reynolds National Center for Business Journalism