Many people mistakenly equate nonprofit organizations with charity organizations. But that’s not the case. Even the name nonprofit is a misnomer: nonprofits can make money, but any money generated must benefit the organization’s purpose and members. Unlike traditional businesses, nonprofits have no owners or shareholders.
A wide variety of organizations are organized as nonprofits, including charities and hospitals, local symphonies, arts organizations, charter schools, even zoos and credit unions. That range creates a rich landscape for reporters looking for story ideas.
The IRS 990 form is one of the most powerful tools available to the public for looking into how nonprofits operate. The newest 990 form, first adopted for the 2008 tax year, requires information about the salaries of nonprofit employees and board members, relationships among board members and disclosures of potential conflicts of interest. All 990s also require nonprofits to report the names of all current officers, directors or trustees and the five highest-paid employees whose income exceeded $100,000. Most 990s can be found online through Guidestar.org.
Reporters looking into the operations of their local zoo, symphony or charity organization can look for red flags. Does the group spend most of its money on its core mission or is more money spent on fundraising, marketing and administration? Where does the organization donate its money?
Are the salaries of key officers and employees in line with similar organizations?
Toby Sells, a reporter with the Memphis Flyer, used 990 forms to explore operations of The Urban Child Institute, a Memphis-based nonprofit dedicated to using data-driven research to improve the lives of infants. Sells found that while The Urban Child Institute published dire annual reports on the state of children in Memphis and the effects of poverty and poor health care, the group used very little of its $148 million in assets to directly help children. Instead, The Urban Child Institute let its investment portfolio grow each year, while issuing grim research reports.
Sells also reported the organization’s CEO made $633,529 in 2013 for managing 11 employees (including himself), which was out-of-line with compensation at similar organizations, according to state and national compensation reports.
The Arizona Republic’s Robert Anglen used 990 forms to write an exhaustive investigation on a network of 22 charities tied to Phoenix televangelist Don Stewart. Anglen found the charities used most of their donations on administration (nearly 60 percent) and inflated their true bottom line by passing the donations (on paper only) from charity to charity.
While few reporters have the year it took Anglen to write the Don Stewart investigation, reporters can start with key local nonprofits like the zoo, the local symphony or prominent local charities and advocacy organizations to dig for red flags that might make a good story.
Sometimes, even a poorly reported 990 form can generate a good story. Charities must report the names and addresses of every person or organization to which it gave money, but many charities fail to list donations. Sometimes, key parts of a 990 form are left blank or improperly reported.
Reaching out to board members is another great place to start when looking into struggling nonprofit organizations. When I reported on the financially struggling Memphis Symphony Orchestra for The Commercial Appeal, I found the organization had been outspending for years. Yet, the board kept approving the budgets year after year, with little oversight. Several board members anonymously said they had no idea the symphony was in dire financial straits until a new CEO was brought on board.
“2011 Symphony Opening Night 033” by Flickr user “bthrewww,” Creative Commons license