For several years, I led the nonprofit ethics program of the Cincinnati Better Business Bureau, where my job involved close examinations of nonprofit financial statements, annual reports, and fundraising materials, to evaluate whether local charities met national standards of accountability. If you’re considering a position at a nonprofit, here are some key documents and resources to include in your research, especially if you’re applying for a leadership role.
Note: These are primarily resources for researching 501(c)(3) organizations, which are the most common and most widely recognized type of nonprofit. Other groups, such as political, labor, or trade associations, will have some of these documents available. For churches, synagogues, mosques, and some religiously affiliated organizations, you’ll need to rely on their internal documents if you want to do this kind of research.
Most established nonprofits put together an annual report of some kind. It might be nothing more than a special issue of their donor newsletter, or it could be 64-page glossy magazine expensively designed and produced. The annual report is often available on the organization’s website or by asking for a copy. The annual report, if it’s done well, will contain several key pieces of information that will greatly help you in your research:
- Mission, vision, and central accomplishments: Most nonprofits have a mission statement and a vision statement, which range from powerful, inspiring statements of social change to insipid snippets of corporate doublespeak. Often, a better gauge of the nonprofit’s work is the story it tells about its work from the past year. What achievements do they feature in the annual report? Does it sound like the organization is making concrete progress toward its goals? Do they even have clear goals that you can support?
- Basic financial information: What’s the financial health of the organization? Are they running a deficit? How much do they spend on their programs, administration, and fundraising?
- Board of directors and key staff: Most annual reports will include the organization’s board of directors and a directory of the leading staff. (Some will include the names of all staff.) This is a great networking tool. Here is a list, printed in black and white, of the most influential people involved in the organization. Some large nonprofits, like hospitals and universities, may have conflict-of-interest policies that prevent the board from influencing hiring decisions, but at many others, a recommendation from a board member or top staff member will be a great boost to your chances. If nothing else, you’ll be able to gain insight about the organization’s values and activities from an insider.
- Major donors and sponors: Another great networking tool. Many nonprofits include lists of their donors and corporate sponsors in their annual reports, especially ones that depend on large numbers of donors for support. Even if any donors you know aren’t especially influential, they can still give you insight about why they believe in the organization and support it financially. This can give you some great talking points for your interview.
- Style and tone: For many nonprofits, the annual report is one of the most important (and expensive) marketing pieces they produce each year. As such, annual reports can give you a great sense for the personality of organization. Do they place a high value on design? Writing? Is it conservative? Edgy? Light-hearted? Serious? This is a great way to discover whether you are a good fit for the organization.
IRS 990 and Audited Financial Statements
The IRS 990 is the informational tax return that nonprofits submit annually to the IRS. These documents are available for free download from Guidestar.org. Nonprofits may also make them available on their website, along with their audited financial statements. What can you learn from these documents?
- Even more financial information: The 990 and financial statements will include comparisons to past years, a breakdown of the nonprofit’s assets, information about its endowment (if it has one), and detailed information about its expenses and sources of incomes. Depending on the level of detail, you may even be able to determine the annual budget for the department you’re applying to.
- Salary information: The IRS 990 includes salary information for key employees of the nonprofit. Depending on the position you’re applying for, you may be able to see what the previous person in the role or your potential peers made. At the very least, you’ll get a sense for how salaries at the organization compare to the market and what the benefits package might include.
- Information about corporate structure, related entities, conflicts of interest, financial concerns, etc.: Here, we’re starting to get into the fine details that may not be useful to all people. Then again, there is potentially useful information in these details. In my work in charity ethics, I was usually looking for evidence of suspicious activity, such as conflicts of interest or legal actions, but you can also learn about organizations’ plans for expansion, fundraising progress, and overall health from this fine print.
Newsletters and Fundraising Materials
If a nonprofit provides past newsletters on its website, take some time to read through. You’ll be able to get a sense of the organization’s story, the people who matter to the group, important accomplishments, and, possibly, details about why the position you want is open.
Fundraising materials can a bit harder to come by, but they can give a very clear sense of the organization’s values and strengths (or lack thereof). There’s an organization that has sent me fundraising letters every other week for 6 years, even though I’ve never had a single contact with the group so far as I can remember. Not only is this a tremendous waste of money and paper, it also suggests to me that the organization doesn’t respect its real donors, either.
Reports from Charity Watchdogs
Most large national nonprofits will have reports available from the leading charity watchdog groups. For local nonprofits, it depends on their location. Greater Cincinnati (where I ran the charity ethics program for the BBB) has excellent coverage, as do several other areas of the country.
- BBB Wise Giving Alliance: BBB reports on charity will include descriptions of their missions, programs, and finances, along with an evaluation against the BBB’s Standards for Charitable Accountability. You’ll be able to see whether an organization is run transparently and whether there are any ethical issues you should know about.
- Charity Navigator: Another good site for checking out a charity. Charity Navigator has historically focused on financial analyses of nonprofit organizations, but they’ve branched out more recently to include effectiveness reports. Charity Navigator will also give you a good comparison of how the organization compares to others in its service category.
If you’re feeling particularly adventurous, you could even explore Secretary of State records to learn about the organization’s founders and past board members, in case you wanted a sense of the history and context of the organization. This is probably more than enough for most people, though.
Do you have any suggestions for research a potential employer? What’s worked out well for you?
- If you ask and they don’t want to give you a copy, that should be a red flag about their transparency and stewardship. Not every nonprofit produces an annual report, however, so be sure to ask if it’s not available or simply wasn’t produced. ↩
- By the way, even if you don’t think your friends and colleagues are “board member material,” take a look — you may be surprised. Many nonprofit board members are quite humble about their service. While some board members are chosen for their ability to donate (or raise) large sums of money, that’s more the exception than the rule. Most are drawn from the ranks of volunteers and local businesspeople who are committed to the organization’s mission. Many nonoprofits also value diversity of background and income for their boards. ↩
- Be careful, though. Salary information is notoriously difficult to interpret. For example, I recently looked a nonprofit’s 990 as part of researching them for a job interview. Even though it was very small (less than 10 employees), the two founders both made six-figure salaries, accounting for more than 40% of the organization’s expenses. Is that too much? Well, they are both senior, experienced people in their field living in high cost-of-living cities (meaning they were probably making much less than their peers). Further, it’s common for nonprofit founders to defer salaries in the early years of starting the organization, so these amounts could include deferred payments. Compensation is an area where having a friend in HR or someone who knows the industry well can help a great deal. ↩