As a donor, it's crucial to understand where your contributions go and how effectively a charity operates. In Alaska, where nonprofit organizations play a significant role in our communities, taking the time to analyze their financial information can empower your giving decisions. One of the most valuable tools for this is the IRS Form 990, a public record that reveals extensive financial details about nonprofit organizations.
This page will walk you through the essential components of Form 990 that you should review. By understanding these key sections, you can assess how well a nonprofit like Alaska Wheels Forward is fulfilling its mission. Whether you're looking for transparency in executive compensation or wanting to know how much of your donation is spent directly on programs, this guide will help you navigate the numbers effectively.
Step-by-step walkthrough
Retrieve Form 990
Start by accessing the Form 990 for Alaska Wheels Forward. You can find it by visiting ProPublica Nonprofit Explorer at https://projects.propublica.org/nonprofits or Candid GuideStar at https://www.guidestar.org. This form is publicly available and offers a detailed financial snapshot of the charity.
Review Part I Summary
Check Part I of the Form 990, which provides a summary of the organization’s mission, key revenue, and expenses. This section gives you an overview of the charity’s operations and its focus areas, helping you understand how they align with your values.
Analyze Part IX: Functional Expenses
Navigate to Part IX, which breaks down the charity’s expenses into program, administrative, and fundraising costs. A healthy charity typically allocates 75% or more of total expenses to programs. This highlights how effectively the organization is using donations to further its mission.
Check Schedule J: Executive Compensation
Review Schedule J for insights into executive compensation. Compare salaries with the organization’s revenue and size to ensure that compensation is reasonable. High salaries compared to revenue might indicate mismanagement or inefficiency.
Inspect Schedule L: Related-Party Transactions
Examine Schedule L for any related-party transactions, which can raise concerns about potential conflicts of interest or self-dealing. It's important to flag any transactions that seem excessive or lack transparency, as these could indicate financial mismanagement.
Positive signals (green flags)
✓ High Program Expense Ratio
A program expense ratio of 75% or more indicates that the charity effectively directs funds towards its mission, maximizing the impact of donor contributions.
✓ Transparent Executive Salaries
If executive compensation is reasonable and in line with industry standards based on revenue and size, it reflects responsible governance and accountability.
✓ Clear Mission Alignment
A well-defined mission in Part I and consistent program funding in Part IX indicate that the charity remains focused on its goals and objectives.
✓ Strong Donor Relationship
If the charity lists major donors and grantmakers transparently, it reflects healthy community relationships and indicates trustworthiness in financial dealings.
Warning signals (red flags)
⚠ High Administrative Costs
If you see a high percentage of funds allocated to administrative or fundraising expenses (less than 75% on programs), this could be a warning sign that the charity isn’t prioritizing its mission effectively.
⚠ Excessive Executive Compensation
If executive pay, as listed in Schedule J, seems disproportionately high compared to the organization’s revenue, this raises questions about financial stewardship and mission focus.
⚠ Significant Related-Party Transactions
Watch for multiple or large transactions involving board members or executives in Schedule L. Such transactions can indicate potential conflicts of interest and a lack of transparency.
⚠ Declining Revenue Trends
If you notice a downward trend in revenue or program funding over consecutive years, it might suggest underlying issues with the charity's sustainability and community support.
Tools + resources
- https://projects.propublica.org/nonprofits
- https://www.guidestar.org
- https://apps.irs.gov/app/eos
- https://charitynavigator.org
- https://bbb.org/charity-reviews
- https://www.aafrc.org/
Alaska state-level oversight
In Alaska, charities are also registered with the state Attorney General’s office. This additional layer of oversight helps ensure that nonprofits operate legally and ethically. You can access the Alaska Division of Corporations, Business, and Professional Licensing for local charity registration information. Additionally, the Better Business Bureau (BBB) provides reviews on local charities, helping you assess their credibility. Local nonprofit associations, such as the Alaska Association of Fundraising Professionals (AFP), also promote best practices in the nonprofit sector.