1. Nonprofit founder used funds for homeless shelters to pay off his debts, NY Daily News, Nov 27, 2017
2. The Narco Freedom Case: Who’s Watching the Caregivers?, The Crime Report January 5, 2015
3. Hiding in Plain Sight: A Nonprofit Fraud Story, Nonprofit Quarterly, March 19, 2019
4. Merrick woman convicted for stealing nearly $1M from nonprofit she headed in Lynbrook, LIHerald.com, July 11, 2019

These articles detail the shadow operations of nonprofits and their officers.

Most tax-exempt nonprofit organizations must file a public financial document with the IRS called a Form 990.

Review Types of Nonprofits from ProPublica

Churches and places of worship are not required to file a Form 990. 

ProPublica’s Nonprofit Explorer search the full text of nonprofit IRS 990 forms. Full-text searching means you can search the whole universe of documents for one name or company.

CitizenAudit ($$ pay database) searches within the full text of 990 forms. 

GuideStar (some basic info, $$ for more access) view charity IRS 990 forms.

Charity Navigator good financial evaluations of nonprofits.

Oversight: Look for State Regulatory Agency like NYS Charities Bureau Registry, which includes a charity registry and transaction search. If the nonprofit gets a grant from or has a contract with a public agency, [search the 990s and open data sources to find contract and grant info] that agency may do or require performance and financial audits of that nonprofit. Search for or file a Freedom of Information Request for audits and reports by that agency on the nonprofit. Check to see if they have been mentioned in City Council committee reports.

Lawsuits: search for any civil lawsuits involving the nonprofit or it’s officers, or any criminal records of the officers.

America’s Worst Charities: database of disciplinary records of regulatory actions taken by states against charities and solicitors, from Tampa Bay Times and the Center for Investigative Reporting

Better Business Bureau Wise Giving Alliance

Search public reviews on Great Nonprofits 

Foundation Center

The Philanthropy 50 – america’s Top Donors, Chronicle of Philanthropy. Additional data sets form COP.

As a class, go through the 990s for the nonprofit from our class readings, Narco Freedom: https://projects.propublica.org/nonprofits/organizations/132690403

Let’s look at what information the core of a Form 990 requests from the nonprofit:

1. Basic facts about the filer
2. What kind of programs does the filer run and how much does it spend on them?
3. Who are the filer’s board members and how does the filer govern itself?
4. Did the filer change in any significant way during the year?
5. How much income did the filer receive and from what sources?
6. What did the filer spend its money on?
7. How much do top earners get paid and salary information
8. Did the filer engage in any insider or excess benefit transactions during the year?
9. Basis for public charity status (if a charity)
10. Does the filer lobby or exercise the 501(h) election?

“In its standards of accountability, the Better Business Bureau says an organization should spend at least 65 percent of total expenses on programs. Divide the line 13 – amount spent on programs, by line 17 – total expenses to get the amount spent on programs. Program expenses are allowed to include some salary, overhead and fundraising costs to the extent those activities promote the charity’s programs.” How to dig deeper into a nonprofit’s finances, Center for Investigative Reporting.

“Observe the contributions made or grants and similar amounts paid. This amount is the total amount that the foundation gave in the past year to nonprofits. This is key to any profile—foundations are required to give 5 percent of their assets. Some foundations give a lot more than that while others stick to the minimum.” 7 Tips for Reading the Form 990, by Elisa Shoenberger, Loyola University Chicago, via Council for Advancement and Support of Education. 

“Pages 7 and 8: Who gets the big bucks  (See Lines 5 and 6 on Page 1.)… two good questions to ask: How well does a particular organization pay compared with similar organizations? And how well does a particular executive’s compensation match his or her performance or (if new on the job) the challenges he or she must overcome?” From Digging into Nonprofits: IRS Form 990, by Ronald Campbell, The Orange County Register via Syracuse University.

Use ProPublica’s Nonprofit Explorer to find the 990s for the nonprofit cited in this article from your readings: Nonprofit founder used funds for homeless shelters to pay off his debts.

How did you find it? Answer, it is Housing Partners, mentioned in the article, you can tell because the principles are also named Leshinsky. 

Let’s go through these Form 990 lines listed below using Housing Partners’ 990 form from any year.

“Page 8, Section B – Outside Contractors: Nonprofits are required to report their five most highly compensated outside contractors receiving more than $100,000. This information is often useful not only because it contains the names and addresses that can advance your reporting, but it includes a (brief) description of the services provided (such as “media placement”). Though only the top five contractors are listed, section B.2 requires the organization list the total number of contractors paid more than $100,000.” From What Information is Important on Form 990s?, Robert McGuire, Center for Responsive Politics, OpenSecrets.org. Outside contractors can be a conduit for the nonprofit officers to line their own pockets as was the case with Human First and Narco Freedom, from our readings. Search for connections between contractors and officers. 

“Nonprofits don’t disclose who gives to them, but they do disclose who they give to. [ProPublica’s NonProfit Explorer] and CitizenAudit…should find almost all nonprofit-to-nonprofit grants. This technique won’t tell you what companies and individuals are funding nonprofits, unless they’re routing it through trusts, etc.” From Searchable form 990s with citizenaudit.org, by Luke Rosiak.

“Use 990s for Routine Backgrounding: 990s are thorough disclosures. It’s a chance to get paper on someone, more than you’ll see in limited forms like incorporation documents. If you’re backgrounding anyone who’s been active in the community, there’s a decent chance they’ll show up. Get in the habit of doing it even when your story has nothing to do with tax-exempt organizations. Nonprofits can be shadow/sister organizations to companies and other groups. They can sometimes have almost no real-world presence, but search an address or a person’s name and they may have one there.” [Rosiak].

“Pages 3 and 4: The kitchen sink Look for “Yes” answers on these pages; in virtually every case, a “Yes” means the nonprofit must file an extra schedule. If the topic is even marginally interesting, make sure you read that schedule. My personal favorite is Line 25, which asks about any “excess benefit transaction with a disqualified individual” – translation: large payments to insiders.” Mining Nonprofit Data, Kendall Taggart, Center for Investigative Reporting, from NICAR 2014.

“Part IV Question 26: did the organization provide a loan to a key employee, trustee, etc.?; Question 27: did the organization provides a grant to a key employee, trustee, etc.?; Question 28:  ‘related business transactions’ (has the organization been paying a brother, mother, sister, etc.?); (Checklist starts on page 3 of the Form 990, Part IV)” [Taggart].

“Part VII Question 2: do any of the board members have a family or business relationship?; Question 6: ‘significant diversion of assets’ – losses attributed to theft, investment fraud, embezzlement and other unauthorized uses of funds in excess of $250,000 or 5 percent of gross receipts; (Starts on page 6 of the Form 990, Part VII)” [Taggart].

• This is a very in-depth read of info you can find in 990s:  How to Read the IRS Form 990, from the  Nonprofit Coordinating Committee of New York, Inc.
• Resources for Investigating Tax-Exempt Organizations from ProPublica
• Margot Williams’ Tipsheet from the 2015 GIJC 
• A data journalist’s guide to IRS Form 990s and investigating non-profit organizations from Dan Nguyen

Take two weeks to write an at least two-page memo on a nonprofit you are reporting on, or want to investigate further. Detail interesting information and data from the 990s, the income, expenses, assets, people, services provided (report on the 990 sections explored during the two in-class exercises), news articles that mention the nonprofit, lawsuits, any public contracts and grants, and any audits or oversight reports. 

Have students answer these three brief concluding reflection questions on paper or through an online service like Socrative:

3. Write down three takeaways from this lesson;

2. Write down two questions you still have after this lesson;

1. Write down the one thing you enjoyed the most about this lesson.