This page provides a guide to how we use the public financial information of a charity (generally available via the IRS Form 990 on GuideStar) to get at certain questions relevant to donors. We believe that there are definite limits to how much can be learned from the 990 Form - we ultimately wish to focus on lives changed, not dollars spent - but do find this information useful for certain contained questions.
We chart revenues and expenses over time, going back as far as we can access them.
Both revenues and expenses are subject to a "donated supplies adjustment" (more below). Over the last three years, we've focused on these main points:
We chart the ratio between total assets and annual expenses, going as far back as we can access them.
Expenses are subject to a "donated supplies adjustment" (more below). The result is a number that tells us approximately how many years the organization could continue to operate if revenue were to cease.
We chart expenses by program over time, going back as far as we can access them.
We aim to show the weight of expenses for each program that we analyze, but sometimes the data we have limits the level of breakdown we can provide. (When necessary we use IRS-reported program categories, though these often provide little detail).
We prefer to see larger expenses and/or expense growth in the programs we have confidence in.
We chart expenses by IRS designations "Administrative expenses," "Fundraising expenses," and "Program expenses", going as far back as we can access them.
If non-program expenses total over 50% of total expenses, we worry that the organization exists more to pay salaries than to provide services. We believe that reading any more into this metric is a mistake; more on this topic here.
Many charities receive significant donations of supplies (such as medicine), which they then use in their programs. Such donations are unlikely to be fungible with other funds, and are therefore largely irrelevant to the questions above. For example, nearly half the expenses of the Carter Center are in the form of donated supplies used in health programs. Including these expenses in our calculations would a) exaggerate the weight that health programs have in the Carter Center's overall allocation b) cause understating in the Carter Center's "overhead expenses" as a percentage of its total and c) cause understating in how many years its assets would allow it to operate.
Not all "in-kind donations" necessarily fall in this category. Some may be sold, netting funds that are fungible with other funds. When there is a particularly large line item under "in-kind donations", whose description implies that it is describing donated supplies, we treat this figure as a proxy for "donated supplies" and subtract it from both revenue and expenses for all relevant calculations.