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The team from Charity Navigator, the nation's largest independent charity evaluator and leading donor advocate, shares their thoughts on emerging nonprofit-sector issues and offers tips to better inform your intelligent giving decisions.

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Thursday, August 8, 2019

It's 2019. Why are we looking at 2017 990s?

When looking at the ratings on the Charity Navigator website, you’ll see the fiscal year for the most recent IRS Form 990 that a charity’s rating is based on.  Currently, in most cases, you will see a fiscal year-end date from 2017.  Being that it’s now 2019, you may be thinking that a rating using 2017 data is extremely outdated.  But, there is more to this story. 

First, the IRS requires a charity to submit their Form 990 within five months of their fiscal year-end date.  Beyond that, it is extremely easy for a charity to get a six-month filing extension by simply filling out a one-page form.  If a charity has a December fiscal year-end, their December 2018 Form 990 will not be due to the IRS until May 2019; with the extension, they may wait to file until November of 2019. 

Once the IRS receives their Form 990, it takes time for the them to process it and make it publicly available.  E-filing the Form 990 is much quicker and preferred by Charity Navigator, and the turnaround time is, on average, one month.  But, if the charity files a physical 990 by mailing it to the IRS, the timing from the IRS receiving it to it being publicly available is more like three to four months, on average. 

Second, although the data used in our ratings is dated due to 990 filing requirements, it’s still very valuable. Our rating methodology is intended to capture an organization's commitment to financial health, accountability, and transparency. Our evaluations provide a snapshot that illustrates how a given organization is performing in regards to certain metrics. 

On the financial side, we analyze a charity’s shorter-term efficiency and longer-term capacity.  These figures, even if they are not extremely recent, are still a good indicator of financial health. Furthermore, many of our financial metrics look at multiple years of data and average them in order to provide a picture that is inclusive of a few years of the charity’s operations. The accountability and transparency metrics we consider in our evaluations indicates that an organization is committed to best practices, which are safeguards against future problems. Conversely, an organization that doesn’t have policies that represent some or all of these best practices in place is more likely to engage in unethical or irresponsible activities now or in the future. 

Third, our advisory system ensures that we can respond to real-time events when needed. Even if the 990 data we are using for a particular charity is a bit outdated, our team researches and reviews current news that may alter the status of a charitable organization, and we will take action accordingly. 

If you find a charity you plan to support has outdated financial information, we encourage you to contact them directly and tell them you expect them to be timelier.  Suggesting they e-file is a great start. The IRS requirements we included above are the longest a charity can wait to file, but there is no minimum time period so a charity should be as timely in filing as possible. 

Written by Matthew Viola, Vice President Program Analyst Operations at Charity Navigator.

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1 comment:

Jean Doolittle said...

Thank you! That's helpful information with a good suggestion at the end.