Before a funder commits money, it usually wants some confidence the recipient can handle it well. A lot of that confidence is available, for free, in documents the organization has already filed. A nonprofit’s IRS Form 990 and its audited financial statements are public, standardized, and surprisingly informative. The challenge isn’t access — it’s knowing what the documents are actually telling you.
Reviewing nonprofit finances has been a steady part of our work across philanthropic and federally funded portfolios, and we want to be clear about the goal up front: reading a 990 is not about catching an organization in a mistake. It’s about understanding whether it can responsibly steward the money you’re considering giving — and surfacing the right questions to ask, early and kindly.
Start with where the money comes from
Look at revenue. Is it concentrated in one or two sources, or spread across many? An organization that depends on a single grant or donor is more fragile than one with diversified support — not disqualifying, but worth understanding. If your grant would be a large share of their budget, that’s a relationship to enter thoughtfully, because your decision carries more weight for them than you might intend.
Check whether there’s a cushion
Find net assets, and specifically unrestricted reserves. Reserves are what let an organization absorb a late payment, a lost grant, or a slow season without scrambling. A few months of operating reserve signals stability. Very little reserve isn’t a red flag by itself — plenty of excellent, lean organizations run close to the line — but it tells you something about risk, and about how a delay on your end might land.
See how much reaches the work
Compare program spending to administrative and fundraising costs. The point isn’t to chase an arbitrary “overhead” ratio — that framing has done real harm in the sector, and lean organizations often under-invest in their own infrastructure just to look efficient. The point is to understand the shape of the spending and whether it matches what the organization says it does.
Make the numbers and the narrative agree
Finally, read the story the organization tells about itself — on its website, in its appeals, in the 990’s own program descriptions — and check it against the financials. When the narrative and the numbers line up, that’s a good sign. When they don’t, it isn’t necessarily a problem, but it’s exactly the thing to ask about.
None of this requires an accounting background. It requires knowing which questions each document answers, and treating the review as the beginning of a conversation rather than a verdict. A clean read of a 990 protects the funder and, just as often, points to the one question that helps a grantee most.
Harborline Grants helps funders build review and due-diligence processes that are rigorous and humane. If your team could use a steadier hand through a funding cycle, we’d welcome a conversation.
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