Under certain sections of the IRS tax code, corporations involved in charitable, educational, artistic, religious and social services can qualify for tax-exempt status. In return for such status, the government requires most of these organizations to keep publicly available records for anyone to view. It turns out, these records are a treasure trove for reporters.
Here are some tips on how to investigate charities and other non-profits groups.
-Check out the incorporation papers and charity registration. Like other corporations, non-profit officials have to file incorporation papers in the state where the organization is headquartered. Incorporation papers spell out the bylaws and list all of the founding officers. Look for links between donations and officers. Look for a state registration or license to raise funds.
– Get the non-profit’s annual IRS Form 990. If the organization raises more than $25,000 a year, it must report revenues and expenditures. A simple comparison of multiple years’ budgets can provide a clue about the organization’s financial health. Consider a free account at Guidestar.org, which will give you some information. A paid account gives you more detailed information. Also, the organization itself should make these forms available upon request.
– Look for the highest-paid employees. The detailed Form 990 lists salaries of the five highest-paid employees. Such compensation figures can be invaluable as you compare to similar organizations in your area or across the country.
– Compare administrative costs versus service costs. Investigations have shown that some non-profits overspend on executive salaries and fundraisers when compared with amounts actually spent on educational or social services.
– Look at government contracts. Some non-profits are contracted to provide aging, health care and other services on behalf of government agencies. Check out how these contracts are granted and administered. Look for violations and contract complaints.
– Be nosy. Attend fundraising events, talk to former directors, look at meeting minutes and audits, take a tour of the charity’s headquarters, find people who have received services from the charity and check court records to see if anyone has sued the charity.
–Local housing agencies. Recent investigations have shown mismanagement and corruption at many low-income housing agencies across the country.
–Charities involved in disaster relief. For example, examine a local charity that is raising money to help victims of an international disaster. Use documents mentioned and sources to make sure charitable fundraising isn’t really a scam.
–School non-profit foundations. The foundations have become a big part of local school districts. Many school districts use private foundations to raise money for scholarships, teacher supplies and other programs. Likewise, universities have hidden big donors and athletic recruitment behind foundation facades.
–Examine the arts. Most local symphonies, theaters and performing arts centers are organized as non-profits. An analysis of donations, salaries and expenditures, along with good reporting, can reveal the health of arts organizations in trying economic times. At the very least, it’s always an interesting story to see how much the local big-name conductor makes each year.
Joel Campbell is a member and former chairman of SPJ’s Freedom of Information Committee and is an associate professor of communications at Brigham Young University. His reporting does not necessarily reflect the views of BYU. He can be reached at email@example.com or @joelcampbell on Twitter.