Sample report
What a Second Look looks like
A real report, not a mock-up. It came from a publicly filed Form 990 put through the same extraction and analysis a paying client's return goes through, then anonymized: the organization's name, EIN, address and officer names were removed or replaced. The figures and the findings are the ones the run produced. No client document is ever shown here.
Second Look: national education nonprofit
FY2023 · Form 990 · page 1
$10.4M in revenue against $9.9M in expenses, so the year ended about $566,000 ahead. Spending was 86.8% program, 10.4% management, 2.7% fundraising. The pressure is not on the surplus. It is on where the money comes from, and on a balance sheet that has to be read a line at a time: cash covers about three and a half months of spending, which is not the same thing as three and a half months of reserves.
The short version: 1 red, 2 watch, 5 clear. Two questions could not be answered from what was filed and are listed at the end.
A reader who stops here should still know what was found, what was not, and what is missing. That is what this page is for.
This is what arrives in your inbox.
Summary
$10.4M in revenue against $9.9M in expenses, so the year ended about $566,000 ahead. Spending was 86.8% program, 10.4% management, 2.7% fundraising. The pressure is not on the spending side: it is that half the money came from one funder and the public support percentage dropped 14 points in a single year. Cash covers about three and a half months of spending, which is not the same thing as three and a half months of reserves.
Findings
Needs attention: Public support fell from 49.9% to 35.4% in one year, about two points above the 33 1/3 percent public support threshold. Under that line there is a 10 percent facts and circumstances route, which is a conversation to have deliberately rather than discover.
Stronger next year: The test runs on a five-year rolling window, so the work is in the years rather than the form: a broader base of smaller donors moves it and one very large gift can move it the other way. Schedule A, Part VI is where an unusual year gets explained, and the facts and circumstances case gets made if the percentage falls under the line. Where one gift moved the percentage, there is a second question for your preparer: a substantial gift from a disinterested party, attracted by the organization's public nature, unexpected, and large enough to distort the test may qualify as an unusual grant under the regulations, which takes it out of both halves of the fraction on Schedule A rather than capping it at 2% of total support. That determination rests on the facts of the gift, it is not automatic, and it is not available for a gift from somebody who was already a substantial contributor. If a large gift is expected, ask how it lands against the 2% limit before it is accepted rather than after.
Watch: One foundation gave about $5.2M, roughly half of all revenue for the year.
Stronger next year: Concentration is a fact about the year, not a failing, and the return can say what is being done about it. Schedule O. Draft language to adapt, with your own figures: "[number] grants provided [x]% of revenue in FY[year]. The board's FY[year] plan adds an individual giving program with a target of [x]% of revenue and a fee-for-service pilot beginning in [quarter]." A funder reading that sees a board that knows its own risk, which is the opposite of what an unexplained concentration conveys.
Watch: Cash and savings of $2,870,000 cover about three and a half months of spending. Net assets without donor restrictions are $1,200,000 of the $4,100,000 total and include property, so neither figure is an operating reserve, and the return does not say how much of the cash is free to spend.
Stronger next year: Three different figures get called reserves and the return establishes only two of them. Part X reports cash and savings on lines 1 and 2, and net assets split by donor restriction on lines 27 and 28. Neither is a reserve figure: the form does not say whether that cash is itself restricted to a purpose, or how much of the unrestricted balance is the building rather than money. Schedule O is where an organization can say what a reader cannot work out. Draft language to adapt, with your own figures: "Of net assets of [total], [amount] is property and equipment and [amount] is restricted to [program]. Cash and savings at year end were [amount], of which [amount] is available for general operations, about [n] months of spending against the board's reserve target of [n] months." A board that has a written reserve policy should say so in the same sentence, because that is the thing a funder is actually checking for.
In good shape: Program spending was 86.8% of expenses, and the return reports an independent board with conflict of interest, whistleblower and compensation review policies in place.
Questions for the board
- What is the plan to widen the donor base before public support drops below the 33 1/3 percent threshold?
- Does our largest funder have a multi-year commitment, and what happens to the budget if that grant shrinks?
- Of the $2,870,000 in cash and savings, how much is committed to a restricted purpose, and what is the figure the board should be treating as its operating reserve?
What the report covers
- Revenue mixWho funds you, how concentrated that is, and what it means if the biggest source walks.
- Functional expensesProgram versus management versus fundraising, whether the split is defensible, and how it moved.
- Public support testYour percentage, the trend, and how many years of runway you have before status is at risk.
- Schedule L and related partiesLoans, transactions, and family relationships that funders and journalists look for first.
- Governance answersThe Part VI answers where a "no" may raise a governance question for a funder or another reviewer.
- CompensationOfficer and key employee pay in context, and whether the approval process is documented.
- Balance sheet healthCash and savings, net assets split by donor restriction, months of cash worked from the two figures behind it, and liabilities that deserve a question.
- What to do about itEach finding comes with a worked example of what a stronger return shows on that line, and wording you can hand to your preparer.
- Three questions to askSpecific, in plain language, ready for the next board meeting.
Coverage depends on the form filed, the schedules included and the information provided. Not every section applies to every return.