Sources
What a Second Look is read against
Every section of the report follows the IRS's own instructions for the form and its schedules, and the public support test is worked the way Schedule A works it. The documents are public. Here they are, with what each one is used for.
IRS instructions and guidance
Links open the IRS page for the current filing year. When a report quotes a line number or a Part, it is the line and Part these instructions define.
Where the money went, revenue mix (Part VIII), functional expenses (Part IX), governance answers (Part VI), compensation (Part VII), balance sheet (Part X) and the Schedule O explanations the report looks for.
The same reading for organizations that file the short form.
Private foundation returns: qualifying distributions, the minimum distribution requirement and the excise tax on net investment income.
The public support test section: the five-year computation, the section 170(b)(1)(A)(vi) test in Part II, the section 509(a)(2) test in Part III, the 33 1/3 percent line and the 10 percent facts-and-circumstances alternative.
- Public charity support test (Form 990, Schedules A and B)
IRS, Exempt Organizations annual reporting requirements
The IRS's plain-language explanation of how public support is measured and what happens when an organization fails the test.
The Schedule L and related parties section: excess benefit transactions, loans to or from interested persons, grants to them, and business transactions that must be reported.
The compensation section: what counts as reportable pay, the approval-process questions, and the arrangements that need explaining.
Background on public charity classification, private foundation rules and the disclosure requirements the report refers to.
Where the numbers come from
For a filed return, totals and prior years are taken from the IRS e-file record rather than read off the PDF, and the report says so at the end. A draft return has no public record, so a pre-filing review works from the draft alone.
- SOI Tax Stats, annual extract of tax-exempt organization financial data
IRS Statistics of Income
The e-filed figures behind the totals and year-over-year comparisons in a report on a filed return.
- Nonprofit Explorer
ProPublica
How the site looks up an organization by EIN and reads the IRS e-file extract and the public copy of the filing.
Where to confirm an organization's exempt status, its public charity classification and its filing history.
Which lines are the firm's judgment, not an IRS rule
Most of what the report checks is defined by the IRS. A few thresholds are the checklist R.S. McDuffie CPA & Associates uses on the returns it prepares, and they are the levels funders tend to ask about. They are listed here so a red or yellow flag is never mistaken for a legal finding.
- Program share of expenses: the report flags under 60 percent red and 60 to 70 percent yellow. The IRS sets no required ratio; these are the levels funders and rating bodies commonly ask about.
- Months of cash: under three months is flagged yellow. This is a reserve guideline, not a filing requirement.
- Revenue concentration: a single source over half of revenue is flagged yellow as a dependence risk, separate from the Schedule A support calculation.
- Public support under 40 percent, or falling three years in a row, is flagged red so a CPA reads it. The IRS line is 33 1/3 percent, with the 10 percent facts-and-circumstances alternative; the report flags early to leave time to act.
A report is analytical commentary for educational purposes. It is not an audit, review or attestation, and not tax or legal advice on a specific position. If a line in your report points at one of these documents and you want to know what it means for your organization, ask on your private report page and a CPA answers there.