What you get
What we look for in your return
One report, written for the people who have to sign the return rather than for accountants. Every finding says what a stronger return would have shown on that line, not only what is wrong with this one.
Who funds you, how concentrated that is, and what it means if the biggest source walks.
Program versus management versus fundraising, whether the split is defensible, and how it moved.
Your percentage, the trend, and how many years of runway you have before status is at risk.
Loans, transactions, and family relationships that funders and journalists look for first.
The Part VI answers where a "no" may raise a governance question for a funder or another reviewer.
Officer and key employee pay in context, and whether the approval process is documented.
Cash and savings, net assets split by donor restriction, months of cash worked from the two figures behind it, and liabilities that deserve a question.
Each finding comes with a worked example of what a stronger return shows on that line, and wording you can hand to your preparer.
Specific, in plain language, ready for the next board meeting.
Most reviews stop at what is wrong. This one keeps going.
A finding you cannot act on is a worry, not a service. So every red and yellow finding carries an example of what a stronger return shows on that line. Here is the real one, word for word, that arrives when program spending comes in under the review threshold.
Program share under 60%: Program services are 52% of total expenses, under the 60% line on this firm's review checklist.
Stronger next year: The percentage is not the finding; what supports it is. A stronger return states the allocation method in Schedule O instead of leaving Part IX to be read as a judgment. Draft language to adapt, with your own figures: "Shared costs are allocated on a quarterly time study. The Executive Director's compensation is charged [x]% to program, [y]% to management and [z]% to fundraising on that basis." If no time study or written policy exists behind the split, starting one this year is the thing that changes the number honestly.
On a pre-filing review the same examples say Before you file, because the draft can still be changed. Every example is written by this firm and reviewed once, not generated for you: none of it is required by the IRS, and none of it promises an outcome.
Each section follows the IRS instructions for the form and its schedules, and the public support test is worked the way Schedule A works it. See the documents every report is read against.
An excerpt, so you know what arrives
Every report reads all schedules, compares against the prior year where the filing allows, and ends with three questions specific to that return. Any report with a red flag is read by a licensed CPA before it reaches you.
Get a second look from $79Summary
$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?