Demystifying Grants: How To Read A Foundation’s Form 990

Foundations abound. If you’re the main grant seeker for your organization, the number of foundations you hear about from Board, staff, and colleagues can feel overwhelming. You may have compiled a list of all those names, which is a great start. But what do you do from there? How do you decide if, how, and when to apply to the foundations? How do you know what to apply for or how much funding to request? Some foundations provide information on their websites, but many do not.

Enter the Form 990.

Every foundation is required to submit an annual Form 990 to the IRS, and the form is public record. A 990 is dense, but there are certain key sections that will provide you with the information you need.

Finding a Form 990

Many websites provide access to 990s, such as Candid’s Foundation Directory Online, but require paid subscriptions, largely because their staff has sifted through the 990s and culled relevant information for subscribers.

Luckily, you can access 990s for free on the IRS website or through Guidestar. To perform a search, all you need is the foundation’s name or Employee Identification Number (EIN). You will then have access to several years’ worth of 990 submissions. I suggest looking at 990s from the past three years so you can identify trends.

NOTE: If you cannot find a grant maker’s 990, it’s possible the grant maker is actually a Donor Advised Fund (DAF), a giving vehicle that is gaining popularity among donors. Donors often include the word “foundation” in the name of their DAFs, but DAFs are not required to file 990s as traditional private foundations are.

Sifting Through a Form 990

Timeframes

Once you’re in the 990, at the top of Page 1 you will see the timeframe for which the foundation filed. If the foundation’s fiscal year matches the calendar year, then they might leave that section blank. However, if they operate on their own fiscal year, the beginning and end dates will be indicated here. It is useful to note the fiscal year beginning and end because some foundations make the bulk of their grant commitments at the beginning of their fiscal year. Keep that timing in mind as you shape your approach.

Scale

You want to understand the scale of the foundation: How much total grant funding does the foundation typically give each year?

It helps to look at their assets first. You can find the fair market value of the foundation’s assets on Page 1, Line I. A foundation must meet or exceed an annual payout of 5% of its total assets. If the foundation’s payout falls below 5% several years in a row, it can lose its tax-exempt status. Why the 5% requirement? The rule ensures a foundation maintains its charitable purpose, but still has room to preserve (and even grow) its assets. Foundations are permitted to include expenses beyond grants in their payout total, such as reasonable expenses associated with carrying out their tax-exempt purpose (i.e., administrative expenses related to grantmaking). With that in mind, many foundation payouts exceed the 5% requirement.

Next, look at the foundation’s total giving. The total amount of grant dollars that the foundation actually awarded to organizations during the year will be listed in Part I, Line 25, Column D. This number does not include grants that were authorized without being paid yet – it only includes payments that were actually made. Line 25, Column A represents all grants that were authorized, but not necessarily paid during the filing year.

Giving Trends

Once you understand the foundation’s scale, you want to dig into the details. Most importantly, what causes does the foundation typically provide grants for, who have they given grants to in the past, and what size grants do they typically give? Part XV Line 3 lists the grants paid during the year or grants that were approved for future payment. Here you will see each grant recipient’s name, the purpose of each grant, and the amount of the grant award. Look at the types of organizations supported. Are they largely arts focused? Or does there seem to be an emphasis on medical research? Are most grants to universities? If so, is it possible the family leading the foundation is primarily interested in giving to their alma maters? Are the grants relatively small? If so, given your funding goals, does it makes sense to spend time pursuing the grant maker?

You want to don your detective hat, piecing clues together as you review this part of the 990. But be careful not to make assumptions. If a foundation’s 990 one year lists grants only to medical research, that does not mean the foundation is only interested in research. The foundation might simply have been compelled by a particular research project that year. This, again, is why it is important to look through at least three years’ worth of 990s so you can identify trends in giving.

How To Apply

If the grant trends point in your favor, then you want to consider the foundation’s application process. You will find application details in Part XV, on Line 2. Some foundations do not have an open application process and do not accept unsolicited grant requests. In that case, the foundation will indicate on Line 2 that they only consider proposals from preselected charities. If the foundation has an open application process, they often will include some details about how to apply or who to contact. Part XV, Line 2 will also include application submission requirements, as well as any limitations on grants awards, such as geographical restrictions.

NOTE: If the foundation does not accept unsolicited applications, but you believe your work matches the foundation’s interests, I encourage you not to throw in the towel just yet. It’s possible that you just need to get in front of the right person, either foundation staff or Board members. That’s where Part VIII comes in.

The Decision Makers

If you’ve decided you want to pursue an application, it’s time to decide who to contact. Part VIII, Line 1 of the 990 lists the foundation’s paid staff and their Board members. When building a relationship with a foundation, it’s important to get to know the foundation staff. They can provide relevant information about the foundation’s current grant making strategy and perspective on whether the Board will be receptive to your request. The staff can help shepherd your application through the process and can help you put your best foot forward to the ultimate decision makers: the foundation’s Board.

You would be wise to draw upon any links you have with the foundation’s Board members. Often, your own Board members are acquainted with the foundation Board members, which makes for a natural connection. However, when it comes to foundation Board members, I suggest you proceed with caution. Some foundations frown upon organizations tapping into Board connections. This, too, is where a relationship with foundation staff can be helpful – you can have an honest conversation about the foundation’s stance on reaching out to Board members.

Using What You’ve Found

The information you gather will be most useful if you keep it organized and consolidated.

I recommend maintaining your list of foundations to research in an Excel spreadsheet. When someone tells you about a new foundation, add the name to this list. Take time occasionally to explore the basics about the foundations on the list, such as their focus areas and giving restrictions. Make notes in your spreadsheet about your findings, even if a foundation is not a fit. If someone suggests the foundation again in the future, you’ll have answers at your fingertips.

If a foundation seems promising, I suggest creating a grant maker profile that can serve as a snapshot for the decision makers in your organization. The profile will contain relevant information, such as the foundation’s giving history (again, I recommend going back at least three years), staff, and Board members. Using this profile, your team can determine how a grant from the foundation could fit into your fundraising strategy and long-term goals, so you can then decide on next steps.

Hours Well Spent

Yes, 990 research can be tedious, but the end results are certainly worth the tedium. Spending hours researching 990s will save you from spending hours on foundation applications that have little chance of being funded. When you put time toward learning about foundations that share your passions, you lay the groundwork for meaningful funder relationships.

Liz Green is a writer and grant consultant based in the Houston area. You can learn more about her and her work at www.lizgreengrants.com

Sources: Candid; Council for Advancement and Support of Education (CASE); Pacific Foundation Services; Professional Grant Writers