Community foundation 990 forms reveal exactly how much money flows in and out, who sits on the board, and whether your charitable dollars actually reach intended beneficiaries. Reading these tax returns is the most reliable way to assess a foundation's legitimacy, financial health, and operational priorities before partnering with them. Here's what matters most when you're evaluating a community foundation.
Where to Find 990 Forms
Every tax-exempt nonprofit, including community foundations, must file Form 990 annually with the IRS. These documents are public record and freely available through three main channels:
- GuideStar (now part of Candid): Search by foundation name or EIN; access full 990 filings and organizational profiles
- IRS Tax Exempt Organization Search: Direct government database at irs.gov; slower interface but authoritative source
- Foundation's own website: Many larger community foundations post recent 990s directly for transparency
For community foundations specifically, look for filings from the past three years. One-year gaps or missing returns are red flags—foundations operate year-round and should always have current filings.
Revenue and Fund Growth
The first critical metric is total fund balance and annual revenue trends. Most established community foundations hold $50 million to $500 million in assets; smaller ones may hold $10–50 million. Check the summary page and Part I of Form 990 for:
Total contributions received: Community foundations thrive on consistent donor support. Year-over-year growth indicates healthy fundraising. Flat or declining contributions for two consecutive years warrant questions about the foundation's capacity or appeal.
Investment returns: Community foundations invest their endowments. In strong years, investment income should represent 3–8% of total assets. If investment returns suddenly dropped while the stock market rose, ask why—poor management or asset allocation issues may exist.
Grants paid out: Compare grants distributed to fund balance. Responsible community foundations typically distribute 4–6% annually (roughly aligned with spending-rate policies). Distributing less than 3% suggests hoarding; more than 8% may signal unsustainable practices.
Administrative and Program Efficiency
Turn to Part VII, Section A of the 990 to review compensation and staffing. Community foundations of similar size should have comparable staff structures. Red flags include:
- CEO compensation exceeding $300,000+ at foundations under $200 million in assets (disproportionate)
- Sudden spikes in executive salary year-over-year without clear explanation
- Unusually high overhead costs (over 25% of total expenses)
Look also at program expenses. Community foundations should allocate 70–85% of spending to grants and charitable programs, with the remainder covering administration, fundraising, and donor services. Lower percentages suggest administrative bloat.
Board Composition and Conflicts
Review Part VI (governance and management) for board member details. Effective community foundation boards typically include:
- 12–25 members with diverse professional backgrounds
- No single individual owning more than 5% of voting power
- Documented term limits (usually 3 years, with rotation)
- Clear conflict-of-interest policies
Watch for boards that are too small (under 7 members), too large (over 30), or filled entirely with family members or employees. These structures often indicate weak governance and reduced accountability.
Specific Grants and Program Areas
Community foundations organize grants by focus area—education, health, arts, workforce development, etc. Part I lists total grants by category. If you're evaluating a foundation to donate through or request grants from, verify they actually fund your sector. A foundation claiming "education focus" but awarding 90% to disaster relief isn't aligned with its stated mission.
Check Part VIII and IX for recent grant recipients and amounts. This shows real activity, not just promises.
Red Flags and Deal-Breakers
Missing or incomplete 990 filings, unexplained year-over-year revenue drops exceeding 20%, board members with undisclosed related-party transactions, and executive compensation that spikes without justification are all reasons to investigate further or find an alternative.
Tools like Mercoly help you compare and find trusted community foundation providers in one place, making it easier to cross-reference 990 data against operational transparency and donor reviews.
Frequently Asked Questions
Q: How recent does a 990 filing need to be to be useful? Current filings (filed within 6 months of the fiscal year end) are most reliable; use filings no older than 2–3 years unless evaluating historical performance.
Q: What's a normal ratio of grant dollars to administrative costs? Aim for foundations spending at least 75% on grants and programs, with no more than 15–20% on administration.
Q: Can I contact the community foundation directly with 990 questions? Absolutely—reputable foundations welcome questions about their financials and operations; evasive answers suggest governance issues.
Start reviewing 990 forms today, and prioritize community foundations demonstrating transparent financials, stable growth, and board diversity.