Leveraging Form 990 Data to Improve Nonprofit Fundraising Strategies

Fundraising is the lifeblood of nonprofit organizations. Without a steady stream of donations and grants, even the most impactful missions can struggle to stay afloat. While many nonprofits focus on traditional fundraising tactics like donor outreach, events, and online campaigns, there is an often-overlooked resource that can provide valuable insights: Form 990.

This annual tax return, required by the IRS for tax-exempt organizations, is more than just a regulatory requirement. It holds a wealth of financial and operational data that nonprofits can use to refine their fundraising strategies, strengthen donor relationships, and improve overall financial health. By using Form 990 data strategically, organizations can make more informed decisions that lead to sustainable growth.

Why Form 990 Matters for Fundraising

At its core, Form 990 is a public document that offers transparency into a nonprofit’s financial health, leadership structure, and program effectiveness. Potential donors, grantmakers, and watchdog organizations often review these filings to assess how efficiently an organization is using its resources.

For fundraisers, this document serves as a powerful tool for:

• Identifying trends in revenue and expenses
• Demonstrating financial stability and accountability to donors
• Showcasing nonprofit impact measurement through program expenses and outcomes
• Understanding donor behavior and funding sources
• Comparing financial performance with peer organizations

By carefully analyzing the information in Form 990, nonprofits can fine-tune their fundraising strategies to maximize effectiveness.

Key Areas of Form 990 That Influence Fundraising

1. Revenue Streams and Donor Insights

Part VIII of Form 990 breaks down an organization’s revenue sources, including contributions, grants, program service revenue, and other funding. This section provides critical insights into where donations are coming from and how diversified the organization’s funding streams are.

How this data improves fundraising:

• If the majority of revenue comes from individual contributions, fundraisers should focus on donor engagement and retention strategies.
• A strong reliance on grants suggests the need to build relationships with new grantmakers or explore multi-year funding opportunities.
• Limited revenue diversity may indicate a need to expand into corporate partnerships or planned giving programs.

By understanding these patterns, nonprofits can make data-driven decisions about where to focus their fundraising efforts for the greatest impact.

2. Expense Allocation and Efficiency

Form 990 details how an organization allocates its funds between program services, administration, and fundraising. Many donors and grantmakers look at these ratios to determine whether a nonprofit is using its funds effectively.

How this data improves fundraising:

• A high percentage of expenses going toward program services strengthens donor confidence and improves fundraising success.
• If administrative costs appear excessive, nonprofits should reassess their financial efficiency and be prepared to explain these figures transparently to donors.
• If fundraising expenses are relatively low, organizations may need to invest more in donor acquisition and retention strategies to increase long-term sustainability.

Nonprofits that demonstrate responsible nonprofit financial management are more likely to attract major donors and grant opportunities.

3. Fundraising Costs and ROI

Schedule G of Form 990 provides details on fundraising events, professional fundraising services, and associated costs. Reviewing this section helps organizations determine whether their fundraising strategies are cost-effective.

How this data improves fundraising:

• If fundraising expenses are too high compared to the revenue generated, nonprofits should consider alternative methods such as digital fundraising or peer-to-peer campaigns.
• Comparing event costs to net revenue can help assess which fundraising initiatives provide the best return on investment.
• Understanding professional fundraiser fees allows organizations to negotiate better contracts or shift resources toward more efficient strategies.

By analyzing these costs, nonprofits can refine their fundraising approach to maximize donations while minimizing expenses.

4. Major Donor and Grantmaking Trends

Form 990 requires organizations to disclose their top contributors if they have made substantial donations. This information is invaluable for identifying major donor patterns and potential new funding opportunities.

How this data improves fundraising:

• Reviewing past major donors can help in designing personalized stewardship plans to retain their support.
• If certain foundations consistently fund similar organizations, nonprofits can target those grantmakers with tailored proposals.
• Analyzing donation trends over multiple years can reveal opportunities for donor re-engagement or upselling larger contributions.

Major donor insights from Form 990 allow nonprofits to build stronger relationships with high-impact funders and secure long-term financial stability.

5. Compensation and Governance Transparency

Part VII of Form 990 outlines executive compensation and governance structures. While this may not seem directly related to fundraising, it plays a key role in building donor trust.

How this data improves fundraising:

• Donors and watchdog organizations review this section to ensure that leadership salaries are reasonable and aligned with nonprofit financial management best practices.
• A well-structured governance system reassures donors that funds are being managed responsibly.
• If any governance concerns arise, addressing them proactively can prevent negative impacts on fundraising efforts.

Strong transparency in leadership and financial decisions increases donor confidence and encourages long-term contributions.

6. Impact Measurement and Program Effectiveness

One of the most compelling sections of Form 990 is Part III, which outlines a nonprofit’s mission, key programs, and their outcomes. This is where organizations can demonstrate nonprofit impact measurement by showcasing how funds are being used to drive meaningful change.

How this data improves fundraising:

• Well-documented impact stories strengthen donor appeals and grant applications.
• Clear financial allocations to program services reassure funders that donations directly support the mission.
• Tracking program success over multiple years shows long-term impact and encourages repeat giving.

By leveraging impact data from Form 990, nonprofits can craft compelling narratives that resonate with donors and inspire greater giving.

Practical Steps for Using Form 990 in Fundraising

Now that we have covered how different sections of Form 990 can enhance fundraising strategies, here are some actionable steps nonprofits can take:

1. Analyze Past Trends: Review multiple years of Form 990 data to identify patterns in revenue, expenses, and donor contributions.
2. Benchmark Against Peers: Compare financials with similar organizations to understand industry standards and identify areas for improvement.
3. Enhance Transparency in Donor Communications: Use Form 990 insights to proactively address donor questions about financial efficiency and impact.
4. Strengthen Grant Applications: Leverage revenue and impact data to create compelling proposals for foundations and corporate donors.
5. Optimize Fundraising Investments: Assess which fundraising strategies yield the best return on investment and allocate resources accordingly.
6. Monitor Financial Health: Regularly evaluate key financial metrics to ensure sustainability and build donor confidence.

Conclusion

Form 990 is more than just a regulatory document; it is a powerful tool that can transform nonprofit fundraising strategies. By analyzing revenue streams, expense allocation, fundraising costs, and impact measurement, organizations can make smarter financial decisions and build stronger donor relationships.

With a strategic approach to nonprofit financial management, nonprofits can ensure long-term stability while maximizing their mission’s reach. At the same time, a focus on nonprofit impact measurement enables organizations to tell compelling stories that resonate with donors and grantmakers alike.

By using the wealth of data available in Form 990, nonprofits can refine their fundraising efforts, enhance transparency, and ultimately drive greater support for their cause. Also, trust A2Z Filings for expert assistance in filing 501c3 applications. Ensure compliance and approval with our streamlined process. Apply now!