Form 990 red flags: what actually warrants concern
Free, no login. Checks IRS recognition, deductibility, revocation history and filing recency.
Genuine: reserves that cannot absorb a shock
Roughly 19.1% of organizations hold under three months of spending in net assets, against a median of 13.3 months. Thin reserves do not mean mismanagement — many mission-critical organizations run lean by necessity — but they do mean a delayed payment becomes a crisis. If you are the grantmaker, that is an argument for paying early and unrestricted, not for walking away.
Genuine: deficits that repeat
38.4% ran a deficit in the year reported, so one is unremarkable. Three consecutive years of spending down net assets with no corresponding strategy is a different conversation.
Genuine: the governance answers in Part VI
No conflict-of-interest policy, no independent board majority, no board review of the 990 before filing. Each is a simple yes/no, each is cheap to fix, and a cluster of 'no' answers is one of the few things on the return that correlates with later trouble.
Usually not: a high overhead ratio
See what is actually normal. Comparing an organization to its own sector and size cohort dissolves most overhead alarm, and the major charity raters have publicly disavowed the ratio as a performance measure.
Usually not: executive compensation that sounds large
A hospital system or national charity competes for executives with the private sector. The meaningful question is proportionality and process, not the absolute number.
What to ask instead
“What would happen if your largest funder paused for six months?” The answer reveals reserve strategy, revenue concentration and candour in a way no line of the 990 does on its own.