The bottom half of the form 990 is a very simplified statement of activities report, showing greatly summarized data: revenue, expenses, assets and liabilities. Then the grand total of “Net Assets” (aka equity). This is just a summary page – more detailed information is inside. But it gives an idea of the general scale of the operations, the types of revenue, and if they appear financially healthy or about to go broke. The 990 also gives two years of data – current year on the right, prior year on the left. Ideally, they should be fairly similar showing steady growth. Great changes in any line item should have a story behind it: funding gained or lost, moving to an earned revenue model, increased staffing ahead of a major program launch.
If the Net Asset amount on line 22 is negative, this indicates the nonprofit’s liabilities are larger than all their assets. They owe more than they have. What this simple form does not show, is if the negative amount is primarily restricted (common) or unrestricted funds. Either way, this should not continue for more than a year. While a nonprofit might be “net negative” for a short period of time, it is incumbent on the board and leadership to address the problem. Seeing it continue two years in a row is not a good sign.
The 990 is signed by the executive director and tax preparer. The date the preparer signed is always worth a look. For a fiscal year-end December 31 organization, the form should be signed no later than October 31 the following year. This is the extended filing date often used by corporations for their more complex filings. But if the date is much later than that, it indicates the form was filed past the deadline. This is an indication of administration management problems at the nonprofit.