Nonprofit glossary

Plain-language definitions of the terms behind every CharityIndex profile — the language of Form 990s, grades and giving.

501(c)(3): A 501(c)(3) is a U.S. tax-exempt organization operated for charitable, religious, educational, scientific or similar purposes, to which donations are generally tax-deductible.
Form 990: Form 990 is the annual information return that most U.S. tax-exempt organizations file with the IRS, disclosing their finances, governance and programs.
EIN: An EIN (Employer Identification Number) is the unique nine-digit number the IRS assigns to a nonprofit, formatted like 12-3456789 — its permanent tax ID.
Program expense ratio: The program expense ratio is the share of a nonprofit's total spending that goes to its programs and services rather than to management or fundraising.
Cost to raise $100: Cost to raise $100 is how much a nonprofit spends on fundraising to bring in $100 of donations — a measure of fundraising efficiency.
Functional expenses: Functional expenses are a nonprofit's costs grouped by purpose — program services, management and general, and fundraising — as reported in Form 990 Part IX.
Overhead: Overhead is the share of a nonprofit's spending that goes to management, general operations and fundraising rather than directly to programs.
Net assets: Net assets are what a nonprofit owns minus what it owes — its accumulated financial cushion, the nonprofit equivalent of equity.
Public charity: A public charity is a 501(c)(3) that receives support from a broad base of donors and the public — the most common type of charitable organization.
Private foundation: A private foundation is a 501(c)(3) typically funded by a single source — a family, individual or corporation — that often makes grants rather than running its own programs.
Form 990-EZ: Form 990-EZ is a shorter annual return that smaller tax-exempt organizations may file instead of the full Form 990.
Form 990-PF: Form 990-PF is the annual return that every private foundation files, regardless of size, detailing assets, grants and investment income.
Donor-advised fund: A donor-advised fund (DAF) is a charitable account held at a sponsoring organization where donors get an immediate tax deduction and later recommend grants to charities over time.
NTEE code: An NTEE code is a letter-and-number classification the IRS and NCCS use to categorize a nonprofit by its primary purpose, such as education, health or the environment.
Tax-deductibility: A donation is tax-deductible when the IRS lets the donor subtract it from taxable income — generally true for gifts to 501(c)(3) public charities.
Restricted funds: Restricted funds are donations a nonprofit must spend only on the specific purpose or time period the donor designated.
Endowment: An endowment is a pool of donated funds a nonprofit invests long-term, spending only the investment income while preserving the principal.
Form 990-N: Form 990-N (the "e-Postcard") is the minimal annual electronic notice filed by small nonprofits with gross receipts normally $50,000 or less — it contains no financial detail.
Operating reserves: Operating reserves are the unrestricted funds a nonprofit can tap to keep programs running when revenue dips — commonly measured in months of operating expenses.
Operating margin: A nonprofit's operating margin is revenue minus expenses, expressed as a share of revenue — positive means a surplus, negative means the year ran at a deficit.
Independent board: An independent board member is a director who isn't compensated by the organization and has no financial or family ties to it — watchdogs expect independents to hold the majority of votes.
Audited financial statements: Audited financial statements are a nonprofit's accounts examined by an independent CPA, giving donors third-party assurance the reported numbers are materially accurate.
In-kind donation: An in-kind donation is a gift of goods or services — medicine, food, airtime, pro-bono work — rather than cash, recorded at an estimated fair value on the Form 990.
Unrelated business income (UBI): Unrelated business income is money a nonprofit earns from a trade or business that isn't substantially related to its exempt mission — and it's taxable, unlike mission income.
Fiscal sponsorship: Fiscal sponsorship is an arrangement where an established 501(c)(3) receives tax-deductible donations on behalf of a project or young charity that doesn't yet have its own exempt status.
Matching gift: A matching gift is a donation an employer (or major donor) makes to mirror another gift — commonly dollar-for-dollar — doubling the impact of the original donation at no extra cost to the giver.
Donation bunching: Bunching is concentrating two or more years of charitable giving into a single tax year so itemized deductions clear the standard deduction and the gifts actually reduce your taxes.