I found the answers in the IRS Form 990 — the publicly available tax filing that must be filled out by a variety of nonprofit organizations in the United States.

It turned out the museum was overseen by a tax-exempt charity, which meant its tax records were open to the public, which meant anyone curious about the museum, like me, could learn all kinds of things about its finances.

The tax records helped me write a series of news stories about how the museum was actually a telemarketing operation that raised $12 million from 2004 to 2009 in the name of helping the families of state troopers who died in the line of duty. For every dollar raised, this “charity” had actually spent less than one penny on that worthy goal.

The museum’s activities had already caught the attention of the Texas Attorney General’s office and it went to court to shut down the telemarketing operation, claiming it was duping donors.

Today, the museum is history. The story I stumbled across offers a lesson for any journalist who writes about a nonprofit organization at some point in their career (and we all do). It pays to take the time to look up the 990 — even for seemingly innocuous stories.

The 990 filing, while not perfect by any means, is a road map that can guide you to a better understanding of how a charity works. How much money does it make? How much does it pay its executives? Has it ever been the victim of embezzlement?

The 990 isn’t just a tool for journalists, either. It’s for anyone who wants to know more about a charity. These organizations are often holding out their hats for donations. In return, you’re allowed to look at how they handle the money they raise. And it’s easier than ever to get your hands on these tax records online, often for free.

Here’s how to find 990s and analyze them. Sometimes, the things you discover will raise questions that need to be answered by the charity. But you’ll never know to ask those questions unless you read the 990.

Obtaining tax records of charities

Different types of nonprofits fall under the U.S. Internal Revenue Code. Many follow 501(c)(3) of the code, which covers charities that raise funds from a variety of donors. There are also charitable foundations that rely on fewer benefactors. Churches don’t have to file a 990. But religious schools and private universities do.

The IRS says you can visit the office of any group that falls under 501(c)(3) and request copies of their tax filings for the past three most recent years. If they made more than $25,000, they’re supposed to file a 990-EZ or the full 990 form, depending on their revenue. But if you’re in a hurry or don’t want to raise alarm bells at the nonprofit, there are also free online tools to obtain the records.

The pioneer in making 990s widely available is Guidestar.org. Sign up for a free account, and Guidestar lets you search by keyword and location to find the charity of your choice. Click on a profile, and you can download recent 990 tax forms.

OK, so you found the 990 you’re looking for. Now what?

Analyzing the 990

Here are a few things I usually look at. The front page of the 990 gives you an overview of the organization:

You can find basic information, such as the main office address and phone number, the year the charity was founded and how many employees it has:

You’ll also find the overall revenue, expenses, fundraising numbers and whether the group made or lost money. Remember, nonprofit doesn’t mean no profit:

In the case of the obscure museum I was curious about, we can see that its telemarketers raised $2.2 million in 2009. Is that a lot or a little? Whenever you look at a financial document, it’s helpful to compare it to past reports to put those numbers into context. My suggestion is to look at several years of 990 filings. Plug the numbers you’re interested in into a spreadsheet, and you can now spot trends.

In my case, I was interested in how much money the museum raised, and how much money its related nonprofit entity was donating to the families of fallen state troopers. The San Antonio Express-News has a paid account with Guidestar, which let us download 990 tax filings for the previous five years. I typed the revenue totals and payments into a spreadsheet.

Across a broad time frame, it was clear that little money was trickling down to the families who needed it.

Digging deeper

The second page of the 990 has the mission statement of the organization and what it claims it accomplished — useful if you want to compare the rhetoric to reality.

Page 3 is the beginning of a lengthy questionnaire. Interesting nuggets might be buried there.

Part VI of the questionnaire asks about the management of the organization and whether it had a “significant diversion” of assets that year. If an organization checks “yes,” that usually means it was the victim of theft.

You don’t see this checked “yes” very often, but the Washington Post published an excellent series in 2013 about more than 1,000 organizations that lost millions of dollars.

Answering “yes” to questions in the questionnaire can trigger a requirement to fill out supplemental information further down in the 990. There you can find, for example, “Schedule O,” which is where the charity explains how the “significant diversion of assets” happened.

The salaries of the nonprofit’s top employees and the identities of board members often makes for interesting reading, which you’ll find in Part VII of the 990:

Some organizations fill this out in an attachment because it’s so long.

Again, be on the lookout for supplemental information toward the back of the 990 for more information about how employees and board directors are compensated.

You might find a “Schedule J” that fleshes out compensation packages for the group’s leadership. You might also find a “Schedule L,” which details “transactions with interested persons.” That probably sounds better than what it is, the “Potential Conflict of Interest” section. This is where a charity might report “excess benefit transactions” to the IRS, which means it overpaid in a transaction with someone who had ties to the organization, such as a charity executive.

Part IV of Schedule L lists business transactions with “interested persons,” such as board members. Last year, this section caught my eye when I was covering a rare, public clash between Louis Agnese Jr., the longtime president of the University of the Incarnate Word, and UIW’s board. In Schedule L, Incarnate Word reported several transactions with businesses tied to the school’s board members, including Charles Amato, the past chairman of the board:

Such transactions aren’t illegal. But Agnese’s critics said the board at UIW had always strongly supported Agnese. It was surprising when the new chairman, Charles Lutz, announced he couldn’t condone Agnese’s conduct.

You also might find “Schedule R,” which details related organizations and partnerships, and any transactions with them. This is where I learned the Texas Highway Patrol Museum was tied to other organizations, which led me to yet more 990 tax filings.

Tying it together

Remember the cover page of the 990 and its overview of revenue and expenses? Be sure to review three sections that offer greater detail on those subjects.

Part VIII is the “Statement of Revenue,” which breaks down revenue streams for an organization. You’ll find how much money comes from membership dues, fundraising events, government grants and other categories.

Part IX is the “Statement of Functional Expenses,” where you can find how much an organization spends on advertising, legal fees, travel and other expenses.

Part X is the balance sheet, where you can see the breakdown of assets and liabilities. You can check for things like how much cash the group had on hand at the beginning of the year compared to the end of the year.

This numbers might not seem very sexy. But the simple act of reading them, plugging them into a spreadsheet and comparing them over time can lead to good questions and beef up a mundane news story.

What’s in a name?

Keep in mind that some organizations call themselves “foundations,” but they might not be. A foundation usually relies on one or several wealthy benefactors, and by law, it must spend at least five percent of its investments on charitable purposes.

Foundations file a slightly different tax form called a 990-PF. One difference is that the foundation lists its grants and recipients. You can see where the money’s going and where the foundation’s priorities lie.

This came in handy when I profiled San Antonio billionaire B.J. “Red” McCombs, who has made headlines for big-ticket multi-million dollar donations that gets his names on buildings. But the 990-PF for his foundation listed a variety of gifts totaling $4.7 million, most of which were smaller donations that never made the news.

“Those gifts you never hear about,” McCombs told me. But he’s convinced the smaller donations make a difference. “If it’s to the food bank, for example, we fully believe that they can take $100 and do five times as much with it as as we could possibly do.”

Other helpful websites

The 990 is a starting point. Even Guidestar, which revolutionized public access to 990s, cautions that these tax records aren’t the best barometer of whether a charity is fulfilling its stated mission.

But the 990 can still be useful. Time after time, I’ve found gems in these seemingly dry tax filings that made me a little more informed about a charity and gave me good questions to ask.

Here are some other resources for finding 990s and checking out nonprofits any time you drive by, say, an empty museum and wonder what their deal is:

• The IRS’ exempt organizations search tool: Allows you to verify an organization’s tax exempt status, and download the agency’s entire database of nonprofit entities.
• The Foundation Center’s 990 finder: Another free online source to track down 990s. The group offers an online guide to demystifying the 990 for foundations.
• Citizen Audit: An awesome, fee-based tool that lets you conduct keyword searches across millions of nonprofit tax documents.
• Federal Audit Clearinghouse: Searchable database of nonprofit organizations that receive federal dollars and must undergo audits.
• Charity Navigator: Offers 990s for nonprofits and rates thousands of organizations.

The post How to find and analyze tax records of charities: The IRS 990 form explained appeared first on John Tedesco.

The caller probably promised that every penny of your donation stays in Bexar County. You were probably told that it all goes to a worthy cause.

Like most sales pitches, it wasn’t entirely true.

Last year the union representing Bexar County sheriff’s deputies hired a telemarketing firm called PFR Promotions to raise money for a charitable program called “Shop with a Sheriff.” Also called “Shop with a Cop” in other cities, it’s a holiday shopping spree for poor kids.

The event is real. But most of the money from donations goes to PFR Promotions, not the kids.

I started looking into Shop with a Sheriff after receiving a tip from someone who read our stories about the Texas Highway Patrol Museum, another telemarketing entity that relied on the credibility of law enforcement officers to raise money. The small San Antonio museum actually employed hundreds of telemarketers across Texas who raised millions. Yet only a fraction was spent on charity. Executives squandered donations on luxury vehicles and junkets. In December 2011, the Texas Attorney General’s Office filed a lawsuit and successfully shut down the operation.

Shop with a Sheriff is a real event that helps children. But most of the money raised — 67 percent — goes to PFR Promotions, a telemarketing firm based in Arizona. Only a third trickles down to the charitable cause.

Donors aren’t being told that vital information. In Texas, the law requires telemarketers who are raising money for law enforcement organizations to disclose their overhead before any donation is made. The law applies to companies located outside Texas. Organizations are also required to report that information to the Texas attorney general, which the union had failed to do.

Union President Juan Contreras acknowledged that he wasn’t aware of that legal requirement and pledged to take care of the problem immediately. He said the union might sever its relationship with PFR Promotions.

But in the meantime, I’d love to hear from potential donors whether PFR’s telemarketers are complying with the law.

If you’ve received a phone call, feel free to contact me and let me know if the caller is disclosing who he works for — and where your money is really going.

The post Have you been asked to donate to Shop with a Sheriff? Call me. appeared first on John Tedesco.

Sued by the Texas Attorney General and accused of squandering donations, the Texas Highway Patrol Museum in King William is a step closer to its demise.

Check out our past news coverage of the museum, which is actually a telemarketing operation that spends only a fraction of its revenue on charitable causes.

The post Facing lawsuit, board of Texas Highway Patrol Museum gives up $1.2 million in assets appeared first on John Tedesco.

The Texas attorney general’s office announced yesterday that it has sued the Texas Highway Patrol Museum, a nonprofit telemarketing organization based in San Antonio that raises millions of dollars in the name of helping state troopers.

I had always been curious about the museum, which is housed in a brick building at St. Mary’s and Alamo streets but attracts few visitors. In October, we examined the museum’s tax records and found that only a fraction of the nearly $12 million in revenue raised by the museum’s telemarketers actually went towards the charitable causes it touted. For every dollar raised, less than a penny was spent on Department of Public Safety troopers and their families.

Attorney General Greg Abbott’s lawsuit reveals new details about what, exactly, donors’ money was spent on. State investigators obtained financial information and credit card statements from the museum, and found employees had paid for cigars, liquor, vacations, meals and “exorbitant” vet bills for an “office cat.” The lawsuit describes an organization with few controls over how money was spent, and an absentee board that seldom asked questions.

In our last story, I interviewed Scott Henson at the criminal justice blog Grits for Breakfast, who had received a telemarketing call from the museum in August. Scott wasn’t happy that the caller initially claimed to be with the Texas Highway Patrol — as if the caller were really with the Department of Public Safety. “This group is about as much about helping troopers as buzzards are about helping roadkill,” Scott wrote at the time. He called yesterday’s lawsuit “way past time.”

Related: How to find and analyze tax records of charities: The IRS 990 form explained

The museum’s assets have been frozen and it’s been closed since Friday. Its lawyer, Kim Brown, called the lawsuit “heavy handed” and said the expenses were justified.

What about the cigars?

Prizes for telemarketers, he said.

Liquor?

Drinks for office parties.

The office cat?

The vet bills for the cat were unavoidable.

The lawsuit lays out more expenses for trips, meals and cars that the state describes as wasteful spending. But Brown said the museum is hardly a fly-by-night organization that defrauds people. The small museum has operated in San Antonio for years, he said, and while it has high overhead costs, it does spend money on charitable causes.

The attorney general is seeking to dissolve the nonprofit museum and its related entities. The next step is a hearing for a temporary injunction that has yet to be scheduled.

Here’s a searchable library of all primary documents we’ve obtained about the museum. If you’ve had any experiences with the museum or its telemarketers, feel free to contact us.

The post Attorney General Greg Abbott sues the Texas Highway Patrol Museum in San Antonio appeared first on John Tedesco.