What data and information should you look for and review? Start with assets, compensation for key employees, financial aid awards and repairs/new construction. These basic categories will give you a pretty good idea of what a school takes in and where it spends its money. The numbers don't lie. In other words if the school's website claims the school awarded $5 million a year in financial aid, you will see a corresponding entry on the Form 990 confirming that statement.
Be aware of two things as you review the data and information contained in a private school Form 990:
1. The Form 990 is a tax return. As a result, it will always be a year or two behind. For example, in 2010 you can expect to see 2008 returns with 2009 data and information just starting to trickle in as those more current returns are filed.
2. The Form 990 is a typical IRS document with all sorts of confusing tables and schedules. Don't let that intimidate you. The data and information is in PDF format so that you can scroll through all the pages and search for the data you want to review fairly easily.
Reviewing a private school's Form 990 will give you peace of mind. Seeing proof to back statements being made about the school by its staff and even your educational consultant is reassuring. After all, you are making a huge investment in your child's education. Do your homework in the same way you research any major purchase or decision. Get the facts. Evaluate them. Then make your decision.
Let's look at the key categories mentioned above: assets, key employee compensation, financial aid awards and repairs/new construction.
Assets include everything the school owns. You will see some impressive numbers for tangible things like buildings, equipment and so on. You will also see the value of the school's investments or endowment as of the return date. For example, The Lawrenceville School's 2008 return shows assets of $410 million.
Key Employee compensation
The IRS requires nonprofits to report compensation for employees and trustees making more than $50,000 annually. This information is contained in Part V-A of the return. Using Lawrenceville's return (page 23) you will see that its headmaster had a cash salary of $275,000 in 2008.
Private schools use financial aid to attract and retain qualified students. Lawrenceville awarded over $7 million in financial aid according to page 24 of its 2008 990.
Repairs and New Construction
One of the things private schools are doing in the 21st century is to make their plant and equipment sustainable. So you will see some significant amounts of money being spent in that expense category which is reported in Part II of the 990. Lawrenceville, for example, spent over $6 million in 2008 on construction and repairs as reported on page 10 of its return.
As you can see, private school financial data and information is available for public inspection, to use the IRS' coy phrase. Reviewing the IRS Form 990 will give you answers to any questions you have about a particular private school's operations.
More About Nonprofits