How to Tell If a Nonprofit Employer Is Financially Stable Before You Take the Job

In July, the Los Angeles Homeless Services Authority approved a $496 million budget for fiscal year 2026-27. The year before, that number was $829 million. A 40 percent cut, voted through at a commission meeting, minutes before the agency released a homeless count showing unsheltered homelessness in the city had climbed 7.9 percent.

The people most affected by that number work at LAHSA and at the subcontracted service providers who depend on its pass-through dollars.

The warning signs were on the record well before the vote. LAHSA's own finance committee documents show state funding falling 26 percent between the 2024-25 and 2025-26 budget years, from roughly $115 million to $85 million. Funding for its time-limited rental subsidy program dropped from $240 million to $123 million over the same span. Those figures sat in public board packets months before the budget vote made headlines.

The same is true of almost every nonprofit employer in Southern California. Before you accept an offer, you can pull that organization's tax return, read its balance sheet, and see where its money comes from. It takes about twenty minutes and costs nothing. Below is exactly how.

Why bother

When you take a nonprofit job, you are making a bet on someone else's funding model. That is different from the private sector, where a company's revenue at least tracks whether customers keep buying. A nonprofit's revenue tracks whether a foundation renews, whether a county contract survives a budget cycle, whether Congress reauthorizes a program.

Right now in Los Angeles, both of those last two are live questions. HUD suspended LAHSA from federal homelessness grants in June. LAHSA sued. On August 6, Judge David O. Carter heard arguments on whether to block the suspension, with a ruling expected by August 26 and roughly $240 million in regional funding at stake. Separately, a federal judge in Rhode Island struck down HUD's 2026 grant rules on August 7, voiding the terms LA-area providers had been drafting applications under.

None of that means you should avoid homeless services work. It means you should walk in knowing which side of the balance sheet your salary sits on.

Step 1: Confirm they are actually in good standing

Start at the IRS Tax Exempt Organization Search. Type the organization's name or EIN. You are looking for two things: that they appear as a current exempt organization, and that they do not appear on the automatic revocation list.

The IRS revokes exempt status automatically after three consecutive years of not filing a required annual return. That list updates monthly. An organization on it has lost the ability to receive tax-deductible contributions, which for most charities is an extinction-level problem.

This check takes ninety seconds and rules out the worst cases.

Step 2: Pull the Form 990

Go to ProPublica's Nonprofit Explorer. It is free, it covers millions of organizations, and it holds full Form 990 documents going back roughly two decades. Search the name. You will get a summary page with several years of financials and links to the filed PDFs.

Two limits worth knowing. Very small organizations that file only the 990-N postcard will not have detailed financials there. And churches are not required to file at all, so a faith-based employer may have no return to read.

Step 3: Read four numbers

Open the most recent 990 and find these.

Total revenue. Part VIII, line 12. Write down the figure for the three most recent years available. You are looking at direction, not size. Revenue that fell two years running is the single most useful thing you will learn.

Total expenses. Part IX, line 25. Compare it to total revenue for the same year. If expenses exceed revenue, the organization ran a deficit.

Total assets and total liabilities. Part X, lines 16 and 26. Subtract liabilities from assets to get net assets.

Net assets without donor restrictions. Also in Part X. This is the money the organization can actually spend on payroll if a grant arrives late. Restricted net assets may look reassuring on paper while being legally unavailable to cover your paycheck.

A single-year deficit means very little. Nonprofits run them routinely, often because a multi-year grant landed in one fiscal year and got spent across three. Three consecutive deficits paired with shrinking unrestricted net assets is the pattern to take seriously.

You will see advice online that every nonprofit should hold three to six months of operating reserves. Treat that as a rough reference rather than a rule. The National Council of Nonprofits declines to name a target at all, pointing out that the right level depends on how predictable an organization's revenue is. A group funded by a decade-old family foundation and a group funded by annually appropriated county contracts face different risks at identical reserve levels.

Step 4: Find out who actually pays the bills

This matters more than the totals, and most job seekers skip it.

Part VIII breaks revenue into categories: contributions and grants, government grants, program service revenue, investment income. Look at the proportions.

An organization drawing 85 percent of revenue from one government contract is not automatically fragile, but its risk is concentrated in a place you can watch. County budget hearings and state appropriations are public. If you take that job, you will know when trouble is coming, which is more than most private-sector employees get.

An organization drawing 85 percent from a single foundation carries a similar concentration with far less visibility. Foundation boards do not hold public hearings before they sunset a program.

Then open Schedule A. Public charities have to show that a meaningful share of their support comes from the broad public rather than a handful of sources. The main threshold is one-third, measured over a five-year window. Organizations falling between 10 percent and one-third can still qualify through a facts-and-circumstances test, which they document in Part VI of that schedule.

If you see an organization relying on the facts-and-circumstances test, that is not misconduct. It does tell you their donor base is narrow, and that they have some ongoing IRS exposure they need to manage.

Step 5: Skim the governance sections

Part VI covers governance. Part VII lists compensation for officers, directors, key employees, and the highest-paid staff. Schedule J adds detail for higher earners. Schedule L discloses transactions with interested persons, meaning business the organization did with its own board members, executives, or their families.

Read Schedule L. Most organizations have nothing there. When something appears, read what it is. A board member's construction firm winning the renovation contract is worth a question.

While you are in Part VII, look at executive pay against total expenses. There is no correct ratio, and small organizations legitimately pay their founders a large share of a small budget. You are checking whether the numbers make sense together.

Step 6: Account for the lag

Here is the part that trips people up. Form 990 is due on the 15th day of the fifth month after the fiscal year ends, which is May 15 for calendar-year organizations. Filers can take an automatic six-month extension with Form 8868, pushing it to November 15. Then it takes months to reach public databases.

The return you are reading may describe a fiscal year that ended eighteen months ago. For LAHSA in August 2026, a 990 would not yet reflect the budget cut at all.

So supplement it:

• Audited financial statements. Many organizations post them. Ask for the most recent one during the interview process. A nonprofit that spent $750,000 or more in federal funds in a year requires a Single Audit, and ProPublica has been collecting those since 2016.
• Board minutes and agendas. Public agencies and quasi-public bodies like LAHSA publish them. This is where budget trouble surfaces first.
• Local news. Voice of OC, Voice of San Diego, LAist, and CalMatters cover nonprofit finances and government contracting more closely than national outlets.

Five questions for the final interview

Once you have read the 990, you can ask about it without sounding adversarial. Frame these as interest in the organization's plans.

1. "I saw revenue shifted between FY23 and FY24. What drove that?"
2. "How much of the current budget is committed for the next twelve months versus still being raised?"
3. "Is this position funded by a specific grant, and when does that grant cycle end?"
4. "What happened to headcount over the last two years?"
5. "If the largest funding source went away, what is the plan?"

Question three is the one to ask. Grant-funded positions are common and often good jobs. You just want to know before you sign, rather than eleven months in.

Pay attention to how people answer. A finance-literate executive director will discuss this openly, because they think about it daily. Evasion tells you something.

What this looks like for Southern California specifically

Regional funding mix shapes the risk. Homeless services, community health, workforce development, and immigrant legal services in LA, Orange, and San Diego counties lean heavily on government contracts, so they rise and fall with county budgets, state appropriations, and federal grant rules. Arts organizations, private schools, and advocacy groups depend more on foundations and individual donors, which move on different timelines for different reasons.

Neither is safer. They fail differently, and they telegraph failure differently. Government-funded work gives you public warning signs if you watch for them. Philanthropy-funded work gives you a longer runway and less notice.

The actual point

None of this is about avoiding organizations under financial pressure. Most of the nonprofits doing the hardest work in Southern California are under financial pressure right now. If you rule those out, you rule out the sector.

The point is going in with your eyes open. Knowing that your role sits on a grant expiring next September changes what you negotiate, what you build, and when you start looking again. That is a stronger position than finding out at a staff meeting.

Twenty minutes, before you sign.

Browse current openings across Los Angeles, Orange, San Diego, Riverside, San Bernardino, and Ventura counties at SoCal Nonprofit Jobs. New roles posted weekly.

Free tools referenced

• IRS Tax Exempt Organization Search: status and revocation list
• ProPublica Nonprofit Explorer: full 990s and Single Audits
• Candid / GuideStar: profiles and some financials
• NCCS at the Urban Institute: bulk nonprofit data by state and county