In light of our upcoming Charity Navigator project I have been thinking about charity evaluation and transparency in connection with the 990 form. Should evaluation measures taken, like those made at sites such as Charity Navigator, be made a required part of the 990 form? While organizations do have to be accountable to donors and funders, the 990 form is currently the only national legally enforced accountability document organizations have to fill out that is readily available to the public.
Should the IRS make additional requirements to be enforced? Such as transparency, demonstrated need, outputs, outcomes etc? What about proprietary information? Museums like the Roberson and the Tioga County Historical Society do not necessarily want to share program information before it is announced to the public. What about client confidentiality as with the case in many social work organizations? Would additional 990 requirements be a burden to nonprofit organizations?
My take on this is that three principles, good accounting, planning and disclosure, are a major part of accountability. Crutchfield and McLeod Grant stated in chapter one of Forces for Good that high-impact nonprofits don’t necessarily have “perfect management.” I agree an organization can have an impact with less than perfect management, but an organization should be fairly competent in the three principles above or how can they be accountable? Making additions to the 990 and 990-EZ might be a way to make nonprofits more transparent and accountable.
Here is a good (short) article on the changes made to the 990 in recent years. Are these modifications enough?
FYI: here are the different ways a nonprofit can file and the form categories they fall into.
Form 990-N: Gross revenue < $50,000
Form 990EZ: 2010 and later tax years if gross receipts are < $200,000 total assets are < $500,000
Form 990: Gross revenue => $200,000 and total assets are >$500,000
Form 990PF: Required of all private foundations, regardless of revenue.
Andrea,
ReplyDeleteI do believe that there are numerous reasons to reconfigure the 990 form, particularly if rating organizations are going to continue to use them as a primary tool in their evaluation process. In the article I sited in my post, there was mention of a 1999 Urban Institute study of 58,000 nonprofits that found that 59% who received public donations reported zero fundraising expenses or left the fundraising line blank. The other thing that caught my attention was that telemarketing is often labeled “education and outreach.” I do not have any other response to that than “huh!” Maybe the current form is not the problem; maybe the requirements for full and honest completion should be increased and improved.
Andrea you have asked several questions, but what stands out to me is your question about the IRS enforcing additional requirements on nonprofit organizations. I do think that additional requirements would be a burden on nonprofits. It is pretty straight forward to look at financial reports or do an audit to see if organizations are being fiscally responsible, but it is much harder to look at an organization's outcome measurements and know whether or not what is being reported is really effective for the community. Even if the government started collecting this information, what would they do with it and how would they determine if the measures were in fact effective?
ReplyDeleteI think that if we start requiring organizations to report every little thing, we may actually take away from their effectiveness in implementing a program. As our reading pointed out, organizations already under report overhead costs because they are afraid of losing funding from funders or donors who would be upset if they new the true overhead expenses. In knowing this, how can we ask for more reporting that will certainly increase overhead costs further?
I think that if government starts requiring organizations to report too many things, then we do not allow organizations enough room for error which is part of the learning process and what ultimately can make a program better.
As long as reports are available to hold organizations financially accountable then I think we need to let nonprofits run their own organizations without being micromanaged. Donors and funders are not a vulnerable population so there is no reason why they cannot decide where to donate their money. At some point, funders and donors need to do their own homework and decide where they feel their money is best spent.