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									        IRS Forms 990
      as a Research Tool

           Mark Hager
Center on Nonprofits and Philanthropy
         The Urban Institute
                  Form 990
• Charities with federal charitable exemption must
  file annually.
• In 1980s, states began to adopt Form 990 as their
  required form as well.
• Public document. Widespread disclosure and
  legitimacy of form has spurred filing.
• More than 200,000 public charities filed Form 990
  or Form 990EZ in 2000.
• Increasingly used by researchers to document and
  understand nonprofit organizations and sector.
        Not all organizations file
• Delinquency. Some organizations fail to file, or file very
       late.
• Small size. No registration if < $5,000 in gross receipts.
       Not required to file if annual gross receipts < $25,000.
• Religious focus. Congregations not required to file.
• Entities embedded in larger organizations, or Chapters.
• Unincorporated, or sole proprietorships. If all revenues
       are earned, organizations are not motivated to seek
       charitable exemption.
• Quasi-governmental. Community action agency or mental
       health clinic, etc., that function as govt agencies.
       Research using Form 990
• Studies of scope and dimensions of nonprofit
  sector, including local inventories.
• Subsector analyses.
• Spatial analyses.
• Benchmarking of financial variables.
• Analyses of program services and activities.
• Sampling frames for primary data collection.
        Overhead Costs Study
• Sampling Frame: NCCS Core file of circa
  2000 Form 990 filers.

• Exclusions:
     - Gross receipts < $100,000
     - Mutual benefit, pension/retirement
       funds, real estate orgs, named trusts
           Data Collection
•   5000 organizations drawn
•   3782 attempted pre-calls
•   3114 successful pre-calls
•   3069 surveys FedEx’d
•   1540 surveys returned after four
         months and multiple prompts
• 1540 / 3069 = 50.2%
   Widespread Questions about
      Financial Reporting
Factoid: Of nonprofit organizations that
  report at least $5 million in annual
  contributions, about 1 in 4 report no
  fundraising costs.
Factoid: Of nonprofit organizations that
  report at least $10 million in annual
  expenses, about 1 in 25 report no
  administrative costs.
        Research Question


How consistent is reporting between IRS
 Form 990 and an independent survey
 of nonprofit financials?
Contributions – 53% inconsistency
    Contributions      Contributions
     reported on        reported on
       990, but       both survey and
    missing/0 on            990         Survey within
        survey             74%          +/- 50% of 990
         16%                                 51%


  Zero or missing                        >50% more
  on both Survey                        contributions
      and 990         >50% more          reported on
       10%           contributions         survey
                    reported on 990         19%
                         30%
Government Grants – 32% inconsistency
                        Contributions
   Contributions         reported on
    reported on                             Survey within
                       both survey and
      990, but                              +/- 50% of 990
                             990
   missing/0 on                                  49%
                            43%
       survey
        10%
                                                    >50% more
     Zero or missing                               contributions
                            >50% more
     on both Survey                                 reported on
                           contributions
         and 990                                      survey
                          reported on 990
          47%                                          35%
                               16%
Special Events – 39% inconsistency
                           Expenses
     Expenses                               >50% more
                          reported on
    reported on                              expenses
                          both survey
      990, but                              reported on
                            and 990
    missing/0 on                              survey
                             35%
       survey                                  63%
        11%
                                        >50% more
  Zero or missing                        expenses
  on both Survey                        reported on
                    Survey within
     and 990                                990
                    +/- 50% of 990
       54%                                 17%
                         20%
         Professional Fundraisers –
            10% inconsistency
                                      Survey
                                     Did not        Contracted
                         Did not   Contract with       with
                                                                  Total
                         Report    Professional    Professional
                                    Fundraiser      Fundraiser

       Did not Report      --         1%            < 1%          1%
      Did not Report
Form
 990
       Professional
     Fundraising Fees
                         1%          87%              6%          94%
         Reported
        Professional
      Fundraising Fees
                         < 1%         4%              1%          5%
           Total         1%          92%              7%          100%
            Joint Cost Allocations –
               14% inconsistency
                                        Survey


                          Did not   No Joint Costs Allocate Joint
                                                                    Total
                          Report     to Allocate       Costs


       Did not Report     < 1%          1%           < 1%           1%
Form   Did not Allocate
 990     Joint Costs      8%           76%            14%           98%
       Allocated Joint
           Costs          < 1%        < 1%             1%           1.0%
            Total         8%           77%            15%           100%
DV: Consistency Across 5 Measures

5 of 5                19%
4 of 5                       34%
3 of 5                      32%
2 of 5          12%
1 of 5     3%
0 of 5   <1%
      Functions of Respondents
• Development Staff (n=196):
   - Fundraising director, other fundraising staff
• Executive Staff (n=819):
  - Executive or chief operating officer, president,
       administrative staff
• Accounting Staff (n=160):
    - Financial officer, accounting director,
       accounting staff, bookkeeper, tax professional
   Do we expect function to matter
    in consistency of reporting?
                      m1   m2   m3
Development Staffer

Executive Staffer

Accounting Staffer
    Bivariate relationships between
  function and reporting consistency
                      m1   m2    m3
Development Staffer   -*
Executive Staffer          ns
Accounting Staffer              +*
              Conclusions
• Form 990 is a valuable source of data on
  nonprofit organizations.
• Poor reporting on key financials is a big
  challenge to that value.
• Inaccurate reporting has implications for
  management of individual organizations,
  public policy research, and giving decisions.

								
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