IRS Forms 990 as a Research Tool Mark Hager Center on Nonprofits and Philanthropy The Urban Institute

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IRS Forms 990 as a Research Tool Mark
HagerCenter on Nonprofits and PhilanthropyThe
Urban Institute
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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.

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Not all organizations file

• Delinquency. Some organizations fail to file, or
  file very late.
• Small size. No registration if lt 5,000 in gross
  receipts. Not required to file if annual gross
  receipts lt 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.

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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.

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Overhead Costs Study

• Sampling Frame NCCS Core file of circa 2000
  Form 990 filers.
• Exclusions
• - Gross receipts lt 100,000
• - Mutual benefit, pension/retirement
  funds, real estate orgs, named trusts

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Data Collection

• 5000 organizations drawn
• 3782 attempted pre-calls
• 3114 successful pre-calls
• 3069 surveys FedExd
• 1540 surveys returned after four
• months and multiple prompts
• 1540 / 3069 50.2

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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.

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Research Question

• How consistent is reporting between IRS Form 990
  and an independent survey of nonprofit financials?

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Contributions 53 inconsistency
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Government Grants 32 inconsistency
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Special Events 39 inconsistency
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Professional Fundraisers 10 inconsistency
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Joint Cost Allocations 14 inconsistency
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DV Consistency Across 5 Measures
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Functions of Respondents

• Development Staff (n196)
• - Fundraising director, other fundraising staff
• Executive Staff (n819)
• - Executive or chief operating officer,
  president, administrative staff
• Accounting Staff (n160)
• - Financial officer, accounting director,
  accounting staff, bookkeeper, tax professional

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Do we expect function to matter in consistency of
reporting?
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Bivariate relationships between function and
reporting consistency
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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.