Non-profit IRS filings: Can organizations be more transparent?

Editorial

InDetail:

View our in-depth chart exploring community organizations’ budgets, with breakdowns of expenses, revenue and other items. Click here or on the photo below to download the chart in .pdf format.


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View all stories in this year’s InFocus series

For the third year in a row, qnotes published its Community Assessment Survey taking an in-depth look at community groups’ various financial disclosures to the Internal Revenue Service and other agencies. The annual survey is an opportunity for community members to have direct access to the documents each non-profit and tax-exempt community organization must file with the IRS. Other groups, like Equality North Carolina’s political action committee, file documents with the state board of elections.

Our spreadsheet detailing each organization’s expenses, revenue and other budgetary items grew tremendously this year. After two years of the survey, we responded to various feedback received from community groups who felt their data could be more fairly represented. Part of the concern lies in how each organization compiles their year-end filings and which forms they use.

The forms

The IRS requires tax-exempt organizations to file year-end fiscal documents detailing their expenses and revenue. These forms, known as Forms 990, are available in three different versions. All organizations, including the 501(c)3, (c)4 and (c)6 groups we surveyed, are required to file the documents, keep them on file and to disclose them to members of the public upon request.

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But, some organizations are given options as to which form they can file. An explanation of the forms below:

Form 990-EZ — Organizations with gross receipts less than $200,000 and year-end total assets less than $500,000 can file a Form 990-EZ. This form is shorter and less complex than a full Form 990, comparable in some respects to the more simple personal income tax Form 1040-EZ. Like the 1040-EZ for individuals, Form 990-EZ for organizations is easier to complete and requires fewer itemized expense reports.

Form 990 — The more complex Form 990 is used by larger organizations and required for those with groups with gross receipts of $200,000 or more and total assets of $500,000 or more. Many smaller organizations, however, opt to complete the more complex Form 990, which includes a far more robust itemized accounting of expenses throughout the year.

Form 990-N — Very small organizations with gross receipts of $50,000 or less can submit Form 990-N, or the “e-Postcard). The document is simple and, though open to public inspection, lists limited information about the group, its mailing address, its principal officer, employer identification number and a general dollar amount under which the organization’s gross receipts fall. For example, each of the three organizations we surveyed who filed the Form 990-N each had gross receipts under $25,000. No other data regarding their expenses or revenue is available.

990 or 990-EZ?

This year, our annual survey looked at 13 different organizations and their affiliated groups. Of them, the majority filed the full and more complex Form 990. Only three groups — Gay Men’s Chorus of Charlotte, the LGBT Community Center of Charlotte and One Voice Chorus — filed the more simple Form 990-EZ.

The two forms itemize expenses and revenue differently and the Form 990 allows for a much more in-depth view of how an organization spends its money and how it devotes resources, painting a financial picture that is nearly impossible to see in a Form 990-EZ.

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For example, the LGBT Center of Raleigh had expenses of $92,365 and revenue of $105,530. Though they weren’t required to file Form 990, they did so anyway. In the document (see page 10), members of the public are able to inspect how much of the center’s expenses were dedicated to programming services, management and general expenses and fundraising expenses. Community members can also get a deeper look at the exact type of expenses spent on salaries, benefits, professional fees and other independent contractors, as well as money spent on office expenses, occupancy and rent and other itemized expenses.

In comparison, the LGBT Community Center of Charlotte — with expenses of $64,821 and revenue of $52,999 — filed the more simple Form 990-EZ (compare page 1 of this document with page 10 from the Raleigh center’s filing). Members of the public can view only a very simple breakdown of those expenses, often lumping together several different items under one category. This more simplistic accounting makes it more difficult for members of the public to determine just how much money might be being spent on a variety of expenses.

Aiming for transparency

At qnotes, we believe transparency and accountability are important. Indeed, they are paramount to an organization’s ability to gain and maintain trust with their donors, members, supporters, clients and other community members who either support them or depend on them. A commitment to transparency is the mark of an organization fully dedicated to community service. When we began our Community Assessment Survey three years ago, we aimed to ensure organizations remained accountable to their own stated commitment to these principles. So far, we’ve been pleased with organizations’ openness, their willingness to disclose documents at request and their voluntary participation in our annual survey.

But, some organizations can do more. Every community group should be more forthright with their expenses and revenue. Each should file the full Form 990. Each should compile a more thorough and transparent annual report and make it available to the public either on their website or in printed form, or both.

Further, every organization should be more committed to filing their required IRS documents on time. Each of the years we have engaged non-profit groups in our survey, we have had to push back our timeline and deadline for completion. Still, we remain a year behind when reviewing tax filings. By fall of 2012, the public should be able to inspect most organization’s 2011 filings. Instead, 2010 filings were the most recent reports most organizations had available.

Aiming for improvement

We know that each of the more than a dozen community groups we survey each year are different. They each have different missions and visions. They each have different clients. They each have different accounting systems. Most are all or almost completely volunteer-run. So, we depend on a partnership with these groups in order to continue improving our survey. We welcome feedback, suggestions and constructive criticism that will make next year’s survey more complete and more thorough. Such feedback enables us to work with our community groups, each doing wonderful and needed work locally or statewide, in keeping them transparent and accountable. You can send any comments to editor@goqnotes.com.

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Posted by Matt Comer

Matt Comer previously served as editor from October 2007 through August 2015 and as a staff writer afterward in 2016.

One Reply to “Non-profit IRS filings: Can organizations be more transparent?”

  1. I strongly applaud your annual Community Assessment reporting.

    However, the call for smaller groups to complete the full 990s is somewhat off the mark.

    One should consider the disproportionate cost to a smaller organization of finding or hiring the assistance to properly file the full 990s.

    That is one of the reasons the IRS doesn’t require it.

    Separately, the call for more timely filings is certainly in order — not simply for external reporting to this outlet or the community, but for an organization to be able to properly function with full self-awareness of its current situation.

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