Recent IRS Changes Increase Transparency
Changes at the Internal Revenue Service will make financial data about the nonprofit world more broadly accessible to the public—and that’s a good thing.
According to the Chronicle of Philanthropy, the tax agency has come under pressure in recent years by open-government advocates who wanted the information available in a format that is easy to put in a spreadsheet and analyze. Until now, the IRS has released this kind of data only to a few research groups; everybody else could obtain only a set of DVDs that allowed readers to look one by one at each charity’s informational tax return, but made large-scale analysis tough to do.
The data released by the IRS doesn’t include everything on the informational returns filed by charities and foundations. Mostly it includes figures on sources of financial support, total assets and revenue, spending on overhead and programs, and compensation paid to a group’s top-paid officials. It also lacks the names and locations of the organizations, instead just offering a federal employee identification number for each group’s form.
So while the changes aren’t as user friendly as they might be, they are an improvement and will allow for wider use of information.
Nonprofits should welcome this change, take advantage of it, and encourage their donors to do the same.
As our donors become more sophisticated in analyzing how their charitable dollars are spent, the nonprofit community is under increased pressure to be not only more efficient and effective with each dollar, but more transparent as well. A well-managed organization has nothing to fear with the increased potential for scrutiny and should encourage efforts to educate and evaluate, whether by donors or peer organizations.
To encourage this drive for efficiency, The Bill & Melinda Gates Foundation is holding a competition that will offer $100,000 grants to projects that help nonprofits and donors pull together information on a wide variety of sources, such as data that would show a nonprofit program’s results, what beneficiaries and grant makers thought about the project, and what other experts say about its value.
The competition, which could finance as many as 80 projects, expects to receive at least 1,000 applications. Details about how to apply are available at www.grandchallenges.org.
Everyone in the philanthropic community grows stronger when we raise the standards of accountability by which we are all measured.
For more information on how to help your organization meet transparency standards, reach out to me directly through Jeffrey Byrne + Associates, Inc. at email@example.com.