IRS avoids shedding full light on charities
The Internal Revenue Service just blew a beautiful chance to give donors the most relevant, accessible financial information about charities.
Scandals at United Way, the Nature Conservancy, the Red Cross and other nonprofits helped prompt the agency to revamp Form 990, on which charities report activities to the public. But the unveiling of the new form on Thursday shows that the IRS caved in to pressure from nonprofits to keep disclosure as full as it should be.
A draft form proposed earlier this year included statistics on a summary page giving a clearer idea about how much donations pay for executive salaries and other non-charity items. But the IRS scrapped requirements to disclose the number of employees making more than $100,000; fundraising expense as a portion of contributions; total expenses as a percentage of assets and executive compensation as a portion of total compensation.
Charities dismissed the IRS proposal to list easily accessible fundraising expenses as "value laden." You bet it's value laden. If 90 cents out of every donated dollar goes to pay some for-profit fund raiser, that's valuable information for givers.
Although the new form will require disclosure of first-class air travel and club dues for executives, the IRS rejected proposals to list all executive expense reimbursements and allowances. The agency will require better disclosure of loans, business deals and other transactions with insiders, but even this could have been improved.
The new requirements stop far short of information available on publicly traded, for-profit organizations. Donors are investing in charities no less than shareholders are investing in Merck and Exxon. The information they receive should be at least as comprehensive.
Comments
Jay - Great article. People need to understand these ratios and know where there money is going. I sit on a board of a national non-profit out of Rockville and know what sacrifices the staff, including the Exective Director, take to kepe the admin and fundraising costs low. They have a clear understanding of the fact that if those costs are low, there is more going to the programs which is why anybody should be working for a charitable cause.
People donate to their work sponsored charities too easily. You have to do the research and there are a lot of great sites out there that readily offer up all the information you need to make an informed decision on your charities.
Posted by: TS | December 21, 2007 10:22 AM