Originally published on Inside Philanthropy on June 22, 2015.
One rabble rouser has been trying to get the IRS to make individual nonprofit tax forms available in an electronic format anyone can easily search. What may seem to a casual observer like a minor battle would actually be revolutionary for the entire sector.
Quick disclosure: I hate 990s. Not the concept of them, of course, as they are the chief method of accountability that nonprofits entities must file annually in exchange for tax exemption. But I hate just about everything else about them.
Covering philanthropy and working with nonprofits, I’ve spent so many hours popping open PDF after PDF—old, grainy scans of these tax forms—squinting and Control-F-ing my way through past giving, foundation by foundation, year by year. So when I read about efforts to improve the accessibility of these forms, my heart races, and yours should too.
I’d go so far as to say getting 990s to a universal state, easily searchable by computer, is central to the future success of philanthropy and nonprofits—and the shifting relationship between government and private wealth. Stay with me.
Briefly, in case you’re unfamiliar, 990s in various forms hold annual financial, leadership, and major staffing information on organizations (with some exceptions) that take the nonprofit tax exemption. If any such organization doesn’t make this information available on its website or in annual reports, the 990 is the only way to scrutinize its activity.
But the state of 990s as released by the IRS is pitiful. Only certain types of nonprofits have to file this information electronically, and even then, the IRS redacts confidential information and converts the documents to unsearchable image files. Non-electronic forms are similarly scanned in as images. There are independent agencies like Guidestar and the Foundation Center (whom I salute) that either store these image files or catalog some of their data by hand, and then usually charge a fee to access their databases. That’s as good as it gets.
But a guy named Carl Malamud has been railing against the IRS to fix this. And he’s making some headway. There’s been recent movement toward requiring electronic filing of all 990s, as well as making them available in machine-readable format, so anyone can search all nonprofit data.
This is so much more than some geeky open data activist fighting on principle. And it’s more than about how much I hate reading PDFs. Fixing 990 accessibility affects organizations ranging from soup kitchens to massive foundations, and it would be good for all involved. Here’s why it’s so important:
It will make nonprofits and foundations way more effective
We’re always writing about how much foundations love big data projects. You know why? Big data is pretty awesome. So why wouldn’t civil society want its own data to be put to use? Digitally searchable 990s for the country’s nonprofit organizations would mean the sector’s data would be compiled and catalogued such that the smartest people behind a keyboard could weaponize it.
There are many foundations investing a lot of time and money into analyzing their own data on the effectiveness of their grants and grantees. But it’s sort of like the blind men and the elephant. We could be looking at the whole elephant—more than 1.4 million nonprofits reporting nearly $5 trillion in assets, playing an ever-expanding role in art, science, education, health care, conservation, urban planning, etc. As open data advocates point out, you could look at geographic trends, map giving and nonprofit activity against economic and government data, and generally analyze all grantmaking and charitable activity in an empirical way.
Look at the revolution in recent years in open local government, with third parties like the Sunlight Foundation and government agencies alike learning the power of setting their information free. It engages the public, saves money, invites innovation. It cracks open a gold mine of possibilities.
More than ever, there are organizations like the Foundation Center and the Center for Effective Philanthropy doing this kind of analysis with more than a little grunt labor, but right now, the number of eyes and brains working at it is severely limited without investing serious resources.
It will build trust in philanthropy and charities
Unfortunately, the nonprofit sector is in limbo when it comes to transparency. Organizations are not exactly operating out in the open, but the tax forms make for pretty easy pickings for someone who wants to do some digging. As a result, you see the admirable, semi-annual investigation by ProPublica about how certain charities are scams or mismanaging funds. Anyone who has done any fundraising will tell you the widespread skepticism that “my money is going to good use.”
Meanwhile, there’s tremendous cynicism about philanthropy, with mainstream coverage dealing mostly in mind-boggling zeros or, again, periodic scandal. As wealth accumulates in this country, distrust of philanthropy is only likely to grow.
But people working in foundations and NGOs know that such black eyes represent just a sliver of a massive industry devoted to overwhelmingly altruistic goals. Currently, taking any sort of comprehensive look is a giant pain in the ass.
Put it all out there. Just ask any membership-based charity how sharing builds a relationship. And again, local governments across the country are putting their finances online for the public to easily peruse as a way to build trust and engagement.
It’s about power, not busting corrupt charities
Yes, there are legitimate concerns about irresponsible charities and mismanagement of funds. And political activity is getting harder to separate from charitable giving. But to me, the importance of accessible nonprofit records isn’t about watchdogging for scams, or picking a thrifty charity.
It’s about scrutinizing a pool of tremendous influence that is playing an increasing role in the country’s vital functions. Charitable organizations and foundations tend to bristle at talk of increased accountability, because, after all, they are fighting the good fight. Why not worry more about powerful corporations and governments?
Like it or not, as the government’s role shrinks, philanthropy’s role in formerly public services grows. Last year, charitable giving in the U.S. hit $358 billion. Large foundations are steering the entire national conversation on important subjects like education reform.
As the sector picks up the slack in so many aspects of our culture, we need to watch it, almost as if it were an auxiliary government. Reading scanned PDFs, often only available a year or two after grants are made, is a laughable way to do so.
The absolute best charities and foundations are all about this sort of transparency and analysis. The drive for comprehensive digital access to the entire sector’s activity ought to be a cause for everyone in the sector, not one dogged activist.