IRS fails to require listing of key data for charities

December 23, 2007|By JAY HANCOCK

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 from being 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 fundraiser, 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.

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