Philanthropy

Tax forms not dependable as only source of NFP data:

April 10, 2006

Not-for-profit organizations' tax filings can provide a wealth of information, from big-picture data like annual revenue and expenses to nitty-gritty details, including the CEO's salary.

But drawing conclusions-or trying to compare organizations-based only on the IRS Form 990 is difficult at best.

First off, not all tax-exempt organizations are required to file tax returns. Groups with less than $25,000 in annual revenue are exempt from filing, as are all churches and many other religious institutions.

And among those that do complete the forms, how organizations respond to questions on the 990s appears to be open to interpretation. That's particularly true when it comes to compensation.

The form asks for a variety of pay-related information, chief among them:

total compensation paid to officers, directors and key employees;

total salaries and wages for other employees;

names, titles, time commitment and compensation details for all officers, directors, trustees and key employees; and

names, titles, time commitment and compensation of the top five other employees who make more than $50,000.

Seems simple, right? Maybe not.

Of the 170 tax returns reviewed by IBJ, more than a dozen appeared to have missing or inconsistent information.

Martin University's most recent return, for example, didn't provide any information about compensation for its president, the Rev. Boniface Hardin, other than a note saying the university furnishes him and Vice President Jane Schilling with residences and automobiles.

Finance Director Jim Scott offered an explanation: Both Hardin and Schilling have taken vows of poverty as members of their religious orders, and the $15,000 they each receive annually is paid to the orders.

Gleaners Food Bank likewise didn't include CEO Pamela Altmeyer's salary on its most recent return, although it has been listed in the past. She made about $78,500 last year, a Gleaners spokeswoman said.

Auditor Bob Zurface, who prepared the return for Gleaners, said the omission was an oversight.

"It's pretty easy to make a mistake on a 990," Zurface said.

The tax forms have other flaws, too, which is one of the reasons the IRS is in the process of revising them.

A number of changes were instituted for the 2005 tax year, said David Fish, a manager in the agency's Exempt Organizations Division. Among them: Not-for-profits now must disclose anything paid to former officers and provide more information about compensation that comes from related organizations.

The IRS asks for compensation data to ensure that it is appropriate, but philanthropy experts said that determination depends more on the process used to set salary than the number itself.

"All the IRS knows is the dollar amount and whatever breakdown is provided," said Marc Owens, a Washington, D.C., attorney who led the Exempt Organizations Division for 10 years. "They have no idea of the duties and responsibilities, the experience of the individual in the position or how hard they work."

And by the time 990 data is made available to the public, it is dated. Organizations have five months after the end of their fiscal years to file returns, but commonly get as many as two three-month extensions.

GuideStar, a Virginia-based not-forprofit, maintains an impressive online database of the forms, but they often aren't available until months after filing. And although organizations are required to provide copies of returns to the public upon request, their responses can be uneven.

IBJ asked dozens of not-for-profits for copies of their returns as part of its review. Most handed over copies without delay, many without charging the "reasonable" copying fees IRS regulations said they could collect.

Officials at several agencies balked, however.

George Proctor, executive director of the Indiana Masonic Home Foundation, told IBJ he was referring the request to an attorney and intended to charge $2.50 per page for copies. He provided the return a short time later without specifying a copying fee.

Other returns were provided without delay, but with missing information. One organization failed to send the even-numbered pages, citing a copying error. Several didn't send the schedules and attachments that included compensation information.

Everyone complied eventually.
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