Open-government advocates are calling on Congress to require nonprofits to file their Form 990 informational tax forms with the Internal Revenue Service electronically and asking the IRS to work with third parties to create a public database of the information contained in the forms.
While the IRS annually collects financial information from about 1.5 million tax-exempt groups through the Form 990, it is not easy to obtain aggregated public data about nonprofits collected on these forms, notes a new report by the Aspen Institute.
The report, drafted by a former top Obama official in charge of pressing for open government records, offers a road map for how government, foundations, nonprofits, and private companies can build a public database from information on Form 990 returns. Those data would promote transparency, help detect fraud, and help track and compare trends on topics such as grant allocations, fundraising costs, compensation, and employment.
Until recently, the creation of such a database seemed like science fiction to many in the nonprofit world, largely because of government bureaucracy and gaps in technology.
But a number of large foundations and nonprofit research groups like GuideStar, the Foundation Center, and the Urban Institute say they are prepared to work together to build and maintain a Form 990 database.
Such a database “could help transform not simply the way that the Form 990 is digitized and distributed but the way that information about the activities and impact of charities, foundations, and the social sector more generally flows,” says Darin McKeever, deputy director at the Bill & Melinda Gates Foundation, which provided funding for the report.
A Challenging Job
Although the Internal Revenue Service is required by law to make the Form 990 filings public, returns are released as individual files that are cumbersome and bulky to navigate.
And while research groups like GuideStar and the Foundation Center have developed large databases about nonprofits based on the Form 990, these groups charge for access, which recovers the costs of converting the IRS data into something more usable, the report says.
Those costs are high, in large part because of how the IRS collects the 990 information. Since nonprofits are not required to file the forms electronically, many groups resort to completing them manually. As a result, it is difficult to pull accurate information into a database.
Beth Noveck, the former U.S. deputy chief technology officer for open government and a co-author of the Aspen Institute report, likens proposals to create a public database of nonprofit financial information to recent efforts by the U.S. Department of Health and Human Services to make government-collected data on health trends available online.
By making such data publicly available, researchers can, for instance, map the spread of infectious diseases in real time, says Ms. Noveck.
She says these tools are helping to “deliver better wellness to the sector and also to people—and I think we can see and hope and imagine that we’re going to see something similar in the nonprofit space emerging as well.”
The free report, Information for Impact: Liberating Nonprofit Sector Data, is available for download at the Aspen Institute’s Web site.