The Taxman Cometh
There's no question in our minds that more transparency is called for where the work of non-profits is concerned. Afterall, non-profits are just as likely as for-profit organizations to get fouled up by questionable financial practices.
That said, it's highly questionable whether the Internal Revenue Service should be playing the role of expert where the effectiveness of non-profits is concerned. But, that's exactly what's happening as the IRS, for the first time in 25 years, prepares to overhaul Form 990, the annual information return filed by most non-profits in the U.S.
The IRS claims the changes are meant to “increase transparency” and make it easier for the IRS to “facilitate compliance oversight.” For an overview of the IRS' redesigned form with its 15 schedules, instructions and the IRS' own commentary on the reasons for all this, just click here.
From a fundraising standpoint the proposed changes fall into two groups: 1) issues of presentation that can affect how potential donors look at an organization when veiwing Form 990 and, 2) burdens on an organization that may be imposed as a result of new fundraising reporting requirements.
ADRFCO (Association of Dircect Response Fundraising Counsel) is kicking up a dust storm over this in coalition with the Association of Fundraising Professionsals (AFP), the Council on Advancement and Support of Education (CASE). and the Direct Marketing Association's Nonprofit Federation . ADRFCO vows to fight the IRS on the so-called “metrics” the tax service is proposing.
Some of the 'metrics' which ADRFCO terms “contrived” go a proposed laundry list of changes, including an accounting for every outside vendor that contributes products or services to any sort of fundraising, a computed 'fundraising ratio', and placing the name and salary of the highest paid employee of the non-profit on the first page of the proposed Form 990.
Well, frankly, it's about time our trade pays attention to developing or refining meaningul metrics. However, those metrics should go well beyond measuring fundraising efficiences to –far more importantly –the effectiveness of an organization's actual delivery on its goals and programs, thus giving donors a real measure of insight and comparison.
BUT…this is NOT the job of the Internal Revenue Service. For the government to impose meaningless, out-of-context ratios via a tax form as though these were the “best measure” of non-profit performance is asinine and counterproductive.
HOWEVER…all of us should be alert to the reality that even this well-intentioned and mis-guided attempt at squeezing performance data out of non-profits should be taken as ONE MORE WARNING that donors–and their government and other watchdog protectors –crave more information about whether gifts are well-used and getting the job done.
Roger & Tom
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