Subject: Chron. of Phil.: Goodbye to Foot-Dragging Accountability
From: M Petrelis <[email-masked]>
Date: Thu, 23 Apr 1998 13:16:48 EDT

Click Goodbye to Old-Fashioned, Foot-Dragging Accountability
By David Cay Johnston
The Chronicle of Philanthropy, 202-466-1200
1255 - 23rd Street, NW, Washington, DC 20037
April 23, 1998

The California Community foundation has done what no major foundation has done
before: posted its Form 990 informational returns on the Internet.

That was one small step in cyberspace for a big foundation, but a giant leap
for the rest of philanthropy--which, whether its leaders want to or not, will
soon be forced to follow the California Community Foundation's lead.

Few practices have done more to undermine the good works of charitable
organizations than the good works of charitable organizations than the active
resistance of some of America's most visible non-profits organizations to
federal and state laws requiring them to be open about their finances.  Just
as bad, if not worse, many of the most prestigious organizations do no more
than the law demands.  Anyone who doubts that should try to call the
Metropolitan Museum of Art in New York and ask to be sent a copy of its tax
form.

Receiving an exemption from taxation is a privilege, but too many charities
and 
foundations act as if it were an entitlement.  It is not.  And if Americans
are seething about taxes, as many members of Congress contend, then all non-
profit groups need to wise up and recognize that the days of playing games
about financial disclosure are about to come to an end.

Historically, individual charities pretty much controlled access to the
financial reports they submitted to the government.  The law said Forms 990
had to be made available, but how is a person supposed to get in touch with a
charity that can only be found through a post-office box--and then does not
respond to mailed inquiries?

To be sure, donors, researchers, competitors, reporters, and others could get
any 
organization's Form 990 by going to the Internal Revenue Service or to state
attorneys general.  But doing that typically involved a wait of six weeks to
six months--and in our high-tech world, to delay is to deny.

But technology, and a few determined charities, are about to overthrow the
powers of delay and denial.  The digital 990 is about to be born, and when it
is, a few clicks of a computer mouse is all it will take to obtain a charity's
tax forms.

Looking at the California Community Foundation's site
(http://www.calfund.org), it is 
possible to see what the future will look like.  The foundation, which appears
to be the first major philanthropy to post its actual 990 forms--for 1994,
1995, and 1996--has made it easy to view the data, including attached
statements that disclose such basics as how much Jack Shakely, the
foundation's president, was paid.

The California foundation posting is not the first time that 990 data have
been made 
available through the Internet.  The Foundation Center
(http://www.fdncenter.org), the AIDS Service Provider Accountability Project
in San Francisco 
(http://www.accountabilityproject.com), and the group Philanthropic Research
Inc., 
through its GuideStar project (http://www.guidestar.org), all have posted
abstracts of some 990 financial data on their Web sites.  Philanthropic
Research has posted its own 990 electronically, and the form 990 Web Site
Project (http://www.form990.org), run by Cliff Landesman of the Fund for the
City of New York, has succeeded in getting some charities to voluntarily
submit their tax-return information so it can be put on line.

Laudable as those efforts are, they are minor compared with what will become
available in the months ahead.  Several non-profits groups, including the
Urban Institute and Philanthropic Research, are working on projects that will
allow people to go to a Web page, punch in the classification for the type of
organization they are interested in, and, in moments, be provided with details
that show how organizations that perform similar services handle their money.
A few more computer commands will allow a viewer to see how a charity's total
revenue compares with its spending on programs; to compare the organization
with dozens, even hundreds, of others; and to analyze both its performance and
its stewardship of resources.

That should give donors, regulators, journalists, and others a more nuanced
view of the non-profits world than has ever been available.  It will be a boon
to state and regional associations of non-profit groups, to grant-maker's
forums, to coalitions of charities, and to many others that will be able to
easily download information into their own spreadsheets and data bases to get
a much more accurate picture of the size, efficiency, and financial
performance of non-profit groups.  And it will make evaluating non-profits
executives' salaries based on their performance much easier than ever before.

Of course, the quality of that data will depend on how honestly, carefully,
and 
thoughtfully charities prepare their information returns.  Many non-profit
groups do such a poor job of filling out the 990s--leaving out information,
making sloppy mathematical mistakes, and often deliberately distorting their
finances--that some of their tax returns are practically useless as
informational tools.

When the Internet makes the tax forms more easily available, many non-profit
groups may find themselves under new pressure to improve the quality of their
financial reporting.  Organizations that try to hide the true state of their
finances will be more quickly discovered, as journalists, watchdog groups, and
others take advantage of new computer tools to uncover inconsistencies and
distortions in 990 data.

Given the rising tide of public cynicism about charities, the availability of
better 
information has to be a plus to those who believe that only a few non-profit
groups are abusing the system.  And if the number of fraudulent charities is
indeed growing, then those who behave ethically can only benefit if the public
has ready access to the kinds of information that will make it easier to
distinguish between legitimate charities and counterfeits.

(David Cay Johnston, a reporter for The New York Times, has a long history of
covering non-profit organizations for numerous publications.  His e-mail
address is 
[email-masked].)

>end<