VI. CONCLUSIONS This report has discussed the state of nonprofit financial reporting and provided advice on how to analyze a nonprofit’s financial performance using currently available information. In this section, we present some expected enhancements in financial reporting and outline a plan for making additional improvements. A. Anticipated Improvements Stakeholders interested in a single nonprofit tax filing are presently able to go the Guidestar website and download a scanned version of the document. The National Center for Charitable Statistics is completing a “digitized” version of these filings. The digitized information is expected to be available in late 2001 and will allow users to analyze almost all of the Form 990 datafields for almost all recent filers of the Form 990 and 990EZ. Recently, the National Association of State Charity Officials (NASCO) has worked together to develop a unified registration statement. In the eleven participating states, a nonprofit will be able to complete a single annual filing that will be accepted in a number of states. The NCCS is working with NASCO and others to develop software that will allow nonprofits to file the unified registration statement electronically. Potentially, this software may accommodate more complex financial reporting, such as audited financial statements. A third project underway at NCCS will produce information that will classify not only the nonprofit by its industry code but also classify its programs. This project relies heavily on the information reported in Part III of the Form 990. Currently, this section is often left empty or is not accurately completed by the nonprofit filing the return. B. A Plan for An Improved Performance Assessment Page 58 58 In conclusion, we present six policy proposals for performance assessment starting with modest improvements that can be made quickly and building to more ambitious options for overhauling the system. We would recommend a graduated approach to making changes in the nonprofit accountability system, as stakeholders become more active and engaged in using data on nonprofit financial performance. First, the Internal Revenue Service should revise the 990 forms to conform to generally accepted accounting principles (GAAP) and encourage dissemination of audited financial statements. By following GAAP, the users will obtain information on the consolidated entity (rather than just a single legal entity), a cash flow statement, and more detailed data on restricted funds and other operations of the firm. This expanded disclosure will improve the understanding of individual organizations, enhance the allocation of resources within the community, and better achieve nonprofit accountability. Just as only nonprofits with a minimum of $25,000 in revenues are required to file a 990 form, a reasonable cut-off could be established for the preparation of audited financial statements. The threshold in many states is $125,000 in annual revenues. Right now there is considerable uncertainty in the accuracy of the information reported in the 990 forms. Stakeholders need assurance that the financial data, particularly as it relates to executive compensation, administrative overhead, and other non-program expenditures are reported consistently and accurately. Moving to a system that requires GAAP accounting and the use of audited financial statements would be a first step in improving reliability and relevance. Second, information technology now makes it possible for this information to be shared much sooner and more broadly. There is no compelling reason that tax filings (and audited financial statements) could not be filed electronically by nonprofit organizations and quickly posted on the web. Timely and publicly accessible filings will reduce search costs for donors and Page 59 59 is a first step in reducing the information asymmetries between small and large funders. Public- private partnership could develop downloadable software for creating and submitting the tax filings as well as the infrastructure for receiving and posting these filings. As mentioned, some early initiatives are underway. Third, education and public information could improve stakeholders' understanding of the importance of financial reporting to sensible performance assessments. A public information campaign could raise awareness of differences in nonprofit operating practices and impress on donors, clients and communities the importance of being informed about nonprofit organizations they support directly or indirectly. Even though private support is often provided without restrictions, public information and awareness could only improve the allocation of resources to the nonprofit community and encourage better nonprofit management. We therefore believe that a broad initiative aimed at activating stakeholders would be critical to any successful reengineering of nonprofit accountability. Fourth, more relevant disclosures should be provided to stakeholders. In particular, management discussion and analysis (MD&A) and indicators of program activity could be included in the financial reports (Herzlinger 1996 and 1997). Financial measures may effectively capture the key risk and return measures of for-profit organizations. However, the value added of nonprofits is not measured by the dollars spent on program services, but rather in the reach of its programs. While measuring impact and effectiveness remains difficult, there are proxy measures of program activity that can still be collected and disseminated. Encouraging more extensive disclosure of program rationale, inputs (e.g. number of employees and volunteers), and outputs (e.g. number of clients served and hours of service delivered) would be a useful first step. Page 60 60 Our fifth recommendation recognizes that providing more extensive and reliable information more quickly may be insufficient. The amount of financial reporting by publicly traded firms and extensive SEC enforcement activities demonstrate an important point: Even the best financial reporting system alone cannot prevent fraud and fraudulent reporting. Whenever substantial amounts of money are involved, abuses are likely to occur. The nonprofit sector now constitutes 12 percent of the US economy and 10 percent of the workforce and continues to grow. For this reason, greater coordination the nonprofit financial reporting system is necessary and may require a new organization, whose primary focus is non-profit organizations. A range of organizational structures and powers are possible. This body could be an independent, self- regulating organization, like the FASB, New York Stock Exchange, or NASDAQ. It could be a quasi-independent government agency, like the Federal Reserve System. Alternatively, it could be an intergovernmental agency, such as the Federal Financial Institutions Examination Council that oversees regulatory filings and examinations of financial institutions. Finally, it could be a federal agency, such as the SEC that could either work cooperatively with the IRS or subsume the responsibilities of the Exempt Organizations Division. The ability to sanction or fine an organization for late, erroneous, or fraudulent reporting would be an important power for this agency. Once established, the new agency could be funded in one or more ways: The system could be funded with annual filing fees that are based on a sliding scale. This scale could range from $50 to 250 per year, and perhaps an initial application fee of $100. With 600,000 nonprofit filers with an average filing fee of $100, such a system would generate $60-65 million to launch a top quality information dissemination system. Alternatively, the system could be funded by a range of parties, including government agencies, foundations, corporations, and federated funders, Page 61 61 which use this data in their decision-making and evaluation of nonprofits regularly. While this approach would remove the costs from the nonprofit agencies, it would be difficult to support and sustain in the long run given the changing priorities of many funders. Another option would be to create an endowment to support this initiative, which could be funded by a combination of fees from the nonprofits and contributions from funders. A final option would be to attempt to finance the system by charging users who access the data a fee. This is the least workable of the options given the scale of the initiative and the fact that demand for the data must be stimulated and cultivated. Sixth, we suggest that an independent commission be created to study the nonprofit reporting system and make recommendations for the new agency and its funding. While we are not recommending a specific organizational structure or duties for the new agency, the process by which this organization is formed is important. The present financial reporting system does not provide the reliable and relevant information that the stakeholders should demand, and nonprofit organizations are not held accountable for providing this type of information. These commissions have been successfully in the business setting. The Wheat Commission led to the redesign of the standard setting process and the creation of FASB. More recently, the Jenkins Committee re-evaluated the business-reporting model, leading to a greater emphasis on reporting of non-financial outcomes by businesses. The goal of the commission would be to develop a blueprint for an effectively operating nonprofit reporting system and new agency based on input from the stakeholder, regulator and nonprofit communities. The commission would design an implementation plan complete with recommended funding proposals. It would then work to develop a consensus behind its recommended plan and achieve implementation. Page 62 62 In constructing any new system for improving performance assessment, it will be critical to have nonprofit organizations actively involved in all aspects of the system’s design. The experience of the credit unions is instructive in this regard. Their oversight system is popular among participants precisely because there is ample opportunity for input and control. Any new nonprofit accountability system must therefore be supported by the nonprofits themselves. This will entail convincing the sector that better information and more informed donors will strengthen support for nonprofits and generate greater levels of support in the long run. By working simultaneously to improve the supply of nonprofit financial information and to stimulate demand for this information, a new nonprofit reporting agency – conveying data based on audited financial statements – could lay a strong foundation for the sector’s continued growth. Improving the sector’s accountability system will go along way toward building the trust that nonprofits need to thrive in the growing space left open between the state and the market. Page 63 63 References: Abramson, A. J. 1995. Sources of Data on Nonprofit Finance. 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Wilson, G. P. 1995. An Integrated Framework for the Presentation of Accounting Knowledge. Working Paper, Sloan School of Management, MIT. Wolf, T. Managing a Nonprofit Organization, New York: Prentice Hall (1990). Page 69 Part I OMB No. 1545-0047 Return of Organization Exempt From Income Tax 990 Form Under section 501(c) of the Internal Revenue Code (except black lung benefit trust or private foundation), section 527, or section 4947(a)(1) nonexempt charitable trust Department of the Treasury Internal Revenue Service The organization may have to use a copy of this return to satisfy state reporting requirements. For the 2000 calendar year, or tax year period beginning , 2000, and ending , 20 D Employer identification number Name of organization Please use IRS label or print or type. See Specific Instruc- tions. E Telephone number Number and street (or P.O. box if mail is not delivered to street address) City or town, state or country, and ZIP code Check here if the organization’s gross receipts are normally not more than $25,000. The organization need not file a return with the IRS; but if the organization received a Form 990 Package in the mail, it should file a return without financial data. Some states require a complete return. Revenue, Expenses, and Changes in Net Assets or Fund Balances (See Specific Instructions on page 16.) Contributions, gifts, grants, and similar amounts received: 1 1a Direct public support a 1b Indirect public support b 1c Government contributions (grants) c 1d Total (add lines 1a through 1c) (cash $ noncash $ ) d 2 Program service revenue including government fees and contracts (from Part VII, line 93) 2 3 Membership dues and assessments 3 4 Interest on savings and temporary cash investments 4 5 Dividends and interest from securities 5 6a Gross rents 6a 6b Less: rental expenses b 6c Net rental income or (loss) (subtract line 6b from line 6a) c 7 Other investment income (describe ) 7 (B) Other (A) Securities Gross amount from sales of assets other than inventory 8a 8a Revenue 8b Less: cost or other basis and sales expenses b 8c Gain or (loss) (attach schedule) c 8d Net gain or (loss) (combine line 8c, columns (A) and (B)) d Special events and activities (attach schedule) 9 Gross revenue (not including $ of contributions reported on line 1a) a 9a 9b Less: direct expenses other than fundraising expenses b 9c Net income or (loss) from special events (subtract line 9b from line 9a) c 10a Gross sales of inventory, less returns and allowances 10a 10b Less: cost of goods sold b 10c Gross profit or (loss) from sales of inventory (attach schedule) (subtract line 10b from line 10a) c 11 Other revenue (from Part VII, line 103) 11 12 Total revenue (add lines 1d, 2, 3, 4, 5, 6c, 7, 8d, 9c, 10c, and 11) 12 13 13 Program services (from line 44, column (B)) 14 Management and general (from line 44, column (C)) 14 15 Fundraising (from line 44, column (D)) 15 16 Payments to affiliates (attach schedule) 16 Expenses 17 Total expenses (add lines 16 and 44, column (A)) 17 18 Excess or (deficit) for the year (subtract line 17 from line 12) 18 19 Net assets or fund balances at beginning of year (from line 73, column (A)) 19 Net Assets 20 20 Other changes in net assets or fund balances (attach explanation) 21 21 Net assets or fund balances at end of year (combine lines 18, 19, and 20) Form 990 (2000) For Paperwork Reduction Act Notice, see page 1 of the separate instructions. Cat. No. 11282Y A C Room/suite Check if application pending F K B Check if applicable: Final return Amended return Change of address 2000 Organization type (check only one) Accounting method: J G Enter 4-digit group exemption no. (GEN) I 501(c) ( ) 527 or 4947(a)(1) Cash Accrual Other (specify) H(a) Yes No Is this a group return for affiliates? If “Yes,” enter number of affiliates Is this a separate return filed by an organization covered by a group ruling? H(b) H(d) (insert no.) Yes No Initial return Change of name Are all affiliates included? (If “No,” attach a list. See inst.) H(c) Yes No Note: H and I are not applicable to section 527 orgs. ? Section 501(c)(3) organizations and 4947(a)(1) nonexempt charitable trusts must attach a completed Schedule A (Form 990 or 900-EZ). Open to Public Inspection Check this box if the organization is not required to attach Schedule B (Form 990 or 990-EZ) L ( ) Page 70 Page 2 Form 990 (2000) Statement of Functional Expenses All organizations must complete column (A). Columns (B), (C), and (D) are required for section 501(c)(3) and (4) organizations and section 4947(a)(1) nonexempt charitable trusts but optional for others. (See Specific Instructions on page 20.) Do not include amounts reported on line 6b, 8b, 9b, 10b, or 16 of Part I. (C) Management and general (B) Program services (D) Fundraising (A) Total Grants and allocations (attach schedule) 22 23 Specific assistance to individuals (attach schedule) Benefits paid to or for members (attach schedule) 24 Compensation of officers, directors, etc. 25 Other salaries and wages 26 Pension plan contributions 27 Other employee benefits 28 Payroll taxes 29 Professional fundraising fees 30 Accounting fees 31 Legal fees 32 Supplies 33 Telephone 34 Postage and shipping 35 Occupancy 36 Equipment rental and maintenance 37 Printing and publications 38 Travel 39 Conferences, conventions, and meetings 40 Interest 41 Depreciation, depletion, etc. (attach schedule) 42 Other expenses (itemize): a 43 b c d e Total functional expenses (add lines 22 through 43). Organizations completing columns (B)-(D), carry these totals to lines 13—15 44 Statement of Program Service Accomplishments (See Specific Instructions on page 23.) Program Service Expenses What is the organization’s primary exempt purpose? (Grants and allocations $ ) Other program services (attach schedule) Total of Program Service Expenses (should equal line 44, column (B), Program services) (Required for 501(c)(3) and (4) orgs., and 4947(a)(1) trusts; but optional for others.) Part III Part II If “Yes,” enter (i) the aggregate amount of these joint costs $ ; (ii) the amount allocated to Program services $ ; Yes No 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43a 44 43b 43c 43d 43e Reporting of Joint Costs. Did you report in column (B) (Program services) any joint costs from a combined educational campaign and fundraising solicitation? (cash $ noncash $ ) All organizations must describe their exempt purpose achievements in a clear and concise manner. State the number of clients served, publications issued, etc. Discuss achievements that are not measurable. (Section 501(c)(3) and (4) organizations and 4947(a)(1) nonexempt charitable trusts must also enter the amount of grants and allocations to others.) (iii) the amount allocated to Management and general $ ; and (iv) the amount allocated to Fundraising $ a b c d e f (Grants and allocations $ ) (Grants and allocations $ ) (Grants and allocations $ ) (Grants and allocations $ ) Form 990 (2000) Page 71 Form 990 (2000) Page 3 Balance Sheets (See Specific Instructions on page 23.) (B) End of year (A) Beginning of year Note: Where required, attached schedules and amounts within the description column should be for end-of-year amounts only. Assets 45 Cash—non-interest-bearing 45 46 46 Savings and temporary cash investments 47a Accounts receivable 47a 47c 47b Less: allowance for doubtful accounts b 48a Pledges receivable 48a 48b 48c Less: allowance for doubtful accounts b 49 Grants receivable 49 50 Receivables from officers, directors, trustees, and key employees (attach schedule) 50 51a 51a Other notes and loans receivable (attach schedule) 51b 51c b Less: allowance for doubtful accounts 52 52 Inventories for sale or use 53 53 Prepaid expenses and deferred charges 54 54 Investments—securities (attach schedule) Investments—land, buildings, and equipment: basis 55a 55a Less: accumulated depreciation (attach schedule) b 55b 55c 56 Investments—other (attach schedule) 56 57a Land, buildings, and equipment: basis 57a 57c 57b Less: accumulated depreciation (attach schedule) b 58 Other assets (describe ) 58 Total assets (add lines 45 through 58) (must equal line 74) 59 59 Liabilities 60 Accounts payable and accrued expenses 60 61 Grants payable 61 62 Deferred revenue 62 63 Loans from officers, directors, trustees, and key employees (attach schedule) 63 64a Tax-exempt bond liabilities (attach schedule) 64a 65 Other liabilities (describe ) 65 Total liabilities (add lines 60 through 65) 66 66 Part IV 64b Mortgages and other notes payable (attach schedule) b Net Assets or Fund Balances Organizations that do not follow SFAS 117, check here 67 67 Unrestricted 68 68 Temporarily restricted 69 69 Permanently restricted 70 70 Capital stock, trust principal, or current funds 71 71 Paid-in or capital surplus, or land, building, and equipment fund 72 72 Retained earnings, endowment, accumulated income, or other funds 73 73 Total net assets or fund balances (add lines 67 through 69 OR lines 70 through 72; column (A) must equal line 19 and column (B) must equal line 21) 74 74 Total liabilities and net assets / fund balances (add lines 66 and 73) and Organizations that follow SFAS 117, check here and complete lines 67 through 69 and lines 73 and 74. complete lines 70 through 74. Form 990 is available for public inspection and, for some people, serves as the primary or sole source of information about a particular organization. How the public perceives an organization in such cases may be determined by the information presented on its return. Therefore, please make sure the return is complete and accurate and fully describes, in Part III, the organization’s programs and accomplishments. Cost FMV Page 72 Form 990 (2000) Page 4 List of Officers, Directors, Trustees, and Key Employees (List each one even if not compensated; see Specific Instructions on page 25.) (B) Title and average hours per week devoted to position (C) Compensation (If not paid, enter -0-.) (D) Contributions to employee benefit plans & deferred compensation (E) Expense account and other allowances (A) Name and address No Yes Part V Did any officer, director, trustee, or key employee receive aggregate compensation of more than $100,000 from your organization and all related organizations, of which more than $10,000 was provided by the related organizations? If “Yes,” attach schedule—see Specific Instructions on page 26. Reconciliation of Revenue per Audited Financial Statements with Revenue per Return (See Specific Instructions, page 25.) a b c d e (1) (2) (3) Reconciliation of Expenses per Audited Financial Statements with Expenses per Return (4) (1) (2) a b c d e (1) (2) (3) (4) (1) (2) Part IV-B Part IV-A 75 Total revenue, gains, and other support per audited financial statements Amounts included on line a but not on line 12, Form 990: Net unrealized gains on investments Donated services and use of facilities Recoveries of prior year grants Other (specify): Add amounts on lines (1) through (4) Line a minus line b Amounts included on line 12, Form 990 but not on line a: Investment expenses not included on line 6b, Form 990 Other (specify): Add amounts on lines (1) and (2) Total revenue per line 12, Form 990 (line c plus line d) a b c d e $ $ $ $ $ $ Total expenses and losses per audited financial statements Amounts included on line a but not on line 17, Form 990: Donated services and use of facilities Prior year adjustments reported on line 20, Form 990 Losses reported on line 20, Form 990 Other (specify): Add amounts on lines (1) through (4) Line a minus line b Amounts included on line 17, Form 990 but not on line a: Investment expenses not included on line 6b, Form 990 Other (specify): Add amounts on lines (1) and (2) Total expenses per line 17, Form 990 (line c plus line d) $ $ $ $ $ $ a b c d e Form 990 (2000) Page 73 Form 990 (2000) Page 5 Other Information (See Specific Instructions on page 26.) 76 Did the organization engage in any activity not previously reported to the IRS? If “Yes,” attach a detailed description of each activity 76 77 77 Were any changes made in the organizing or governing documents but not reported to the IRS? If “Yes,” attach a conformed copy of the changes. 78a 78a Did the organization have unrelated business gross income of $1,000 or more during the year covered by this return? 78b If “Yes,” has it filed a tax return on Form 990-T for this year? b At any time during the year, did the organization own a 50% or greater interest in a taxable corporation or partnership, or an entity disregarded as separate from the organization under Regulations sections 301.7701-2 and 301.7701-3? If “Yes,” complete Part IX 79 79 Was there a liquidation, dissolution, termination, or substantial contraction during the year? If “Yes,” attach a statement Is the organization related (other than by association with a statewide or nationwide organization) through common membership, governing bodies, trustees, officers, etc., to any other exempt or nonexempt organization? 80a 80a If “Yes,” enter the name of the organization and check whether it is exempt OR nonexempt. b 81a 81a Enter the amount of political expenditures, direct or indirect, as described in the instructions for line 81 81b Did the organization file Form 1120-POL for this year? b Did the organization receive donated services or the use of materials, equipment, or facilities at no charge or at substantially less than fair rental value? 82a 82a If “Yes,” you may indicate the value of these items here. Do not include this amount as revenue in Part I or as an expense in Part II. (See instructions for reporting in Part III.) b 82b Did the organization comply with the public inspection requirements for returns and exemption applications? 83a 83a Did the organization solicit any contributions or gifts that were not tax deductible? 84a 84a If “Yes,” did the organization include with every solicitation an express statement that such contributions or gifts were not tax deductible? b 84b 501(c)(4), (5), or (6) organizations. a Were substantially all dues nondeductible by members? 85 85a Did the organization make only in-house lobbying expenditures of $2,000 or less? b 86 501(c)(7) orgs. Enter: a Initiation fees and capital contributions included on line 12 b Gross receipts, included on line 12, for public use of club facilities 501(c)(12) orgs. Enter: a Gross income from members or shareholders 87 87a Gross income from other sources. (Do not net amounts due or paid to other sources against amounts due or received from them.) b 87b 88 List the states with which a copy of this return is filed 88 90a 91 Located at Section 4947(a)(1) nonexempt char itable trusts filing For m 990 in lieu of Form 1041—Check here 92 92 and enter the amount of tax-exempt interest received or accrued during the tax year Part VI Yes No 85b Dues, assessments, and similar amounts from members c 85c Section 162(e) lobbying and political expenditures d 85d Aggregate nondeductible amount of section 6033(e)(1)(A) dues notices e 85e Taxable amount of lobbying and political expenditures (line 85d less 85e) f 85f g Does the organization elect to pay the section 6033(e) tax on the amount in 85f? h If section 6033(e)(1)(A) dues notices were sent, does the organization agree to add the amount in 85f to its reasonable estimate of dues allocable to nondeductible lobbying and political expenditures for the following tax year? 85g 85h 86a 86b If “Yes” was answered to either 85a or 85b, do not complete 85c through 85h below unless the organization received a waiver for proxy tax owed for the prior year. ZIP code Did the organization comply with the disclosure requirements relating to quid pro quo contributions? b 83b The books are in care of Telephone no. ( ) 501(c)(3) organizations. Enter: Amount of tax imposed on the organization during the year under: ; section 4912 ; section 4955 501(c)(3) and 501(c)(4) orgs. Did the organization engage in any section 4958 excess benefit transaction during the year or did it become aware of an excess benefit transaction from a prior year? If “Yes,” attach a statement explaining each transaction Enter: Amount of tax imposed on the organization managers or disqualified persons during the year under sections 4912, 4955, and 4958 89a b c section 4911 89b Enter: Amount of tax on line 89c, above, reimbursed by the organization d b Number of employees employed in the pay period that includes March 12, 2000 (See inst.) 90b Form 990 (2000) N/A Page 74 Page 6 Form 990 (2000) Analysis of Income-Producing Activities (See Specific Instructions on page 30.) Excluded by section 512, 513, or 514 (E) Related or exempt function income Unrelated business income Enter gross amounts unless otherwise indicated. (C) Exclusion code (B) Amount (D) Amount (A) Business code Program service revenue: 93 a b c d e f Fees and contracts from government agencies 94 Membership dues and assessments 95 Interest on savings and temporary cash investments 96 Dividends and interest from securities 97 Net rental income or (loss) from real estate: debt-financed property not debt-financed property 98 Net rental income or (loss) from personal property Other investment income 99 100 Gain or (loss) from sales of assets other than inventory 101 Net income or (loss) from special events 102 Gross profit or (loss) from sales of inventory 103 Other revenue: a b c d e 104 Subtotal (add columns (B), (D), and (E)) 105 Total (add line 104, columns (B), (D), and (E)) Note: Line 105 plus line 1d, Part I, should equal the amount on line 12, Part I. Relationship of Activities to the Accomplishment of Exempt Purposes (See Specific Instructions on page 31.) Explain how each activity for which income is reported in column (E) of Part VII contributed importantly to the accomplishment of the organization’s exempt purposes (other than by providing funds for such purposes). Line No. Information Regarding Taxable Subsidiaries and Disregarded Entities (See Specific Instructions on page 31.) (E) End-of-year assets (D) Total income (C) Nature of activities (B) Percentage of ownership interest (A) Name, address, and EIN of corporation, partnership, or disregarded entity Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than officer) is based on all information of which preparer has any knowledge. (Important: See General Instruction W, on page 14.) Please Sign Here Type or print name and title. Date Signature of officer Preparer’s signature Check if self- employed Paid Preparer’s Use Only EIN Firm’s name (or yours if self-employed) and address, and ZIP code Part IX Part VIII Part VII Date Phone no. ( ) Preparer’s SSN or PTIN a b g % % % % Medicare/Medicaid payments Form 990 (2000) Did the organization, during the year, pay premiums, directly or indirectly, on a personal benefit contract? Did the organization, during the year, receive any funds, directly or indirectly, to pay premiums on a personal benefit contract? (b) (a) Information Regarding Transfers Associated with Personal Benefit Contracts (See Specific Instructions on page 31.) Part X No Yes No Yes Note: If “ Yes” to (b), file For m 8870 and For m 4720 (see instructions). Page 75 OMB No. 1545-0047 Organization Exempt Under Section 501(c)(3) SCHEDULE A (Except Private Foundation) and Section 501(e), 501(f), 501(k), 501(n), or Section 4947(a)(1) Nonexempt Charitable Trust Department of the Treasury Internal Revenue Service MUST be completed by the above organizations and attached to their Form 990 or 990-EZ Employer identification number Name of the organization Compensation of the Five Highest Paid Employees Other Than Officers, Directors, and Trustees (See page 1 of the instructions. List each one. If there are none, enter “None.”) (e) Expense account and other allowances (b) Title and average hours per week devoted to position (d) Contributions to employee benefit plans & deferred compensation (c) Compensation (a) Name and address of each employee paid more than $50,000 Total number of other employees paid over $50,000 Compensation of the Five Highest Paid Independent Contractors for Professional Services (See page 1 of the instructions. List each one (whether individuals or firms). If there are none, enter “None.”) (b) Type of service (a) Name and address of each independent contractor paid more than $50,000 Total number of others receiving over $50,000 for professional services Schedule A (Form 990 or 990-EZ) 2000 For Paperwork Reduction Act Notice, see page 1 of the Instructions for Form 990 and Form 990-EZ. Part I Part II Cat. No. 11285F Supplementary Information—(See separate instructions.) (c) Compensation 2000 (Form 990 or 990-EZ) Page 76 Page 2 Schedule A (Form 990 or 990-EZ) 2000 Reason for Non-Private Foundation Status (See pages 2 through 5 of the instructions.) The organization is not a private foundation because it is: (Please check only ONE applicable box.) A church, convention of churches, or association of churches. Section 170(b)(1)(A)(i). 5 A school. Section 170(b)(1)(A)(ii). (Also complete Part V, page 5.) 6 A hospital or a cooperative hospital service organization. Section 170(b)(1)(A)(iii). 7 A Federal, state, or local government or governmental unit. Section 170(b)(1)(A)(v). 8 A medical research organization operated in conjunction with a hospital. Section 170(b)(1)(A)(iii). Enter the hospital’s name, city, and state 9 An organization operated for the benefit of a college or university owned or operated by a governmental unit. Section 170(b)(1)(A)(iv). (Also complete the Support Schedule in Part IV-A.) 10 An organization that normally receives a substantial part of its support from a governmental unit or from the general public. Section 170(b)(1)(A)(vi). (Also complete the Support Schedule in Part IV-A.) 11a A community trust. Section 170(b)(1)(A)(vi). (Also complete the Support Schedule in Part IV-A.) 11b An organization that normally receives: (1) more than 33 1 ? 3 % of its support from contributions, membership fees, and gross receipts from activities related to its charitable, etc., functions—subject to certain exceptions, and (2) no more than 33 1 ? 3 % of its support from gross investment income and unrelated business taxable income (less section 511 tax) from businesses acquired by the organization after June 30, 1975. See section 509(a)(2). (Also complete the Support Schedule in Part IV-A.) 12 An organization that is not controlled by any disqualified persons (other than foundation managers) and supports organizations described in: (1) lines 5 through 12 above; or (2) section 501(c)(4), (5), or (6), if they meet the test of section 509(a)(2). (See section 509(a)(3).) 13 Provide the following information about the supported organizations. (See page 5 of the instructions.) (b) Line number from above (a) Name(s) of supported organization(s) 14 An organization organized and operated to test for public safety. Section 509(a)(4). (See page 5 of the instructions.) Part IV Statements About Activities No Yes During the year, has the organization attempted to influence national, state, or local legislation, including any attempt to influence public opinion on a legislative matter or referendum? 1 1 If “Yes,” enter the total expenses paid or incurred in connection with the lobbying activities $ Organizations that made an election under section 501(h) by filing Form 5768 must complete Part VI-A. Other organizations checking “Yes,” must complete Part VI-B AND attach a statement giving a detailed description of the lobbying activities. During the year, has the organization, either directly or indirectly, engaged in any of the following acts with any of its trustees, directors, officers, creators, key employees, or members of their families, or with any taxable organization with which any such person is affiliated as an officer, director, trustee, majority owner, or principal beneficiary: 2 2a Sale, exchange, or leasing of property? a 2b Lending of money or other extension of credit? b 2c Furnishing of goods, services, or facilities? c 2d Payment of compensation (or payment or reimbursement of expenses if more than $1,000)? d 2e Transfer of any part of its income or assets? e If the answer to any question is “Yes,” attach a detailed statement explaining the transactions. 3 3 Does the organization make grants for scholarships, fellowships, student loans, etc.? Attach a statement to explain how the organization determines that individuals or organizations receiving grants or loans from it in furtherance of its charitable programs qualify to receive payments. (See page 2 of the instructions.) Part III b Do you have a section 403(b) annuity plan for your employees? 4a 4a Schedule A (Form 990 or 990-EZ) 2000 Page 77 Page 3 Schedule A (Form 990 or 990-EZ) 2000 Organizations described on line 12: a For amounts included in lines 15, 16, and 17 that were received from a “disqualified person,” attach a list (which is not open to public inspection) to show the name of, and total amounts received in each year from, each “disqualified person.” Enter the sum of such amounts for each year: 27 (1999) (1998) (1997) (1996) For any amount included in line 17 that was received from a nondisqualified person, attach a list to show the name of, and amount received for each year, that was more than the larger of (1) the amount on line 25 for the year or (2) $5,000. (Include in the list organizations described in lines 5 through 11, as well as individuals.) After computing the difference between the amount received and the larger amount described in (1) or (2), enter the sum of these differences (the excess amounts) for each year: b (1999) (1998) (1997) (1996) 28 Unusual Grants: For an organization described in line 10, 11, or 12 that received any unusual grants during 1996 through 1999, attach a list (which is not open to public inspection) for each year showing the name of the contributor, the date and amount of the grant, and a brief description of the nature of the grant. Do not include these grants in line 15. (See page 5 of the instructions.) c d e f Total support for section 509(a)(1) test: Enter line 24, column (e) Add: Amounts from column (e) for lines: 18 19 22 26b Public support (line 26c minus line 26d total) Public support percentage (line 26e (numerator) divided by line 26c (denominator)) % c e f Add: Amounts from column (e) for lines: 15 16 20 Public support (line 27c total minus line 27d total) Public support percentage (line 27e (numerator) divided by line 27f (denominator)) % 21 17 g Investment income percentage (line 18, column (e) (numerator) divided by line 27f (denominator)) % d Add: Line 27a total and line 27b total Support Schedule (Complete only if you checked a box on line 10, 11, or 12.) Use cash method of accounting. (e) Total (d) 1996 (c) 1997 (b) 1998 (a) 1999 Calendar year (or fiscal year beginning in) 15 Membership fees received 16 17 Gross receipts from admissions, merchandise sold or services performed, or furnishing of facilities in any activity that is not a business unrelated to the organization’s charitable, etc., purpose 18 Gross income from interest, dividends, amounts received from payments on securities loans (section 512(a)(5)), rents, royalties, and unrelated business taxable income (less section 511 taxes) from businesses acquired by the organization after June 30, 1975 19 Net income from unrelated business activities not included in line 18 Tax revenues levied for the organization’s benefit and either paid to it or expended on its behalf 20 The value of services or facilities furnished to the organization by a governmental unit without charge. Do not include the value of services or facilities generally furnished to the public without charge 21 Other income. Attach a schedule. Do not include gain or (loss) from sale of capital assets 22 Total of lines 15 through 22 23 Line 23 minus line 17 24 Enter 1% of line 23 25 Organizations described on lines 10 or 11: a Enter 2% of amount in column (e), line 24 26 Attach a list (which is not open to public inspection) showing the name of and amount contributed by each person (other than a governmental unit or publicly supported organization) whose total gifts for 1996 through 1999 exceeded the amount shown in line 26a. Enter the sum of all these excess amounts b Gifts, grants, and contributions received. (Do not include unusual grants. See line 28.) Note: You may use the worksheet in the instructions for converting from the accrual to the cash method of accounting. Part IV-A h Total support for section 509(a)(2) test: Enter amount on line 23, column (e) 27c 27d 26e 26d 26c 26b 26a 26f 27e 27g 27h 27f Schedule A (Form 990 or 990-EZ) 2000 Page 78 Page 4 Schedule A (Form 990 or 990-EZ) 2000 Does the organization discriminate by race in any way with respect to: 33 33a a Students’ rights or privileges? 33b b Admissions policies? 33c c Employment of faculty or administrative staff? 33d d Scholarships or other financial assistance? 33e e Educational policies? 33f f Use of facilities? 33g g Athletic programs? 33h h Other extracurricular activities? If you answered “Yes” to any of the above, please explain. (If you need more space, attach a separate statement.) 34a Does the organization receive any financial aid or assistance from a governmental agency? 34a 34b Has the organization’s right to such aid ever been revoked or suspended? b If you answered “Yes” to either 34a or b, please explain using an attached statement. Does the organization certify that it has complied with the applicable requirements of sections 4.01 through 4.05 of Rev. Proc. 75-50, 1975-2 C.B. 587, covering racial nondiscrimination? If “No,” attach an explanation 35 35 Private School Questionnaire (See page 5 of the instructions.) (To be completed ONLY by schools that checked the box on line 6 in Part IV) No Yes Does the organization have a racially nondiscriminatory policy toward students by statement in its charter, bylaws, other governing instrument, or in a resolution of its governing body? 29 29 30 Does the organization include a statement of its racially nondiscriminatory policy toward students in all its brochures, catalogues, and other written communications with the public dealing with student admissions, programs, and scholarships? 30 Has the organization publicized its racially nondiscriminatory policy through newspaper or broadcast media during the period of solicitation for students, or during the registration period if it has no solicitation program, in a way that makes the policy known to all parts of the general community it serves? 31 31 If “Yes,” please describe; if “No,” please explain. (If you need more space, attach a separate statement.) Does the organization maintain the following: 32 32a Records indicating the racial composition of the student body, faculty, and administrative staff? a Records documenting that scholarships and other financial assistance are awarded on a racially nondiscriminatory basis? b 32b Copies of all catalogues, brochures, announcements, and other written communications to the public dealing with student admissions, programs, and scholarships? c 32c 32d Copies of all material used by the organization or on its behalf to solicit contributions? d If you answered “No” to any of the above, please explain. (If you need more space, attach a separate statement.) Part V Schedule A (Form 990 or 990-EZ) 2000 Page 79 Page 5 Schedule A (Form 990 or 990-EZ) 2000 4-Year Averaging Period Under Section 501(h) (Some organizations that made a section 501(h) election do not have to complete all of the five columns below. See the instructions for lines 45 through 50 on page 9 of the instructions.) Lobbying Expenditures During 4-Year Averaging Period (e) Total (d) 1997 (c) 1998 (b) 1999 (a) 2000 Calendar year (or fiscal year beginning in) Lobbying nontaxable amount 45 46 Lobbying ceiling amount (150% of line 45(e)) 47 48 Grassroots nontaxable amount 49 Grassroots ceiling amount (150% of line 48(e)) Grassroots lobbying expenditures 50 Total lobbying expenditures Part VI-B Lobbying Activity by Nonelecting Public Charities (For reporting only by organizations that did not complete Part VI-A) (See page 9 of the instructions.) During the year, did the organization attempt to influence national, state or local legislation, including any attempt to influence public opinion on a legislative matter or referendum, through the use of: Yes No Amount a b c d e f g h i Volunteers Paid staff or management (Include compensation in expenses reported on lines c through h.) Media advertisements Mailings to members, legislators, or the public Publications, or published or broadcast statements Grants to other organizations for lobbying purposes Direct contact with legislators, their staffs, government officials, or a legislative body Rallies, demonstrations, seminars, conventions, speeches, lectures, or any other means Total lobbying expenditures (add lines c through h) If “Yes” to any of the above, also attach a statement giving a detailed description of the lobbying activities. Lobbying Expenditures by Electing Public Charities (See page 7 of the instructions.) (To be completed ONLY by an eligible organization that filed Form 5768) Check here a if the organization belongs to an affiliated group. Check here b if you checked “a” above and “limited control” provisions apply. (b) To be completed for ALL electing organizations (a) Affiliated group totals Limits on Lobbying Expenditures 36 36 Total lobbying expenditures to influence public opinion (grassroots lobbying) 37 37 Total lobbying expenditures to influence a legislative body (direct lobbying) 38 38 Total lobbying expenditures (add lines 36 and 37) 39 39 Other exempt purpose expenditures 40 40 Total exempt purpose expenditures (add lines 38 and 39) 41 Lobbying nontaxable amount. Enter the amount from the following table— The lobbying nontaxable amount is— If the amount on line 40 is— 20% of the amount on line 40 Not over $500,000 41 $100,000 plus 15% of the excess over $500,000 Over $500,000 but not over $1,000,000 $175,000 plus 10% of the excess over $1,000,000 Over $1,000,000 but not over $1,500,000 $225,000 plus 5% of the excess over $1,500,000 Over $1,500,000 but not over $17,000,000 42 42 Grassroots nontaxable amount (enter 25% of line 41) 43 43 Subtract line 42 from line 36. Enter -0- if line 42 is more than line 36 44 44 Subtract line 41 from line 38. Enter -0- if line 41 is more than line 38 Part VI-A (The term “expenditures” means amounts paid or incurred.) Over $17,000,000 $1,000,000 Caution: If there is an amount on either line 43 or line 44, you must file Form 4720. Schedule A (Form 990 or 990-EZ) 2000 Page 80 Page 6 Schedule A (Form 990 or 990-EZ) 2000 (d) Description of transfers, transactions, and sharing arrangements (c) Name of noncharitable exempt organization (b) Amount involved (a) Line no. 52a Is the organization directly or indirectly affiliated with, or related to, one or more tax-exempt organizations described in section 501(c) of the Code (other than section 501(c)(3)) or in section 527? No Yes If “Yes,” complete the following schedule: b (c) Description of relationship (b) Type of organization (a) Name of organization Information Regarding Transfers To and Transactions and Relationships With Noncharitable Exempt Organizations (See page 9 of the instructions.) 51 Did the reporting organization directly or indirectly engage in any of the following with any other organization described in section 501(c) of the Code (other than section 501(c)(3) organizations) or in section 527, relating to political organizations? No Yes Transfers from the reporting organization to a noncharitable exempt organization of: a 51a(i) Cash (i) a(ii) Other assets (ii) Other transactions: b b(i) Sales or exchanges of assets with a noncharitable exempt organization (i) b(ii) Purchases of assets from a noncharitable exempt organization (ii) b(iii) Rental of facilities, equipment, or other assets (iii) b(iv) Reimbursement arrangements (iv) b(v) Loans or loan guarantees (v) b(vi) Performance of services or membership or fundraising solicitations (vi) c Sharing of facilities, equipment, mailing lists, other assets, or paid employees c If the answer to any of the above is “Yes,” complete the following schedule. Column (b) should always show the fair market value of the goods, other assets, or services given by the reporting organization. If the organization received less than fair market value in any transaction or sharing arrangement, show in column (d) the value of the goods, other assets, or services received: d Part VII Schedule A (Form 990 or 990-EZ) 2000 Page 81 Appendix 2: Summary of Nonprofit Accountability Standards Suggested Key Indicators for Entire Nonprofit Sector Sources: American Inst.of Philanthropy Better Business Bureau National Charities Info. Bureau Charities Review Council of Minnesota Areas Addressed Board - size Minimum-5 voting members - meetings 3 x per year 2 in-person meetings/year At least 3 x per year Mission Clear description Formally stated Stated & accomplishments Programs Consistent with mission Use of Funds - Program At least 60% of annual expenses At least 50% At least 60% of annual expenses At least 70% - Fundraising Fundraising & Administrative Fundraising & admin. "Reasonable % over time" Fundraising & administration = 30% - Administrative combined = 40% or less. =50% or less. or less combined - Net Assets Less than three years is Not more than larger of 2x Not more than 2 x current or next year "reasonable" current year's expenses or operating expenses 2x year's budget Fundraising Expenses = 35% or less of revenue Expenses = 35% or less of Efficiency raised. revenue raised. Information - Annual Report Yes Yes Yes - Audit Yes Yes or financials/same terms Yes & same terms Accounting GAAP; functional allocation; "full disclosure of economic resources & obligations"; same applies for consolidated financials"; detailed annual budget. Other No violation of state/federal laws Page 82 82 Appendix 2: Summary of Nonprofit Accountability Standards (continued) Suggested Key Indicators for Entire Nonprofit Sector Sources: Harvard Business School Maryland Assoc. of Nonprofits Areas Addressed Board - size At least 5 - meetings At least 4 x per year Mission Consistency between goals and mission, Formally stated measured by: (1) asset turnover ratio and (2) liquidity ratio Defined, cost-effective procedures for program eval. Programs Use of Funds - Program 76% cited from landmark national survey by James Cook (Forbes , October 28, 1991) - Fundraising - Administrative - Net Assets "Reasonable over time; 3:1 ratio of fundraising revenue/expenses for 5 yr. & older Nonprofit" Fundraising 18% cited from landmark national survey Efficiency by James Cook (Forbes, October 28, 1991) Information - Annual Report Yes - Audit Audit for NFPs with budgets greater than $300,000 Accounting Internal financial statements at least quarterly Other "Intergenerational Equity" - to compare current Written conflict of interest pol. current period balance sheet with prior year balance sheet. No violation of state/federal laws After adjusting for inflation, if equal, then equity achieved. Page 83 Appendix 3: Sources of Nonprofit Financial Information Websites: Alliance for Nonprofit Management http://www.allianceonline.org American Association of Museums http://www.aam-us.org American Hospital Association http://www.aha.org American Institute of Certified Public Accountants http://www.aicpa.org Aspen Institute http://www.aspeninst.org Association for Research on Nonprofit Organizations & Voluntary Action http://www.arnova.org Association of American Colleges and Universities http://www.aacu-edu.org Attorney General of the State of Illinois http://www.ag.state.il.us Attorney General of the State of Minnesota http://www.ag.state.mn.us Better Business Bureau’s Philanthropic Advisory Service http://www.bbb.org/about/pas.asp California Association of Nonprofits http://www.canonprofits.org Canadian Centre for Philanthropy http://wwwccp.ca Center for Nonprofits (New Jersey Association) http://www.njnonprofits.org Charity Watch http://www.charitywatch.org Charities Review Council of Minnesota http://www.crcmn.org Chronicle of Philanthropy http://www.philanthropy.com Colorado Association of NonProfit Organizations http://www.canpo.org Delaware Association of Nonprofit Agencies http://www.delawarenonprofit.org Donors Forum of Chicago http://www.donorsforum.org Evangelical Council for Financial Accountability http://www.ecfa.org Financial Accounting Standards Board http://www.rutgers.edu/Accounting/raw/fasb FindIt.Org – The Resource for Nonprofit Information http://www.findit.org Guidestar http://www.guidestar.org Harvard University’s Hauser Center for Nonprofit Organizations http://www.ksghauser.harvard.edu Healthcare Financial Management Association http://www.hfma.org Hearts and Minds http://www.heartsandminds.org Illinois CPA Society http://www.icpas.org Independent Sector http://www.indepsec.org Indiana University Center on Philanthropy http://www.philanthopy.iupui.edu Interactive Knowledge for Nonprofits Worldwide http://www.iknow.org Internet Nonprofit Center http://www.nonprofits.org Literature of the Nonprofit Sector http://www.fdncenter.org/onlib/lnps/index.html Management Assistance Program for Nonprofits http://www.mapnp.org Maryland Association of Nonprofit Organizations http://www.mdnonprofit.org Michigan Nonprofit Association http://www.mna.msu.edu Minnesota Council of Nonprofits http://www.mncn.org Moody’s Investor Services http://www.moodys.com National Association of College & University Business Officers http://www.nacubo.org National Center for Charitable Statistics http://nccs.urban.org National Charities Information Bureau http://www.give.org National Endowment for the Arts http://www.arts.endow.gov National Society of Fundraising Executives http://www.nsfre.org NewProfit, Inc. (Venture Capital for the Nonprofit Sector) Nonprofit Coordinating Committee of New York http://www.npccny.org Nonprofit “Cyber-Accountability” http://www.bway.net/~hbograd/cyb-acc.html Nonprofit Resources Catalogue http://www.clark.net/pub/pwalker/General_Nonprofit_Resources Online Compendium of Fed/State Regulations for Nonprofits http://www.muridae.com/nporegulation Peter F. Drucker Foundation for Nonprofit Management http://www.pfdf.org Standard & Poors http://www.standardpoor.com Technical Assistance for Community Services (Oregon & Wash. Assoc.) Texas Association of Nonprofit Organizations Page 84 84 Authoritative Sources on Nonprofits: Financial Accounting Standards Board (FASB) o Statement of Financial Accounting Concepts #4: Objectives of Financial Reporting by Nonbusiness Organizations o Statement of Financial Accounting Concepts #6: Elements of Financial Statements o Statement of Financial Accounting Standards #93: Recognition of Depreciation by Not-for Profit Organizations o Statement of Financial Accounting Standards #116: Accounting for Contributions Received and Contributions Made o Statement of Financial Accounting Standards #117: Financial Statements of Not-for-Profit Organizations o Statement of Financial Accounting Standards #124: Accounting for Certain Investments Held by Not-for- Profit Organizations o Statement of Financial Accounting Standards #136: Asset Transfers to Nonprofit Intermediaries American Institute of Certified Public Accountants (AICPA o AICPA Audit and Accounting Guide for Not-for-Profit Organizations o AICPA Audit and Accounting Guide for Health Care Organizations o Statement of Position 92-9: Audits of Not-for-Profit Organizations Receiving Federal Awards o Statement of Position 98-2: Accounting for Costs of Activities of Not-for-Profit Organizations and State and Local Governmental Units that Include Fund Raising o Statement of Position 98-3: Audits of States, Local Governments, and Not-for-Profit Organizations Receiving Federal Awards Discussion Groups: ARNOVA: ARNOVA-L@ NCCS: NCCSdata@ui.urban.org Charity Channel: LISTSERV@ Cyberaccountability: http://listserv.aol.com/archives/cyb-acc.html Practitioner Journals: Chronicle of Philanthropy Nonprofit Times Nonprofit World Not-for-profit CEO Monthly Letter Publishers of Nonprofit Books: American Hospital Association Press Aspen Institute Center on Philanthropy Harvard University Press Independent Sector Jossey-Bass (part of John Wiley) Organizations Offering Nonprofit Research Conferences: Association on Research on Nonprofit Organizations and Voluntary Action (ARNOVA) Independent Sector International Society for Third Sector Research