Today, the annual IRS Form 990 tax filing is the principal annual disclosure mechanism of nonprofit organizations. Over time, considerable thought has been put into finding ways to improve access and use of the 990 Form, with only scant attention focused on whether the 990 is the right data source on which to build a system of nonprofit accountability. This paper takes a broader perspective, assessing not only the quality of the financial data and its availability, but also the entire financial reporting model. The paper begins with a framework for thinking about organizational accountability. It then examines the current structure of nonprofit financial reporting and contrasts it with alternative systems developed for publicly traded firms and credit unions. The paper concludes with recommendations for improving nonprofit accountability by reengineering the reporting and oversight systems in the sector.
This publication is Hauser Center Working Paper No. 4. The Hauser Center Working Paper Series was launched during the summer of 2000. The Series enables the Hauser Center to share with a broad audience important works-in-progress written by Hauser Center scholars and researchers.