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GuideStar® is a major player and one of the top charity watchdogs in the United States. Through their website at www.guidestar.org, they provide all tax exempt entities in the US with the ability to tell their story, share their mission and solicit program funding. This article highlights how big data from tax exempts and their tax filings of form 990 can be leveraged to provide valuable information to the Not-For-Profit (NFP) sector. Specifically, they ask tax exempts for the following:

  • Overview – general information, mission and impact statements.
  • Financial data – revenues, expenses, expense details for independent contractors, and balance sheet data.
  • Documents – 990s, 990-Ts, audited financial statements, annual reports, and IRS filings (form 1023/determination letters).
  • Programs & results – details on all programs, including program outcomes and funding needs.
  • People & governance – principal officer, CEO, board chair, board leadership practices, list of board/officers, highest paid employees. and compensation, organizational demographics, paid tax return preparer and independent contractors and compensation.

GuideStar’s website provides free access to certain basic data on all tax exempt entities (search for entities and access the most recently filed 990s for 3 years) – all you need to do is register. However, they offer access to their metrics and valuable data to compare your organization on financial and compensation of similar organizations for fees for certain types of data. Our firm has a pro-series license that provides us with significant and unique data and metrics, including access to all 990s on file and the ability to download revenues, expenses and balance sheet data for the past 5 years. What does that mean to you - Big Data is available to you. For example, they classify entities by applicable Internal Revenue Code (IRC) section with the vast majority as traditional public charities “501(c)(3)s”.

The next two tables illustrate how GuideStar classifies entities by entity type and 990 and single audit filings. You will notice that 17.2 percent of the database of entities are revoked due to the lack of tax filings. Also, only 14.4% of all entities file the full form 990 (as compared to forms 990-EZ and 990-N (e-postcard). Only one percent of these entities have single audits under the Uniform Guidance for federal award expenditures > $750,000. With the new tax act recently signed into law on Dec. 22, 2017 “Tax Cuts and Jobs Act (TCJA)”, it is anticipated that many more entities will be filing form 990-T for unrelated business income due to several changes in the tax laws, including, but not limited to, the limits on the use of net operating loss carryovers (now limited to each activity), taxing of certain fringe benefits (transportation, on-premises gyms & other athletic facilities), and payment of excessive “parachute” compensation to the highest-paid employees).

Note that many corporations, lawyers and accountants use GuideStar to verify data on charities and use this information to offer advice to clients on the questions they have about transparency and financial accountability. Similar to other charity watchdogs like the Better Business Bureau and Charity Navigator, they assign seals of transparency, based on the data provided (e.g., platinum, gold, silver & bronze).

It is imperative that your charity periodically update and monitor its data with GuideStar and other charity watchdogs. Transparency and accountability are critical to positioning your entity for consideration for funding from major donors.

As noted previously, UHY Advisors can provide you with custom reports that benchmark your entity against others. The comparisons can be geographic, by IRC section, by mission focus based on codes of National Taxonomy Exempt Entities (NTEE), financial data (such as revenues/expenses > $1 million), as well as many other types of data.

On January 23, 2018, the American Institute of CPAs sponsored a webinar “Metrics for Mission Impact” by Oracle-NetSuite®. This program featured the reporting hierarchy of NFPs including management reporting, financial reporting and tax/statutory reporting. In addition, they discussed how NFPs deal with issues involving new business models, new constituent expectations and disconnect between the front and back office. Finally, they illustrated the concept of Mission Metrics: Proven Benefits for Nonprofits as Full Financial Transparency, Simplified Reporting and Compliance and Constituent Stewardship.

Summary: The stakes are high for all exempt organizations to be transparent and accountable. Those entities that are proactive with their mission, their resources and their message will continue to thrive and be leaders in their fields. We look forward to continuing our role and sharing knowledge with those involved in the tax exempt area.