Nonprofits rely on public trust and that takes transparency

Nonprofits must continually strive to maintain trust through transparency with the public.  Below is a picture (followed by the easier to read text) of a letter I wrote to the editor of the Beaches Leader, the weekly newspaper serving the beach cities in Duval County, FL.  It was published in the June 26, 2014 edition.

 

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More than 795,000 people in the US will have a stroke this year. Stroke is the fourth leading cause of death in the US killing approximately 130,000 each year, leading to annual public costs of approximately $36.5 billion (Centers for Disease Control, 2014). These numbers note the importance of people learning more about the current state of their health and ways in which it can be improved. Never Quit’s goal is to educate the community about stroke and brain bleeds and to encourage them to become more active to decrease the likelihood of becoming a victim of these debilitating, and at times deadly, diseases. Since the organization’s inception, heart disease, the leading cause of death in the US, has been added to its mission. Never Quit’s goals are laudable, and the event offers fun and competitive ways for participants to be physically active while offering free health screenings and medical information. Since 2009, Never Quit has been able to raise a lot of awareness about stroke and other medical conditions while promoting the need for individuals to be more proactive in maintaining their health.

As a nonprofit specialist, my background prompts me to ask specific questions of any nonprofit seeking donations. In 2011, I received a flyer in the mail advertising a race to raise the awareness of stroke and brain bleeds. Since I enjoy running, and have loved ones who have suffered from a stroke, I went to Never Quit’s website (www.neverquitnever.com) to learn more about the event, as well as the organization, prior to registering. There were multiple pages about the family and its very touching history of how stroke impacts not only the victim, but also loved ones.   Also available were pictures of the previous year’s event as well as information on each individual activity within the larger event. However, I was disappointed in the lack of substantive information provided. There was no information about the amount of money raised for stroke and brain bleed awareness, where the revenues from the event went, the number of people who participated in the event, or the organization’s governing board or leadership. This has not changed to this day, and there has been no response for requests for more information.

In 2007, the rules for filling the Form 990 (the tax form nonprofits have to file on an annual basis, akin to the Form 1040 that individuals file) changed to ensure that nonprofits were being transparent and accountable. The change mandates all nonprofits (with the exception of churches), regardless of revenues, file a Form 990; the type of 990 to file is determined by gross receipts (total revenue raised before any expenses). A small nonprofit only needs to complete a 5-question e-postcard (the Form 990-N) confirming that its gross receipts was less than $50,000, but the form does not ask for the actual amount of revenue received. Nonprofits with gross receipts of less than $200,000, and total assets of less than $500,000, are required to file the Form 990-EZ, which asks for more detailed information about the revenue and expenses of a nonprofit, including the five highest compensated employees if they received more than $100,000.   Nonprofits with gross receipts exceeding $200,000 or whose total assets exceed $500,000 must complete the Form 990, which asks for more financial details as well as governance information.   All versions of the Form 990 are open to public inspection. People can request the document from a nonprofit, but best practices for nonprofit accountability is for each nonprofit to post its Form 990 on its website or provide a link where the form can be viewed.

We still do not know how many people participated in the event or the money it raised, other than estimates published in the local newspapers. I note this because these figures are very important to ensure an organization is completing the correct Form 990.   Never Quit filed the 990-N in 2010 and 2012. No 990s were filed for 2009, 2011, or 2013. Rough calculations based on the registration rates and numbers of participants reported in the paper would lead one to believe that the event’s gross receipts have far exceeded the allowable maximum to file the Form 990-N.   At the very least it seems as though Never Quit should be filing the Form 990-EZ, which would provide more information about the nonprofit’s finances to the public. In plain terms, the event’s noteworthy success has pushed it into a higher reporting bracket.

There are over 1.5 million nonprofits in the US, and approximately one million of these are public charities or foundations. Each nonprofit holds a unique role in helping to build and maintain healthy communities across the country. In 2010, there were 1,081 nonprofits operating in Northeast Florida, with 71% having less than $500,000 in annual revenue. Each organization impacts lives of Northeast Floridians. There are many nonprofits at the Beaches working towards bettering our lives in a variety of ways, from the hospital to local theatre groups.  Filing a Form 990 ensures nonprofits are transparent and forthcoming with their finances and governance. This is a minimum standard; in addition to information legally required by the IRS to maintain their tax exempt status, nonprofits should also provide information to the public on their website, including the services and/or activities provided, the number of people the organization serves, and how it is impacting lives.

Nonprofits are granted tax-exempt status because they are operating to promote a public good. For the sector to survive and thrive, it is dependent on community trust, and this trust is only built and maintained through transparency, honesty, and accountability.

 

Georgette E. Dumont, MPA, PhD

Assistant Professor

University of North Florida

MPA Nonprofit Concentration and Nonprofit Graduate Certificate programs

 

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