Investigating NoNprofits

Kendall Taggart
The Center for Investigative Reporting

IRE Regional Training: Honolulu 2013

Overview


-The basics of  the form 990

-Tools beyond the 990

-How to use these tools  on any beat

The ultimate tip sheet on the 990


Ron Campbell of the Orange County Register has a great tip sheet (#3496) on how to decipher the 990 available at ire.org

FIGURE OUT HOW MUCH THEY'RE SPENDING ON PROGRAMS

FROM THE 990:


(Part IX, Line 25, Column B)
(Part IX, Line 25, Column A)

Program Expenses
Total Expenses

But be careful of accounting tricks

Gifts-in-kind
(examples: medical supplies sent abroad)
Schedule F of the 990


Accounting Tricks continued...

Joint cost allocations
Part IX, Line 26 of the 990


Identifying officers and salaries

Part VII of the 990


Tip: Look for other, related charities to see if the same person is collecting two salaries. Related charities should be disclosed in Schedule R.

Checklist of required schedules

Some juicy questions include:

  • Question 26: did the organization provide a loan to a key employee, trustee, etc.?
  • Question 27: did the organization provide a grant to a key employee, trustee, etc.?
  • Question 28:  'related business transactions' (has the organization been paying a brother, mother, sister, etc.?)

Governance

How is the nonprofit managed?
Part VI

  • Question 2: do any of the board members have a family or business relationship?
  • Question 6: 'significant diversion of assets' - losses attributed to theft, investment fraud, embezzlement and other unauthorized uses of funds in excess of $250,000 or 5 percent of gross receipts (see the recent Washington Post investigation)
    • There are four in Hawaii that answered 'yes'

TOOLS BEYOND THE FORM 990:

Get a reporting partner


(Kris Hundley of the Tampa Bay Times prepares to dive into records seized from a telemarketing company by Iowa regulators)

Tools beyond the form 990

#1: STATE RECORDS


Nonprofits are primarily regulated at the state level. 

If a nonprofit fundraises in a state, most states require it to file paperwork. 

Every state collects different information.


BEST ONLINE RESOURCES for state records


#2 Fundraising data

Collected by at least a dozen states

#3 The audit

Often filed with state regulators

Includes information about the financial well-being of a charity from a (hopefully) independent accountant

We learned in an audit that the only grant an organization had given out was to a company with ties to the president of the charity.

 #4 DISCIPLINARY ACTIONS


Resource: 
http://charitysearch.apps.cironline.org/

includes about 8,000 regulatory actions taken by states against all kinds of charities and solicitors.

#5 Beyond the IRS


Citizenaudit.org

ProPublica's Nonprofit Explorer

Guidestar.org - a free account gets you three years of the most recent 990s

(and from the IRS itself - a limited data set with select fields from the 990 can be downloaded at irs.gov)

Using these tools on Any beat

  • When you're backgrounding an individual or a company, run their name through citizenaudit.org to see if they have ties to a nonprofit.
  • Universities and many hospitals are nonprofits and the 990s include a wealth of information. Also, foundations associated with both hospitals and universities file 990s.

USING THESE TOOLS ON ANY BEAT

  • Local government officials sometimes start nonprofits (A Voice of San Diego review of tax records for Southeastern Economic Development Corp. uncovered over $250,000 in secret bonuses the agency's two top executives had paid themselves)
  • Private businesses: nonprofits have to report large payments to private business on their 990s. We were able to estimate the annual revenue of private telemarketing companies based on the payment information in their clients 990s
  • HAve questions?


    email: ktaggart@cironline.org
    phone: 510.809.2204
    @KendallTTaggart