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Using NCCS Data as a Tool for Nonprofit Research. April 4, 2006 Tom Pollak Associate Director National Center for Charitable Statistics at the Urban Institute http://nccs.urban.org. The National Center for Charitable Statistics at the Urban Institute.

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Using NCCS Data as a Tool for Nonprofit Research

April 4, 2006

Tom Pollak

Associate Director

National Center for Charitable Statistics

at the Urban Institute

http://nccs.urban.org


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The National Center for Charitable Statistics at the Urban Institute

  • Repository of IRS data on nonprofit organizations; regular research reports, Almanac on dimensions of sector

  • NCCS created 1981; later, part of Independent Sector’s research division

  • Moved to Urban Institute in 1996 – Nonpartisan economic & social policy research organization

  • NCCS is part of Urban’s Center on Nonprofits and Philanthropy headed by Elizabeth Boris


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NCCS – The Past 10 Years

  • Small team of staff & consultants

  • Leverage through technology & collaborations

  • Building data infrastructure

    • Collecting & standardizing files

    • Putting data online

    • Providing guides and resources to make data accessible

    • The Foundation Center


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NCCS – The Past 10 Years (2)

  • Data quality

    • Electronic Filing of 990s

    • Annual IRS-NASCO Form 990 Meeting

    • Overhead Cost Study & other research

  • Building new data sources

    • GuideStar & IRS collaborations

    • State nonprofit associations, umbrella orgs

    • The Foundation Center


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Nonprofit OrganizationsConcept Map

Registered with IRS but not filing annually

Registered

Registered

501(c)(3) Private Foundations

Other exempt organizations 501(c)(4), 501(c)(5), etc.

501(c)(3) Public Charities

All priv. founaations must register & file annually

Registered AND filing annual returns

Registered & Filing Annually

Registered & Filing Annually

Informal & unregistered organizations & community groups (numbers unknown)


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Dimension #1: IRS Registration

  • Are the organizations registered with the IRS?

    • A neighborhood association, recreation club, or community theater with gross receipts less than $5,000 per year is a nonprofit but is not required to register with the IRS.

  • Religious congregations are not required to register, but many do so anyway.


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Dimension #2: Annual Form 990 Filing

  • Is organization required to file an annual IRS Form 990? (Gross receipts are more than $25,000 & org. is not a congregation.*)

  • All 501(c)(3) private foundations must file annual IRS Form 990-PF forms.

    * Congregations, religious denominations, & closely related organizations are exempt from filing.


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Dimension #3: 501(c)(3)s and Other Exempt Orgs.

  • Are donations to the organization tax-deductible?

    • Public Charities. If donations are fully deductible, then likely to be a “501(c)(3) public charity.” These include most nonprofit arts groups, universities, hospitals, & human service organizations.

    • Private Foundations. If donations are partially deductible, then likely to be a “501(c)(3) private foundation.” These include the Gates Foundation, Ford Foundation, Carnegie Corporation, & 60,000 others.

  • Otherwise, it could be a trade association, labor union, Elks Club, HMO, or a wide range of other “exempt organizations.”


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Dimension #4: Formal - Informal

  • There is no agreement on the outer boundaries of nonprofit “organization”

  • The Formal:

    • Everyone agrees that a private college that files an IRS Form 990 is a nonprofit.


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The Less Formal

Are these “nonprofit organizations”?

  • A neighborhood association that only meets every couple of years and is NOT incorporated?

  • A group of people that get together for a 6-month fight against the building of a Wal-Mart?

  • A group of people who get together once a month for football or to play jazz?

  • What if they call themselves the “Podunk City Jazz and Football Club”? Have a club president? Pay dues? Advertise for new members? Are incorporated?


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Datasets Available

  • IRS Business Master Files

  • NCCS Core Files, based on Form 990

  • GuideStar-NCCS Nonprofit Org Database, based on Form 990

  • IRS Statistics of Income Samples

  • Other Files...


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Good News, Bad News

  • No perfect file. All have limitations

  • If clear about research questions and goals, can usually make good use of our data


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IRS Business Master File

  • All organizations registered as tax exempt with IRS

  • 1.4 million (Jan. ’06)

  • Files available for 1989, 1995-2006

  • Basic descriptive information

    • Mostly from Form 1023 Application for Exemption

    • Gross receipts, assets, tax period from most recent Form 990


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BMF Limitations

  • Missing years in early 1990s

  • 21% of orgs couldn’t be located in a 1990s survey

  • Only the most basic descriptive information

  • Addresses may be out-of-date

  • Some errors on finances

  • Only partial (and probably not representative) coverage of religious organizations


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NCCS Core Files

  • Annual files of organizations filing IRS Forms 990

  • Standard methodology: 1989-2004

  • Public charities, private foundations, and non-501(c)(3) organizations

  • 289,000 in 2003

  • 100+ variables

  • Major financial variables, most types of rev.


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NCCS Core Trend Files

  • “Long and narrow” compilation of small subset of key financial variables from 1989 through latest Core file

  • Available for public charities or private foundations

  • Update for 2004 should be available soon.

  • We can also create custom “wide” datasets with imputed values for missing years


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Core File Limitations

  • No government grants!

  • Missing returns: 1990, 1992…

  • Public charities, private foundations, and non-501(c)(3) organizations

  • 289,000 in 2003

  • 100+ variables

  • Major financial variables, most types of rev.


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GuideStar-NCCS Nonprofit Organizations Database:

“Digitized Data”

  • Key punched independently by GuideStar from images scanned by IRS and purchased by NCCS

  • Finances checked and edited by NCCS

  • NCCS adds classifications, and other fields for researchers

  • All 501(c)(3) public charities filing 990s, EZs

  • FY 1998 – 2003


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“Digitized Data” (2)

  • 400+ variables in multiple files

  • Part 3 program & org. descriptions

  • Part 5 and Sch. A, Part 1 compensation

  • Gov’t grants & full revenue detail

  • Full functional expense & balance sheet detail

  • “Naughty bits”: Other information and Sch. A


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“Digitized Data” Limitations

  • Only public charities

  • Approximately 1% of EINs don’t match IRS’s official list – no easy way to merge with or supplement Core Files

  • Data quality issues in Part 2 due to poor reporting by charities

  • Missing organizations in 1998 due to IRS scanning problems

  • Challenge working with large, complex database


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IRS Statistics of Income (SOI) Samples

  • Annual files of organizations filing IRS Forms 990 -- 1982-2002

  • Public charities, private foundations, and non-501(c)(3) organizations

  • 16,000 organizations in 2002 public charity sample (990 filers plus & 500 EZ filers)

  • 400+ financial variables for 990 filers


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SOI Samples (2)

  • All orgs with $30+ mil. in total assets

  • Sample of others, and very few EZ returns

  • Skilled editors adjust rev., exp. & bal. sheet line items

  • Ideal for national studies of finances of large organizations


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SOI Limitations

  • Field names (“P010”) difficult for researchers (although easier for “array processing” in SAS)

  • Editing/changing of items is both a strength and a weakness

  • No access to confidential 990-T information on unrelated business income without “special sworn status”


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Other Files

  • Unified Database of Arts Organizations – combines IRS, state arts agency mailing lists, and other sources

  • Itemized household giving by zipcode, 1997

  • “501(h) electors” – Organizations that report their advocacy expenses under special IRS rules

  • 1992 program descriptions from IRS 990 Parts III & VIII



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NCCS Resources for Researchershttp://nccs.urban.org

  • Researcher’s Guide to NCCS Data

  • Database file descriptions

  • KnowledgeBase, FAQ+ include technical notes, “snippets” of information, and more

  • Table Wizards, fact sheets and state profiles

  • The DataWeb

  • Classification Tools


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Getting Access to NCCS Data

  • The problem with intellectual property:Marginal costs for distribution is zero but cost to create is large

  • NCCS mission is to make data available for research purposes

  • Until several years, we made all data available for free to researchers, but can no longer afford this “business model”


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NCCS Data: Our Costs

  • Tranforming raw data into researcher-friendly databases

  • Cleaning the financial data

  • Purchase of rights to GuideStar data

  • Ongoing classification

  • Processing data requests

  • Technical support to users & the IRS, Creating & maintaining the DataWeb

  • Outreach & data quality work

  • And more…


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NCCS Data: Your Costs

  • If seeking funding for research using our data, PLEASE talk to us first about including real cost of data in your funding proposals

  • DataWeb access but no data extracts:

    • Free for students and scholars for research purposes

    • Cost for Digitized Data – nominal

  • For unfunded projects, typical cost in the $100-500 range depending on number of databases, with discounts based on need (“the impoverished student” loophole)


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Classification

  • NTEE organization-level classification

    • National Taxonomy of Exempt Entities

    • Purpose, type and major function of orgs.

    • Translates to federal government’s more general NAICS codes

  • Nonprofit Program Classification (NPC)

    • Program level activity codes

    • 1 mil.+ programs

    • NCCS implemented using auto-coding systems


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Classification Quality

  • NTEEs

    • 90% at major group level

    • All records given a NTEE confidence code

    • 800,000 records with firm codes, another million with “draft” auto-codes

  • IRS Activity Codes

    • NCCS discourages use

    • Old IRS self-coding system

    • Useful information

    • 3 per org. assigned: 1st is best


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NTEE Classification

  • National Taxonomy of Exempt Entities (NTEE) created in early 1980s

  • Hierarchical:

    • 10 major categories: From arts, environment, education, health care, human services, & lots of “others”

    • Broken into major groups (letters of the alphabet)

    • 600+ “decile” and “centile” codes

  • Example:

    • Major group “P”: Human Services (general)

    • “P6”: Emergency Assistance

    • “P62”: Victims’ Services


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NTEE Classification

  • National Taxonomy of Exempt Entities (NTEE) created in early 1980s

  • Used by NCCS, Independent Sector, the Foundation Center

  • Starting in 1998 IRS “determination specialists” began assigning codes to new organizations – quality an issue

  • IRS SOI classifications started independently around the same time for SOI sample

  • NTEE-XP used by Foundation Center

  • “Condensed” NTEE-CC (only 600 codes and no “common codes”) created for IRS by NCCS


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A - Arts, Culture, and Humanities

B - Education

C - Environmental Quality, Protection, and Beautification

D Animal-Related

E - Health

F- Mental Health, Crisis Intervention

G- Diseases, Disorders, Medical Disciplines

H - Medical Research

I - Crime, Legal Related

J - Employment, Job Related

K - Food, Agriculture, and Nutrition

L - Housing, Shelter

M- Public Safety

N - Recreation, Sports, Leisure, Athletics

O - Youth Development

P - Human Services - Multipurpose and Other

NTEEs

Q - International, Foreign Affairs, and National Security

R - Civil Rights, Social Action, Advocacy

S - Community Improvement, Capacity Building

T - Philanthropy, Voluntarism, and Grantmaking Foundations

U - Science and Technology Research Institutes, Services

V - Social Science Research Institutes, Services

W - Public, Society Benefit - Multipurpose and Other

X - Religion Related, Spiritual Development

Y - Mutual/Membership Benefit Organizations, Other

Z - Unknown/Unclassified



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Getting Started with the DataWeb

  • Become a registered user at http://nccs.urban.org or email [email protected]

  • One-Minute Tours on the Data Web

  • Guide to Using NCCS Data



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NCCS & IRS E-Filing

  • July 1999 – Began e-filing project(IRS schedules e-filing of 990s for 2007)

  • Feb. 2002 – Live in Pennsylvania with Desktop990 (990 and state forms)

  • Oct. 2002 – Colorado added

  • Feb. 2004 – IRS goes live with e-filing 990s; NCCS unveils 990-EZ Online

  • Feb. 2005 – NCCS unveils 990 Online. To date, nearly 9,000 returns created.

  • Jan. 2006 – IRS requires largest orgs to e-file, implements Fed-State Retrieval System, 7 certified 990 e-filing providers

  • March 2006 – New infrastructure supports multiple states, state-only filings, & morec


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990 Online:The TurboTax for Nonprofits!

  • Web-based system for preparing Form 990 and e-filing with IRS

  • Immediately improves quality of reporting

  • More than 9,000 returns created

  • Free

  • Easy to use

  • Drop-down menus, calendars for selecting items & dates

  • Program takes care of all arithmetic

  • Verifies that all required items are included

  • Context-sensitive links to IRS help and expert tips


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990 Online

  • Generates an Adobe PDF for easy printing, saving

  • Electronically file with the IRS

  • Adding state forms now

  • Secure

  • Import common schedules from Excel

  • Data in usable format

  • Saves data from year-to-year

  • No duplication of entries: Questions are asked only once



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990s, EZs, Extensions…Import Information from Last Year’s Return




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The Future of E-Filing

  • Integration of federal and state e-filing systems

  • Dramatic improvements in quality of information that nonprofits put on forms

  • Dramatic improvements in ability of regulators to ensure quality of data by checking for missing items, checking ratios, etc.

  • Decline in costs of communication from regulators if can be done electronically

  • Save tens of millions in key punching costs

  • Open door to better use of 990s for outcome measurement, use by umbrella associations, and researchers


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New Projects: Helping New Organizations Register with the IRS

  • NCCS working on development of web-based Form 1023 Cyber Assistant – application for tax-exempt status – for IRS

  • Provides assistance for preparer, like 990 Online

  • Goal is better quality applications; also usable data


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Using 990 Data for Financial Analysis: Themes IRS

  • “All 990 Data is Not the Same”: Some 990 items are highly reliable and valid; others are not

  • No single “nonprofit sector”: Almost always need to distinguish large & small

  • Sector vs. panel analysis

  • Fiscal vs. “Core”/”circa” years


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No Single Nonprofit Sector: IRSDistinguishing Large and Small Orgs in Analyses

  • Financial profiles are very different

  • If aggregate large and small,large will overwhelm and distort small orgs’ finances

  • Combine medians,ratios, and panels instead of aggregating dollars


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Good Parts, Bad Parts IRS

  • Part 1 Revenues: B+

  • Part 2 Functional Expenses: C

  • Part 4 Balance Sheet: A-

  • Parts 4-A & B: A-

  • Part 5 Compensation: B

  • Part 7 Income-Producing Activities: C


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Part I: Revenue IRS

  • Gross receipts vs. total revenue

  • Government grants or contracts?

    • Audited financials’ “grants and contracts”

    • Statutory need to distinguish & redefine government grants

  • Read the instructions!

    • Private contributions

    • Dues

    • Special events


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Part I: Net Income IRS

  • “Excess (or deficit) for the year” – line 18

  • Beware of this number: Unstable from year to year

  • The effect of multi-year grants, inkind contributions, etc.


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Part II: Functional Expenses IRS

  • 990,not EZ

  • What’s fundraising?

    • 37% of orgs reporting more than $50k in direct private contributions reported ZERO fundraising costs!

    • Urban Inst./Indiana Univ. Center on Philanthropy Overhead Cost Study

    • http://www.coststudy.org

  • Guidelines clear but POOR reporting, understanding


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Part II: “Other Expenses” IRS

  • More than 30% of "other expenses" could be allocated to one of the existing lines on the Form 990.

  • More than 1/3 of the amount reported by the sample in "other expenses" were for consulting services.

  • Other major categories included occupancy costs (already on the 990), advertising, and insurance.


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Part IV: Balance Sheet IRS

  • Best section on 990

  • Closely corresponds to audited financials

  • Weaknesses: No distinction between current and long-term assets and liabilities

  • No “quasi-endowments” or board-designated funds distinguishable

    • Use investment assets as proxy?

  • Liquid assets: all but real estate and equipment?


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Part IV-A & B: Reconciliation with Audited Financials IRS

  • Can be very useful if small sample

  • On latest SOI file?

  • Not in Digitized Data

  • Donated professional services

  • Unrealized gains and losses from investments


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Part VII: Income Producing Activities IRS

  • Gross under-reporting of Medicare and Medicaid revenue. Why?

  • Nobody wants to pay Unrelated Business Income Taxes

  • Only available on SOI files


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“Core/Circa” vs. Fiscal Year IRS

  • Fiscal year: Only returns with ending period in given fiscal year: 12/31/2005 and 6/30/2005 = FY 2005

  • Core/Circa Year: Latest return received within past 2 years

  • SOI Year: (Almost) only returns STARTING in given calendar year.

  • Choice depends on research question, availability of data


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Geographic Analysis IRS

  • Street Addresses

    • 23% are PO Boxes in BMF

    • 27% in Core files

    • All but several hundred have 10-digit zipcodes

  • County FIPS codes, using 5 digit zipcodes

  • MSAs derived from FIPS


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Challenges IRS

  • Headquarters vs. service delivery area

  • National offices, local branches

  • Community good or ill?

    • Group homes vs. services for residents

  • What’s missing?

    • Depends on the study

    • Missing food pantries, small arts orgs

    • Religious service organizations – maybe

    • Government services


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Using NCCS Data for Surveys IRS

  • Mail surveys

    • 21% of BMF orgs. cannot be located (non-filers)

    • GuideStar “digitized data” vs. Core Files

    • Use GuideStar data for contact names

  • Phone surveys

    • Use GuideStar data for phone numbers & contact names

    • Challenges reaching large organization Exec. Directors


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Which Sampling Frame? IRS

  • Start with population, and start excluding…

    • Include unstaffed organizations? (personnel costs as indicator)

    • Include trusts?

    • Include supporting organizations?

    • Include orgs with national or non-service focus?

  • Start with narrowly tailored group of operating organizations?


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Response Rates IRS

  • 50% possible, but very difficult and expensive

  • Pre-Tests and Cognitive Interviews

  • Dillman multi-modal approach: repeated mail & phone contacts

  • Use of incentives?

  • Internet option is easy, but don’t depend on it

    • NCCS weakness: No email addresses!

    • But outside services are option to explore


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