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How to Make the 990-PF A Better Communications Tool


While reading the Commonwealth Fund’s 2010 annual report essay by John E. Craig, Jr., executive vice president-chief operating officer, someone whose writings I enjoy because he seems to appreciate the fact that financial officers can contribute considerable knowledge to the workings and values of foundations in America, I came across a startling fact.

According to Craig, in 2008, U.S. foundations spent the equivalent of $675 million in costs associated with preparing and filing their form 990-PF tax returns.

As he writes, “To put this number in perspective, it is the equivalent of the required payout for charitable purposes of a perpetual foundation with $13 billion in assets. Such a foundation would be the second largest, falling somewhere in between the Bill and Melinda Gates Foundation and the Ford Foundation.”

Money aside, what really got my interest is Craig’s assessment — that I imagine few would quibble with — that the 990-PF does little in his words to promote “accountability and best practices in the foundation sector.”  Thankfully, he has some very interesting suggestions to make the 990-PF a more valuable document, including as a communications tool for foundations.

Craig notes that as it is currently constituted, the 990-PF is “unnecessarily long, complicated, and poorly organized, with little attention to the needs and priorities of its users.”

He believes that the 990-PF should actually “provide the ancillary function of generating a valuable database for researchers, journalists, and policy-makers.”

He’s quick to add, though, that trying to use the current form “for such purposes reveal its deep flaws: too often, the information requested is of little current relevance…and the complexity of the return make it a researcher’s nightmare.”

So what would he do?

Here is Craig’s  list — taken from a much longer set of recommendations for overhauling the 990-PF –- that would address its current shortcomings as a communications tool:

–Craig believes foundations need to break out expenses to show a more useful picture to readers of how much is spent annually on grants and direct charitable activities, and which expenses are for grants administration, endowment management costs, unrelated business costs, and general administration.

–He also says “the return should be used to prod foundations to use Web sites to report information on their programs and performance that cannot be readily conveyed on a tax return.” For example, he suggests a question be added to the 990-PF that asks whether the foundation maintains a Web site, and if so, to request its url.

He cites a Foundation Center study that only 26 percent of foundations have Web sites. And it’s not just small foundations. Even those “with assets of $100 million or more, 31 percent do not have a Web site, and among foundations with assets between $50 million and $100 million, the shortfall is 51 percent. Only 16 percent of foundations with less than $5 million in assets have an online presence.”

Once again, I can’t quibble with Craig’s plea that:

Surely in the Internet age, maintenance of a Web site that discloses basic information on the foundation’s activities, governance, and management should be a fundamental test of accountability.

–Craig also thinks a more thoughtfully designed 990-PF, and one that they  would have the option of filing electronically, would allow foundations to meet the reporting requirements about their missions, goals, strategies, and results by linking “the informational requests of this section of the return” to their Web sites.

He wisely notes that change would likely result in “more comprehensive, timely, and accessible reporting of the information than a tax return could ever achieve. The 990-PF should push foundation communications in this direction.”

–Another of Craig’s recommendation would both make it possible for foundations to e-file, and, at the same time go beyond the minimal reporting requirements. That could be done, he says, by permitting those foundations already doing so (and hopefully more will follow) to link to the grant information they are posting online nearly in real time via the Grantsfire and eGrant Reporter systems.

Says Craig:

By taking this step, the 990-PF would no longer serve as a print repository for lists of grants made by individual foundations. Instead, raw data on grants by individual foundations would be available on their Web sites, while cleaned and structured data would be available through the Foundation Center’s electronic databases. Foundation transparency would be enhanced, while the currency of data provided to the Foundation Center would be greatly improved.

Still, of the many thoughtful recommendations, my favorite:

The basic return should be as short and uncomplicated as possible and written in plain English.

Amen.

–Bruce Trachtenberg

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