Forecast: Improving Nonprofit Accountability Through Online Technology 

Forecast: Improving Nonprofit Accountability Through Online Technology

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Improving Nonprofit Accountability Through Online Technology

By Claudia Holtzman, Project Director of the Electronic Data Initiative for Nonprofits (EDIN) at Independent Sector
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Interactive websites, e-philanthropy and electronically generated databases have transformed the way nonprofits communicate with the public, grant makers, and donors. Soon, the Internet will change the way charitable organizations interact with government as federal and state agencies forge ahead with "e-services" to become more efficient. Nonprofits should view these advances as welcome opportunities to reduce their paperwork, increase their efficiency in responding to regulatory demands, and improve their organizational effectiveness.

In early 2004, the Internal Revenue Service will offer an option to electronically file, or "e-file", the Form 990 -- the annual information return most nonprofit organizations are required by law to submit to the IRS and to many state charity offices. Over time, "e-filing" will change the way nonprofits collect and report data, and lead to greater consolidation of federal and state regulatory demands on nonprofit and philanthropic organizations.

----> Electronic Data Initiative for Nonprofits (EDIN)

A burdensome, inefficient process of collecting, managing and disseminating nonprofit data motivated several of the nation's leading nonprofit organizations to spearhead a coalition to promote online technology as a means to achieve greater efficiency and accountability in the sector. Representing tens of thousands of charitable groups and foundations, the Electronic Data Initiative for Nonprofits (EDIN) is led by Independent Sector, the Council on Foundations, GuideStar, Inc., National Council of Nonprofit Associations, and OMB Watch, with the Urban Institute's National Center for Charitable Statistics (NCCS) and Surdna Foundation serving as advisors.

EDIN is reaching out to nonprofit organizations, associations, foundations and their accountants and technology providers to build a coalition of support for "modernized e-file" efforts and to encourage software developers to add electronic filing to their Form 990 tax packages for filing the 2003 organizational year returns.

----> Why e-file?

By integrating accounting with report generation, nonprofits will ultimately save time and expense in complying with regulatory requirements. Electronic filing of the Form 990 will result in:

* Greater accuracy
* Reduced paperwork and administrative costs
* Greater efficiency
* More effective use of public resources

----> E-filing: An Important Management Tool

The short-term gains of greater accuracy and efficiency are appealing but the long-term benefits of electronic filing are even more compelling: a complete, timely and accurate database to conduct sophisticated analysis, evaluation and strategic planning.

Drastic budget cuts at the state level require nonprofits to make a strong case for their programs, and to do that requires data. E-filing the 990 will ultimately create a database for nonprofits to analyze and compare operations and programs, benchmark activities, measure outcomes, and establish meaningful performance standards. The Form 990 can be a powerful communications tool; e-filing the 990 can lead to a powerful management tool for nonprofits to increase their organizational effectiveness and sustainability.

E-filing will require nonprofits and their accountants to adopt an even greater commitment to accuracy, accountability and efficiency of nonprofit and government resources. It will require integration with accounting software and integration with state reporting requirements. E-filing in 2004 will be optional but it is likely to be mandatory for many nonprofits some time in the future. Nonprofits, associations and foundations that file 990s should begin now to look at computerized and web-based methods to integrate their accounting with reporting and compliance.

The technology community can help educate nonprofit managers and CFOs on the importance of e-filing and encourage the developers of tax preparation software to add e-filing updates to their Form 990 packages. As the 2004 filing date approaches, the technology community can assist in a successful transition to e-filing by alerting their nonprofit clients to training and workshops on e-filing the 990 and referring their nonprofit clients to EDIN as a resource for information.

With scrutiny of America's institutions at an all-time high, nonprofits have an unparalleled opportunity to increase their credibility and strengthen public trust. Technology consultants can play a key role in this effort by advocating for the adoption of e-filing.


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Further resources:

www.independentsector.org/edin/edin.html

www.guidestar.org/news/features/power01.stm

www.form990.org

coming soon: www.edinonline.org


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About the Author:
Claudia Holtzman is Project Director of the Electronic Data Initiative for Nonprofits (EDIN), a national partnership to promote greater accountability through online technology housed at and administered by Independent Sector, a coalition of leading nonprofits, foundations and corporations strengthening not-for-profit initiative, philanthropy and citizen action. Most recently, Claudia was a consultant to the National Center on Nonprofit Enterprise (NCNE) in Arlington, VA, and to MCI WorldCom Foundation's MarcoPolo: Internet Content for the Classroom, in Reston, VA. She has worked for a variety of nonprofit organizations and associations in the Washington, DC area for the past 20 years, including serving as Director of Communications for Experience Works, Inc., where she helped promote the national nonprofit organization's training, employment, and community service opportunities for mature workers, and as Director of Communications for George Washington University's School of Business and Public Management, where she developed and implemented an integrated marketing campaign to advance the school's relationship with students, alumni, donors and the public. To contact Claudia, email her at [link=mailto:edin@IndependentSector.org] edin@IndependentSector.org[/link].

Tue Aug 19, 2003 9:04 am MST by hross | Email Article | |

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