Are You Transparent?

I recently received an interesting inquiry in my inbox.

A young lady was asked to donate to a 501(c)(3) organization. Upon examining their website and the population they serve, she decided that she wanted to do more than donate. She wanted to become an active volunteer. She met with the Executive Director (ED) at the organization’s office and requested to see a copy of their financials as well as who their donors are. She was taken aback because the ED told her that in order to see those documents, she needed to be a member. She was under the impression that this information was public and could and should be shared. Red flags went up and she contacted KSTB to see if this indeed was a legitimate 501(c)(3) nonprofit organization or a scam.

She did the right thing by contacting us. We informed her that she was indeed correct that the filed Form 990 tax returns of 501(c)(3) charities and the organization’s application for tax-exemption must be made available to the public for three years following its filing. Because the young lady was at the physical office, we further let her know that requests made in person must be fulfilled immediately, or within 30 days for a written request, with no charge other than a reasonable fee to cover photocopying and mailing.

It’s been brought to my attention lately that some nonprofits are not aware of this and become offended and flat out refuse requests. They think that people are being nosey because information on the financial statements include the salaries of directors, officers, and key employees.

The reality is that failing to have this information can reflect poorly on a nonprofit, harming its reputation with the IRS, funders, and the community. To demonstrate a commitment to transparency many nonprofit organizations post their 990 on their websites. The forms can also be viewed on Guidestar.org, CrowdRise, and Network for Good. If all else fails, the information can be requested from the IRS by writing a letter. The IRS generally takes 4-6 weeks to respond, and it may bill you for copying costs.

However, although exempt organizations are required to make their tax returns available to the general public and while donor information has been disclosed
to the IRS on Schedule B, the public inspection copy includes a redacted Schedule B which removes the names and addresses of contributors and only
reports the dollar amounts and description of the donation. Earning trust through transparency and accountability actually goes beyond what the law

requires. Transparency is considered to be a best practice. Not only do those efforts create a more ethical nonprofit organization, but they also build trust
among stakeholders. Additionally, because nonprofits are funded by others, they should also make their board meetings and decisions as transparent as
possible.

Keeping You In the KNOW!
-Dr. Kim