Liberating 990 Data

How do I know I'm a philanthropy wonk? The title of this post thrills me, that's how I know.

I'm crossposting what follows from Beth Noveck, co-author of the Aspen Institute paper on Liberating 990 data. I'm tuning in to the live stream, making sense of my scribbles which I marked all over the paper and will be back here soon with my thoughts on this.


From Beth Noveck

Every year in the United States approximately 1.5 million registered tax-exempt organizations file a version of the “Form 990” with the IRS and state tax authorities. While the questions vary between the version for private foundations or small nonprofits, the 990 collects details on the financial, governance and organizational structure of America’s universities, hospitals, foundations, and charities to the end of ensuring that they are deserving of tax exempt status. These organizations, which together pay $670 billion in wages and benefits annually, create America’s education, culture, art, religion, science, and provide many of the social services upon which our communities depend.

With a national movement in the U.S. to shrink the role of government, non-profits may be expected to expand their programs as they step in to fill essential needs. The role of nonprofits may now become even greater – and deserving of greater scrutiny. 
The data that the IRS collects about nonprofit organizations present a great opportunity to learn about the sector and make it more effective. Yet this data could be made far more useful than it is today. It’s time to “liberate” 990 data and make it easier to gain insight into the workings of America’s nonprofits.

The IRS does make nonprofits’ Form 990 returns available, but only on DVDs for a high fee. A single year’s worth of 990s costs over $2,500, arguably to recoup the costs of pressing and mailing all these dics. But there is no reason to charge for the Form 990 data at all. Just as most people have gotten accustomed to sharing large files via a service like Drop Box, it would be simple for the IRS to publish the returns online for anyone to download in bulk for free. This week two groups committed to government transparency, Public Resource and the Internet Archive, used their own resources to post 12 years of returns online, demonstrating that it can be done.

As President Obama declared on his first day in office, “Information maintained by the Federal government is a national asset,” and IRS data on nonprofits is important and valuable information that should be available to everyone.

The DVDs are only part of the problem. Even if you can afford to buy the DVDs with Form 990 data, as some organizations and news media do, the data on them is contained in image files, which are created by scanning the printed Form 990s rather than putting their data into a searchable database. Image files are useful only for reading about one nonprofit organization at a time. The sector deserves comprehensive and computable data that can be openly aggregated, searched, checked, and analyzed. 
In the long run, as a condition of being a nonprofit, organizations should be required to file the Form 990 electronically, rather than on paper, and the IRS should publish those returns in formats that lend themselves to doing aggregate analytics, creating visualizations and building analytic tools.

The IRS can start releasing in a timely fashion the data it holds that is filed electronically in computable form without waiting until all returns are electronically filed. There’s some debate about how much authority the IRS has to make changes like this on its own, and whether they would require Congressional action. Others argue that under the Freedom of Information Act, they must release the data. But we don’t need to wait for either a legal battle or for the IRS or Congress: The groups that now independently analyze IRS data can and should take the lead.

Evaluation at The Hewlett Foundation

The Hewlett Foundation has just posted an internal working paper on evaluation on its website. I love this - an internal working paper posted on an external website (helloo, sharing!)

The paper is well worth a read. The link is a bit buried on the site, deep into an interview with Fay Twersky the new head of Hewlett's Effective Philanthropy Group,  but the interview with Fay  (co-author of the paper) is also worth the read. Perhaps this practice of interviews with Program leadership and sharing of their internal papers will become common practice for foundations. 

The paper is useful for grantees, evaluation partners, and other foundations. I particularly value the succinct declaration of principles for evaluation, which I've paraphrased below:

Seven Principles of Evaluation at The Hewlett Foundation

1. Lead with purpose (Know why you are doing it - what will the evaluation results inform?)
2. Evaluation is a learning process (so prepare to learn, change, adapt)
3. Evaluation is part of the strategy process (and should start at the beginning)
4. Make strategic choices about what to evaluate (not everything is worth evaluating)
5. Choose methods to maximize rigor without compromising relevance (do it as best you can while making it useful)
6. Share the results!
7. Use the data!

You can download the paper here. 

Let's hope this kind of information sharing is the start of a trend.

The fight over the charitable tax deduction is a red herring

The following post went "live" on December 17, 2012 by accident, because I had mistakenly mis-set the posting function from "Draft" to "Post." I took it down because what went live really was a draft - I spent several days rewriting it. I'm re-posting it now because, for a variety of reasons, I'm not getting any further on my intended re-write and didn't want to lose this set of thoughts completely.
(Lucy Bernholz, January 24, 2013)

******
A recent report found Harvard University paid its money managers (of which there are fewer than 100) more than it paid its arts and science faculty (of whom there are 450).This led several wise-cracking Twitterers to note that Harvard had become "A giant hedge fund with a little school attached."

I laughed, then sighed. But I couldn't stop thinking about it (and not just because I am required by the nature of my undergraduate diploma to find every opportunity to laugh at Harvard).

Even if this is what Harvard has become, is such a cross-subsidy model really so bad? If the endowment didn't earn so much, think of how high tuition would be and how little financial aid would be offered.

One service (ad delivery) cross-subsidizing another service (information delivery) worked to support newspapers for over 150 years. Journalists and democracy theorists now bemoan the loss of that cross-subsidy while worrying about the future of news.

We live in a time when the CEO of an organization called the Nonprofit Finance Fund is quoted in The New York Times saying “The actual distinction between the two sectors, for-profit and nonprofit, is starting to collapse.” If this is becoming true, even if just in terms of revenue models, then it's high time to think about what purpose the distinction between sectors once made, and what will be lost by the blurring that is happening.

So the question ought not to be "Shall we save the tax deduction or not?" but "Why, when, and how do (and should) we use private resources for public benefit?" 

Then we can move on to asking "Do we want or need to provide policy incentives to encourage people or corporate entities to use their resources in certain ways?"

I understand this is a much bigger question and thornier policy design challenge than modern day politics makes possible, particularly while edging closer to falling off a fiscal cliff. But, as Ethan Zuckerman has pointed out as part of the future of journalism discussions, ifyou set out to solve the wrong problem, you're probably notgoing to come up with the right solution. Asking the right question provides part of, perhaps the most important part, of a good answer.

Whatever the current budget negotiations yield for the future of the charitable contributions deduction, let’s realize that a resolution on the question is but a start to a series of bigger and larger questions about the future of the nonprofit sector.  If the charitable contributions deduction remains unchanged, the larger forces at work are already changing the fundamental dynamic at the heart of deploying private resources for public benefit.

Go back and consider the power of that cross-subsidy. When it comes to information and data as a resource for good, we've reached an interesting point. Nonprofits are under enormous pressure to earn money from their data. The likely action for many has been to keep data out of the free/public/open realm for as long as they can while they try to earn money from it. But the commodification of data is a train that has left the station, even if nonprofits are racing to keep a step or two ahead with what they can charge.

Interestingly, commercial technology and data companies - which operate on far larger scale and with much greater resources - often donate their tools and talent to social causes. These actions are subsidized by their paying customers outside the social realm. They don't need to earn revenue on their social sector actions - they're doing this work to do good and keep their employees engaged. Many of them see data as a public benefit and are leading the charge for open, free sharing of the data they help collect, manage, or analyze. 

Ironic, eh?  For-profits push for information to be free (and sometimes call it corporate philanthropy or corporate social responsibility, or occasionally social enterprise), non-profits stand back and try to make money off of data.

If you were a policy actor who believed that the provision of data in a transparent and usable fashion was an important lever of change, what decision would you make about how best to serve the public? Would you champion the efforts of nonprofits or of commercial entities?  How is the public best served? Where do the resources come from? What kind of subsidies, and cross-subsidies, are really at work here? This is the weird new world we live in, and the one for which we need to be writing new rules. Data use and ownership rules are the key to this future, not tax deductions for charitable contributions.

The question of how we use our private resources for public benefit is inherently linked to its sister question - how do we use our public resources (tax revenue) for public benefit (services)? This is, of course, the question that dominated the last election (and the current fiscal cliff negotiations).

We may well decide, as a society, that we want to encourage people to give their private resources for the public benefit. And we may decide that some kind of policy incentive is needed to do that. But it is not the case that the current scheme of tax deductions or exemptions are the only tools we have to use for these purposes. These tax rules are the legacy of 100 years of policy horse trading, and like many other rules, are strongly supported by the established constituencies that have grown up around them. 

They are not the only way of addressing the problem, assuming the problem is identified correctly. 




(The above is mostly about revenue and business models. I'm deliberately not going into issues of governance, choice, freedom of expression, and the associative role of certain organizations. This is a blog post, not (yet) a book. My thanks to Rob Reich (@robreich) for his editorial input on this post)

Data for us all

The 2013 Blueprint relied on a number of data sources, including the fourth annual Nonprofit Finance Fund's survey. That survey relies on you - please take 10 minutes between now and February 15 to fill out the survey for this year. (View previous year’s findings and media attention here.)

To take the 2013 survey, please click on this link before February 15th!: nonprofitfinancefund.org/2013survey. There is also a live link on the homepage of NFF’s website.
Feel free to pass on the link above to nonprofit managers you know—the more survey respondents, the more representative and accurate the findings will be.

NFF analyzes the results and provides them to all of us—nonprofits, government, foundations, lending institutions, media, and umbrella organizations—in late March. Survey respondents who choose to give their contact information will receive the results directly. I know I'll be checking the results as I prepare for Blueprint 2014.

The ground beneath philanthropy

I've been reading a lot about Aaron Swartz. He's a young man, 26, who helped build several of the online tools we use today (RSS, Reddit, OpenLibrary) when he was still in his teens. A polymath, history was a passion of his. Learning was a passion. Open access to information was, it seems from what I've read, his raison d'etre. His driving passion. He did many things to change how information is shared, including, allegedly, hacking into proprietary systems and freeing the information. For this, the owners of those systems (both nonprofit organizations, FYI) dropped their charges against him. One of those involved (JSTOR, a nonprofit provider of online academic articles) has subsequently freed a small portion of its materials. But all the charges weren't dropped, the tech and open access communities are furious, and his parents are blaming the FBI's relentless, aggressive "example-making" prosecution. An effort is underway to remove the US Attorney in charge of the prosecution, some are calling for a pardon, and academics are using the tools they have (ideas, papers, pdfs and twitter) to pay tribute at #pdftribute.

Because Aaron hanged himself on Friday, January 11.

I didn't know Aaron or his family during his life and I don't want to pretend to know him now. I am hesitant to jump on a private family tragedy and wax philosophical because I know how infuriating that can be to those in the midst of intimate sadness.

But Aaron's life was dedicated to the cause of information freedom, and I want to comment on that. I need to say this - our rules about information are clearly, clearly broken. For acts done to further a cause, we have now seen overzealous prosecution result in death. (We've seen this before in other eras, around other rights).

Wise artists, writers such as Bruce Sterling and Cory Doctorow, have been telling us this would happen for years (artists always see the future first). Organizations such as the Electronic Frontier Foundation, Demand Progress (founded by Aaron), Creative Commons and others are the rights advocates of our times.

Our rules about information have been rules about ownership. How we use information, give it, charge for it, share it. These rules are changing, due to the efforts of people such as Aaron. They must change more. How that happens will not be easy or simple. Big institutions will lose lots of power when we make the changes we need, but we can all hope it doesn't involve any more death.

When we talk about shifting how we own, give and share things, please realize this is the ground - moral, normative, and legal - upon which our systems and practices of philanthropy are also based. Aaron's fight is our fight. The ground is shifting. Pay attention.

Blueprint 2013 Now Available!

My fourth annual industry forecast, Philanthropy and the New Social Economy: Blueprint 2013, is now available from GrantCraft, an initiative of The Foundation Center and the European Foundation Centre. And for the first time, it's free for download. This is made possible by GrantCraft which has committed to making the Blueprint widely available and encouraging debate and discussion of its predictions and trend forecasts.


GrantCraft joins my original (and continuing) partners in this endeavor, The Stanford Social Innovation Review and Stanford University's Center on Philanthropy and Civil Society.

I have high hopes for how the Blueprint will improve as I gain insights from working with both Foundation Centers and their members/supporters/users. While the Blueprint has always had an American focus, I am particularly excited about the possibility of a more global conversation and, possibly, more global "blueprints" down the road.

Please download, read, pass on, and comment on the Blueprint over at the GrantCraft website and on the PhilanTopic Blog. There you will find inaugural comments about the forecast from Brad Smith (The Foundation Center) and Mari Kurashi (Global Giving Foundation) with more to come over the next months. We're moving toward a more global discussion - I hope you will join us!

(Previous Blueprints are available here)