Wednesday, October 11, 2006

IRS Scrutiny of Nonprofits

One of the important strategies we feel would benefit the Parkway is to have it managed, through contract with government, by a nonprofit organization which could provide the dedicated funding and management focus now lacking.

In that sense, the increased scrutiny of the nonprofit sector this article examines is a good thing, as it is important that nonprofits be held accountable to the high standard all public organizations should meet.

For just one example: in this era of easy online access to information it should be incumbent upon all public organizations, including nonprofits, to provide detailed annual reports including financial statements, on their websites.

An excerpt.

IRS Takes a Tougher Stance
The tax agency's new approach sparks concern among charities
By Elizabeth Schwinn Washington

The Internal Revenue Service has a message for charity officials: Cross the line, and the odds are higher than ever that you'll get caught.

The agency has been increasing the number of nonprofit examinations it conducts each year, as well as taking other approaches aimed at showing charity leaders, the public, and Congress that it means business.

"We're touching a significant number of organizations and a significant cross-section of different types and sizes of organizations," says Lois G. Lerner, director of the IRS's exempt-organizations office. "Charities need to be aware."

In the past five years, Ms. Lerner's division has added about 100 full-time employees, bringing the total to 905 workers. Most of the new employees have been added to the audit division, which grew from 432 full-time workers in 2001 to 501 this year.

The IRS expects to complete audits of about 6,000 organizations this year, as well as contact another 5,000 groups through a new review process that is less time-consuming and comprehensive than an audit — but that requires them to clarify or correct information submitted to the tax agency.

'More Audit Activity'

Even with the increased enforcement, the percentage of organizations contacted by the IRS within a given year remains small — about 2 percent of the roughly 650,000 nonprofit organizations and foundations that are expected to file informational tax returns with the agency in 2006.