NCCS receives an annual extract of the IRS's Return Transaction File (RTF) of Form 990, 990-EZ, and 990-PF filings, which becomes the basis for Core PC (public charities), Core PF (private foundations), and Core CO (nonprofits other than 501(c)(3)) files. The general process used to create the Core files are:
1) Duplicate returns and returns older than two years are removed from RTF data, keeping the one most recent return record per organization employer identification number (EIN).
2) EIN’s that are missing from the RTF but have filed a return within two years are added from the previous year’s Core file to better represent a full (circa) filing year.
3) Organization name, address, and other identification fields are added to each record. The data is further supplemented with classification fields, including: NTEE primary and secondary codes, IRS subsection and foundation type codes, and FIPS.
4) NCCS conducts an extensive verification process to correct keypunch and reporting errors. All dollar values are systematically checked for mathematical errors, magnitude errors, and inconsistencies with prior-year data. Over 50 different criteria are used to identify potential errors.
5) As many as 4,000-6,000 records will be flagged as having actual or suspected errors each year The RTF does not contain all of the variables needed to systematically correct most errors, so the majority of these returns are re-keypunched by NCCS and systematically verified again.
6) Manual review becomes necessary for records that are flagged a second time for errors. The resources needed to manually compare the thousands of flagged records to scanned return images are prohibitive, so efforts are focused on returns with the largest/most obvious problems. Less than 1% of the original RTF records will be manually verified. However, manual verification of 926 records in the Core 2005 PC file changed total assets by almost $1 billion.
Form 990 returns are manually verified if they meet one or more of the following criteria:
a) Math and Magnitude Check –the difference between actual and expected values of a dollar field is greater than $1 million AND represents more than a 25% variance from the expected amount;
b) Large Organizations – a math and/or magnitude error of any size is found and any dollar field contains a value greater than $100 million;
c) Prior year comparison – the beginning balances of assets, liabilities, or net assets does not equal the ending balances in the prior year; or total revenues, expenses, assets, liabilities, or net assets is 80 times greater or smaller than reported in the prior year and the difference is also greater than $2 million.
Form 990-PF returns are manually verified if they meet one or more of the following criteria:
a) Math and Magnitude Check –the difference between actual and expected values of a dollar field is greater than $1 million AND represents more than a 25% variance from the expected amount;
b) Large Organizations – a math and/or magnitude error of any size is found and any dollar field contains a value greater than $1 billion, or has been identified for annual review (due to size or significant characteristics);
c) Prior year comparison – the beginning balances of assets, liabilities, or net assets does not equal the ending balances in the prior year; or total revenues, expenses, assets, liabilities, or net assets is 80 times greater or smaller than reported in the prior year and the difference is also greater than $2 million.