Knowledgebase

Description:Researchers and representatives from the Research Council of the Association of Fundraising Professionals convened in late 1998 to discuss work that needed to be done to better understand fundraising and administrative costs in the nonprofit sector. Initial analysis of IRS Form 990 data pointed to a significant reporting problem in the sector. The Center on Philanthropy at Indiana University and the Center on Nonprofits and Philanthropy at the Urban Institute agreed to work together to develop and carry out a broad research project aimed at increased understanding of the issues surrounding overhead costs and informing the sector and policymakers.

The project includes four types of data collection. The first uses data reported annually by more than 250,000 501(c)(3) public charities on their IRS Form 990 and collected by the National Center for Charitable Statistics. Data on the Forms 990 includes such financial information as total contributed income, fundraising expenses, and special event revenue and expenses. Second is responses from one thousand five hundred nonprofit organizations to a survey geared toward learning more about their cost accounting practices and the details of their fundraising and administrative expenses. Third, we conducted nine in-depth case studies of representative organizations in order to better understand the dynamics of and thinking about overhead costs and cost accounting in nonprofits. Fourth, we surveyed 50 professional nonprofit accountants and auditors so that we could better understand their current and future role in accurate cost accounting and reporting.

The project was featured in the December 2003 issue of Philanthropy Matters.