Tax Form 990 Could Impact Donation Decisions for Nonprofits

Erica Harris, an assistant professor of accounting at the Rutgers School of Business–Camden, has received a Faculty Research Grant for $8,750 from the Rutgers–Camden Office for Research and Economic Development to investigate the implications Tax Form 990 has on nonprofit organizations.

“Form 990 is a lot more cumbersome than it’s ever been,” Harris explains. “It asks for many governance variables, for example, if an organization has a written conflict of interest or a whistleblower policy.”

The revised tax form was first required in 2008, Harris says, but was slowly phased in for small and large nonprofit organizations, so some are filling it out for the first time this year.

Since all nonprofit organizations are tax exempt, Form 990 serves to make an organization’s information available to the public. For example, the new form asks for an organization mission statement in addition to both financial and nonfinancial performance metrics.

It’s what the public does with the knowledge that most interests Harris.

“The majority of my research looks at Form 990 to try and figure out if donors use information organizations are reporting on the form to influence their donation decisions,” Harris says. “What I’m hoping to find out is if individuals are withholding donations to organizations that are poorly governed.”

Harris says nonprofit organizations that do not have a conflict of interest policy, for example, could be rated poorly and, as a result, lose donor support.

However, she says she’s not sure that the information required on Form 990 is ultimately beneficial.

“We always think that more information is better, but are we making better donation decisions because we have this new information?” Harris asks.

It’s a question Harris hopes to answer when her ongoing research is complete.

“Many small organizations say they have had to spend additional money to gather the nonfinancial information necessary to complete the form and to implement procedures they are not sure will directly benefit them,” Harris says. “A whistleblower policy is an example of a standard that the largest nonprofit organizations should absolutely have. It’s when we start talking about the smaller organizations that we become unsure of the cost benefit.”

A Haddonfield resident, Harris teaches courses in cost accounting, managerial accounting, and performance management and competitive strategy at the Rutgers School of Business–Camden.

An expert in nonprofit accounting, Harris is also researching topics like auditor reputation and its impact on nonprofit donors, the impact of CEO salary on nonprofit contributions, transparency and nonprofit contributions, and the impact of celebrity donations on other donors.

Harris received her bachelor’s degree from the University of Florida, her MBA from the University of Miami, and her Ph.D. from Temple University.

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