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Financial Measures in Nonprofit Organization Research: Comparing IRS 990 Return and Audited Financial Statement Data

Terry W. Knoepfle

North Dakota State University

Thomas H. Pollak

National Center for Charitable Statistics Center on Nonprofits and Philanthropy

The IRS 990 Return is becoming an increasingly prominent source of financial data underlying descriptions of the nonprofit sector and studies of nonprofit organizations. However, questions about the quality of the data continue to be of concern. This study of 350 nonprofit organizations investigates the adequacy, reliability, and appropriate interpretation of IRS 990 Return data through comparisons of selected entries with corresponding measures from each organization’s audited financial statements. Both quantitative and qualitative methods are used to examine and explain the consistency between the two data sources. The study concludes that the IRS 990 Return can be considered an adequate and reliable source of financial information for many types of investigations, but preparers and users of the data need a clearer understanding of its purposes to enable appropriate interpretations.

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