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The Electronic Data Initiative for Nonprofits By Tech News Staff Writer Early this summer, a coalition of organizations representing tens of thousands of charity groups and foundations nationwide, kicked into high gear in its work on the Electronic Data Initiative for Nonprofits (EDIN). The goal of the coalition is to promote online technology as a means to achieve greater accountability in the nonprofit sector.
"Accuracy and quality information are our chief concerns," says EDIN Project Director Claudia Holtzman. "EDIN is about directing public resources towards enhancing the transparency of charitable organizations and advocating for modernization within the government and nonprofit sector to achieve greater efficiencies." First Objective: Electronic Filing of Annual Information Returns Interactive websites, e-philanthropy and electronically generated databases have transformed the way nonprofits communicate with the public, grant makers and donors. Soon, the Internet will affect how nonprofit and philanthropic organizations interact with the federal government as "e-services" become available as a means to comply with federal and state regulatory agencies. The Internal Revenue Service has announced that nonprofit organizations will have an option next year to file electronically their Form 990 or 990EZ – the annual information return required by law. In coordination with the IRS' schedule, EDIN plans to launch a national communications campaign to educate nonprofits and their accountants on the availability and importance of e-filing. Says Holtzman: "E-filing annual reports to the IRS will ease the reporting burden and lead to more accurate, timely and easily accessible information that will help strengthen public trust in the sector and increase nonprofits' credibility." Why E-file? EDIN believes that a strong argument for individual nonprofits to embrace e-filing is efficiency through modernization. Integrating accounting with report generation will ultimately save nonprofits time and money in complying with regulatory requirements. EDIN identifies a number of advantages to e-filing the annual information returns: Reporting and Disseminating Nonprofit Information The current system for reporting nonprofit data is a costly, time-consuming process. It begins with most forms being completed and produced on computers by nonprofits (or their accountants) using tax preparation software. These forms are then printed out and mailed to the IRS, which scans them as images that are kept at the IRS for regulatory purposes. The forms are also provided to GuideStar and the NCCS. GuideStar converts the images to a PDF format and posts them on its website. Additionally, GuideStar keys in the information on the form and creates a database. GuideStar then shares that information with NCCS for research purposes and makes it available to others for commercial purposes. At the state level, the process is also time-consuming. Most of the 38 states that require charities to register, accept the Form 990 as well as require additional information. So once again, a hard copy of the 990, along with other information, is mailed to the state's charity office, which keys in the information for its own state database for regulatory purposes and public disclosure. "This convoluted system is outdated and inefficient, and does not take advantage of the Internet's ability to integrate software with electronic communications," says Holtzman. It also compounds the potential for data reporting inaccuracies. It is not uncommon for the IRS to receive incomplete Form 990s in which fields are left blank. But e-filing will have internal checks in place. For example, in the case of a nonprofit leaving a required data field blank, the online form will issue an error code that will prompt the nonprofit or its accountant to complete that field before the form can be submitted to the IRS. "Electronic filing will be a major milestone in improving the process of nonprofit data collection," says Holtzman. Coordinating with Government Agencies EDIN believes that e-filing at the federal level will be a useful step towards consolidating federal and state reporting requirements on nonprofits to submit information. In addition to communicating the importance of e-filing to IRS senior officials, EDIN is working with the National Association of State Charity Officials (NASCO), which supports e-filing at the state level. Currently, 38 states have filing requirements that differ from that of the IRS. Nonprofits located in these states are required to respond to additional filing requirements. For nonprofits operating in multiple states, the reporting process can be cumbersome. Add to this mix any additional government grants with their own particular reporting requirements and the process becomes overwhelming. "If state requirements can be better coordinated with federal reporting procedures, the burden on nonprofits will be lessened," says Holtzman. In fact, New York's Attorney General, Eliot Spitzer, has been quite vocal in his support of federal and state information sharing about charities, foundation and other tax-exempt organizations ("Making Philanthropy Accountable," The Chronicle of Philanthropy, June 26, 2003). Advocacy through Education EDIN is taking a proactive role to encourage dialogue, provide information and build a coalition of support for improved accountability through electronic technology. EDIN's focus over the next several months is to get the word out to the nation's nonprofit managers and accountants about the advantages and availability of electronic filing. As part of its advocacy effort, EDIN is encouraging tax preparation software developers to add the e-filing option to their Form 990 tax preparation packages. EDIN will provide a list of all products available for e-filing the Form 990 on its website (www.edinonline.org), which will be launched this fall. The website will also include links to quality reporting and related initiatives undertaken by EDIN partners and other organizations. "Over the last decade there's been a great deal of discussion about the importance of quality information on the nonprofit sector as a basis for responsible and effective philanthropy," says Holtzman. "EDIN believes strongly in public accountability and disclosure of information and sees online technology as one of several steps to achieve this." In addition to the website, EDIN plans to reach nonprofit managers, accountants and the grant making community with a monthly newsletter (electronic, of course) that will carry news briefs and ways to learn more about electronic filing. To learn more about EDIN, obtain information about the upcoming website or sign up for EDIN's newsletter, please contact Claudia Holtzman, Project Director, at (202) 467-6112 or via email at EDIN@IndependentSector.org.
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Innovations.... Wireless Innovations: New Wireless Technology Is Good News For Nonprofits (October, 2007) METRIX – A Free Database Solution for Nonprofits (March, 2005) The Case For Wireless Networking (October, 2004) Open Source – New Horizons (May, 2004) The Electronic Data Initiative for Nonprofits (August, 2003) Placing Wireless Technologies in Context: Are They Right for Your Agency? (October, 2002) How "Open Source" Can Open Doors for Nonprofits (June, 2002) CUNY Wired! Showcases the Best in Academic Technology (April, 2002) A Handheld Future (June, 2001) Migration to Handhelds: Visiting Nurse Association of Brooklyn (June, 2001) Using Handhelds in the Field: ACCION International Empowers the Self-Employed Poor (June, 2001) Nonprofits Benefit from ePayments Technology (April, 2001) Handheld Computing: Readers Respond (July, 2000) Is Handheld Computing Ready for you? (May, 2000) Community Voice Mail comes to New York (August, 1999) Other Articles of Interest.... How we're using Information Technology to Further our Mission (February, 1999) |
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