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Perhaps the greatest obstacle to appropriate regulation of the foundation sector, however, is the 990-PF itself—the primary instrument used by the IRS to collect information on foundations, and one on which state attorneys general, the media, and researchers rely. The faults of the 990-PF can be summarized as follows:
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Little altered in format since at least 1969, its underlying premise is that most foundations are exclusively grantmakers, when in fact foundations have become increasingly diverse in their operating styles. The bifurcation of expense data requested on the 990-PF between "Operating and Administrative Expenses" and "Contributions, Gifts, Grants Paid" encourages the presumption that all intramural expenses are for general administration, when for high- and medium-engagement foundations this is unlikely to be the case. |
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Because of the detailed information requested on foundations' endowment assets and investment activity (purchases and sales), the 990-PF return for a foundation like The Commonwealth Fund is typically 500 to 600 pages in length. Most of the information requested on individual investments and thousands of financial transactions is unmanageable and of little use for regulatory purposes. Yet the mass of information solicited poses a major obstacle to electronic submission of the return and electronic analyses of this potentially important database. |
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Most data collected on foundations' revenues and expenses and assets/liabilities are geared to the calculation of the required qualifying distribution and annual excise tax—not to presenting a picture of the foundation's expense structure in the context of its operating style, nor to shedding light on the investment performance of its endowment. As a result, the presentation of the data on the 990-PF is, at best, confusing to researchers and the media and, at worst, misleading. |
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The 990-PF lacks clear definitions of the categories of expenses that foundations are required to report; consequently, considerable inconsistency arises as foundations attempt to interpret IRS instructions and classify their expenditures. |
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The relevance in the foundation context of a fair amount of information collected on the 990-PF is questionable—for example, interest expense, inventories for sale or use, and mortgage loan investments as an assets category. |
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Information on potentially controversial areas, such as trustee compensation, is not solicited in formats that make it readily identifiable. |
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Given all these faults, databases constructed from the 990-PF are seriously flawed, as are many of the analyses that regulators, researchers, and the media base on them.
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