The failure of a substantial portion of mail survey recipients to respond to invitations to participate in research projects raises issues of nonresponse error. Because this error is difResearchers who study nonprofit organizations draw on a wide range of empirical research methods. One common approach-geared toward comparing the same information for a large number of cases-is the survey research method. The general approach involves defining a population of

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. The study of nonprofit organizations has historically been a daunting task. The nonprofit sector is noted for its tremendous diversity in size, purpose, and formality of organizations. The research challenge has been compounded by a lack of institutionalized mechanisms for sorting nonprofits into homogeneous Note: We wish to thank the Aspen Institute's Nonprofit Sector Research Fund for support of this study, Joe Galaskiewicz for his skepticism about financial measures in earlier research efforts, Curt Doetkott for statistical expertise, Mike Palmer for data management expertise, Mariya Chuykova for meticulous attention to detail throughout all phases of data collection and analysis, and five anonymous reviewers whose suggestions contributed substantially to this effort. Preliminary results were presented at the 1996 annual Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA) conference; an earlier version of this article was presented at the 1997 Academy of Management national meeting.

ABSTRACT

We extend our deep appreciation to the nonprofits that participated in our survey. We thank also the Efroymson Fund at the Indianapolis Foundation, an affiliate of the Central Indiana Community Foundation for supporting this work. We are grateful for the very helpful comments on earlier segments and drafts of this paper from attendees at the 2007 Annual ARNOVA conference (Atlanta, Key WordsNonprofit; IRS Registration; State Incorporation; regional analyses 3 AbstractListings of IRS-registered and state incorporated nonprofits for the same region may differ for a variety of reasons. Using Indiana as a case study, we first describe the distribution of nonprofits across these two listings. We then present findings from a small telephone survey of incorporated nonprofits that are not registered with the IRS for Indiana to explore whether they are excluded from the IRS-listing for statutory, technical, or compliance reasons. We consider several aspects of state incorporation status: date of incorporation and whether active status has been resumed or not. We conclude that researchers need to pay careful attention to the limitations of the IRS registration system when wishing to examine the dimensions of the nonprofit sector at local, state or regional levels. Our finding, that some nonprofits fail to maintain active incorporation status, points to significant problems of nonprofit capacity.

Ultimately, nonprofits are accountable to members of the public as they are enjoy the benefits of tax‐exempt status and receive tax‐deductible donations from individuals and organizations. The National Center for Charitable Statistics describes its efforts to provide more high quality data on charities that will help give researchers, policymakers, and the public the ability to assess the impact and increase the accountability of these organizations.