Tax-Exempt Organizations and Nonarticulation: Estimates Are No Substitute for Disclosure of Cash Provided by Operations

Not-for-profit entities' audited financial statements are considered proprietary information, but the World Wide Web provides easy access to financial information from Form 990, the information return filed annually with the Internal Revenue Service. Because of articulation of financial statements inherent with the double-entry system, it is theoretically possible to derive operating cash flows from revenues, expenses, and balance sheet accounts that are included on the return. The objective of this study is to determine whether cash from operations can be accurately calculated from Form 990 data. The paper also describes articulation problems encountered when a small subsample was examined in more detail. As with similar studies of business entities, it appears that an accurate estimate of cash flow from operating activities cannot be derived from the other financial statements. Therefore, based on the results of this study the researchers recommend that Form 990 should be revised to include selected information from the cash flow statement.