Everyone’s arguing about the federal budget
The $3 Trillion Blind Spot: An analysis of IRS 990 filings
U.S. nonprofits handle more revenue than the GDP of the United Kingdom. Their reporting requirements are different from publicly traded companies, and much simpler.
We processed 4 million IRS 990 filings. The data is public, but it takes real effort to make sense of it.
$0T
flows through U.S. nonprofits every year
0.0M
Registered nonprofits
$0B
To charitable nonprofits
01 / The Money
Where $3 trillion actually goes
$3 trillion flows through U.S. nonprofits every year, covering hospitals, universities, religious organizations, and the charitable nonprofits most people picture when they think about giving. The chart below traces how that money actually moves through the system.
We built a system to process IRS 990 filings . 4 million of them so far. The first thing that surprised us wasn’t the numbers themselves. It was that the numbers are all public. The IRS publishes them as digitized XML documents from 2012 onward, but the schemas and field names change between filing years. Correlating them takes work.
Of the full $3 trillion, roughly $500 billion goes to charitable nonprofits. The ones you think of when you donate. The rest flows through hospitals, universities, and other tax-exempt organizations that operate more like businesses than charities.
Most of this spending isn’t waste. Hospitals need staff. Universities need facilities. Even small charities need people to run programs. But the Form 990 categorizes spending for tax compliance. It wasn’t built to show how the money was spent in practice.
02 / The Reporting Gap
How nonprofit reporting works today
A public company files a 10-K annually, a 10-Q every quarter, and an 8-K whenever something material happens. The SEC requires audited financials, risk disclosures, and executive compensation breakdowns. A large-cap company files within 60 days of its fiscal year end.
A nonprofit files a single Form 990 once a year. It can take 12 to 18 months to appear publicly. It doesn’t require audited financials. GiveWell has noted that the form doesn’t provide sufficient information about what a charity actually does or where it operates. And nonprofits with less than $50,000 in revenue don’t have to file one at all.
Public company (SEC)
- 10-K filed annually
- 10-Q filed every quarter
- 8-K on material events
- Audited financials required
- Filed within 60 days
- Executive comp disclosed
Nonprofit (IRS)
- Single Form 990 per year
- No quarterly reporting
- No material event filing
- No audit requirement
- Appears 12–18 months late
- <$50K exempt from filing
We kept expecting to find a catch. Some parallel system we were missing. There isn’t one. 1.8 million organizations, handling more revenue than the GDP of the United Kingdom, file a single annual form while a public company files quarterly with audited financials.
03 / The Charitable Slice
Where the charitable dollars go
We narrowed the data to charitable nonprofits, the $500 billion slice that most people picture when they think about giving. Only $180 billion of that is categorized as program expenses. 36%. The other $320 billion covers operations, staffing, and overhead. Some of it delivers services directly. A social worker’s salary is the program. But the filings don’t distinguish between the two, and nothing in the reporting helps you figure it out.
Operations & staffing$320B
Program expenses$180B
Donors seem to notice. The BBB Wise Giving Alliance found 32% of donors trust charities less than they did five years ago. Gallup puts it at 1 in 3 worldwide. And when researchers ask why, the most common concern is how money gets spent.
1 in 0
Lack confidence globally
0%
Ended in deficit (2024)
Where charitable dollars go
Donor confidence over time
04 / The Starvation Cycle
The gap between reported and actual overhead
The Stanford Social Innovation Review identified a “nonprofit starvation cycle” in which funders cap overhead at 15%, organizations actually spend 31% on administration, and the gap is closed by underreporting or cutting corners.
We see this in the filings constantly. In 2024, 36% of surveyed nonprofits ended the year with an operating deficit, the highest rate in a decade of tracking. Only 41% can pay all full-time staff a living wage.
According to the SSIR research, this gap often shows up as deferred maintenance, reduced training, or dropped monitoring.
05 / The Evidence
What the follow-up data shows
Fund a water well in a remote village, and you’ll get a photo of it being built. You won’t get a report three years later telling you whether it still works. A 2017 UK-funded study visited 200 wells at random in Uganda. 45% were broken. Only 24% could provide safe and adequate water.
Across rural sub-Saharan Africa, roughly 50,000 water supply points have failed, representing between $215 million and $360 million in stranded investment.
Water well status — Uganda (2017)
The nonprofit starvation cycle
What stood out to us was the incentive structure. The funding is typically for new projects. Follow-up monitoring is rarely funded, so it’s hard to know what’s still working.
06 / The System
Detailed reporting is still opt-in
Form 990s are public. Candid and Charity Navigator do useful work rating individual organizations. But after processing millions of filings, what we see is that detailed reporting is still opt-in. The organizations that go beyond the minimum are easy to spot. The rest file what’s required, which doesn’t capture the same level of detail.
The difference in reporting frequency is striking. Public companies file quarterly with audited financials within 60 days. Nonprofits file once a year, and it can take 18 months to appear. Tools like satellite imagery and real-time dashboards exist, but they haven’t been widely adopted in this sector yet.
07 / Final Thoughts
What we found
We started this project thinking the data would be hard to find. It wasn’t. The 990s are filed. The numbers are there. But the forms weren’t designed to answer the questions we were asking. They track categories, not outcomes. And right now, 32% of donors already trust charities less than they did five years ago.
None of this is a reason to stop giving. It’s a reason to work closer with your charity, to understand how they spend and how they measure impact.
Mazhar Memon
Researching nonprofit reporting and public data transparency.
