Who Do You Trust? Comparing Data on Skilled-Nursing Facilities from the Internal Revenue Service and Health Care Financing Administration

Abstract

This article explores the finances of nonprofit skilled-nursing facilities (SNFs) by comparing two sources of data: Internal Revenue Service (IRS) Form 990s and Health Care Financing Administration (HCFA) cost reports. The result shows that the amounts reported to both agencies for bottom-line figures, such as total assets and liabilities, are consistent. More than 80% (263) of the 412 SNFs examined reported either total liabilities or total assets to the HCFA and the IRS that matched within 10%; nearly 60% (235) reported both variables within 1%. However, as the breakout of the financial data becomes more detailed, more inconsistencies are found. Agreement between sources drops rapidly from more than 80% for total liabilities and assets to below 10% for expenses. This may be due to differences in the way that the IRS and HCFA define financial variables, or it may be because preparers are not knowledgeable or careful enough, or because organizations lack adequate accounting systems that allow for accurate, consistent reporting.