I was just perusing some websites I hadn’t looked at in a bit and came across the Panel on the Non-Profit Sector website. The panel was convened by The Independent Sector, a coalition of about 500 charities, foundations and corporate giving programs.
Back in June, the Panel on the Non-Profit Sector submitted recommendations to Congress regarding issues facing non-profit organizations. On September 30, they finished soliciting comments on a draft of supplemental recommendations they will make to Congress in October.
Their recommendations should be of interest to anyone involved with a non-profit organization. They not only outline steps Congress and the IRS should and shouldn’t take, but those that organizations themselves should enact.
The document includes proposals on Federal and State oversight of non-profits (there should be more and better coordination between state and federal level); Better Standards for Reporting to the IRS; More Stringent and Frequent Reviews of Tax Exempt Status; and Abusive Tax Shelters and Charitable Organizations, Amended Rules for Non-Cash Contributions
There are a couple areas I haven’t mentioned and the standards for different size organizations vary so the report bears reading if you have concerns in any area related to these subjects.
The sections that seemed particularly pertinent to current events were those dealing with excessive travel expenditures and compensation for Board Members and Executive Officers. Essentially, they suggest stricter standards, tougher penalties and greater transparency on Form 990-
Compensation reports on the Forms should clearly distinguish between base salary, benefits, bonuses, long-term incentive compensation, deferred compensation, and other financial arrangements or transactions treated as compensation (for example, interest-free loans or payment of a spouse’s travelexpenses) to the individual
.
There are also suggestions on the size, structure and composition of Boards. The panel cites the problem of:
Failures by boards of directors in fulfilling their fiduciary responsibilities may arise when a board leaves governing responsibility to a small number of people, some of whom may have conflicts of interest that can mar their judgment. Other problems emerge when a board disperses responsibility among many people, thereby lessening the obligations of each and by default, increasing the authority of the chief executive officer.
Many board members do not have the training or information necessary to understand adequately their fiduciary responsibilities or common practices for the boards of charitable organizations.
Other sections deal with the related issues of conflicts of interest and audit committees.
The Independent Sector has a statement of their commitment to accountability and transparency right on their main page so the nature of the suggestions, which essentially embrace these concepts, should come as no surprise to anyone.
Since this is also obviously an attempt to take a proactive stance and provide guidance to non-profits before the Sarbanes-Oxley Act starts to be applied to that sector, it will be interesting to see what steps Congress takes.