On December 20, 2007, the IRS released the final version of revised Form 990. This form is submitted by tax-exempt and nonprofit organizations to provide the IRS with annual financial information. The form, in its entirety, is made available to the public and is often the main source of such information.Its release comes at a time when Capitol Hill and the public are demanding more accountability and transparency from the nonprofit/NGO/PVO sector in the U.S. and at a confluence of several issues: Sarbanes-Oxley, Enron and increased scrutiny of the corporate sector; well-publicized scandals within major nonprofits (United Way, American Red Cross), and an increasing desire by donors to know more about how their contributions are being spent.
In October of last year, a panel convened by Independent Sector released Principles for Good Governance and Ethical Practice, A Guide for Charities and Foundations. It is self-described as “principles for good governance and ethical practice…to guide board members and staff leaders of every charity as they work to improve their own operations.” The 33 guidelines, in the four areas of legal compliance and public disclosure, effective governance, strong financial oversight and responsible fundraising, include 6 principles required by law and 27 that the panel recommends should be “strongly considered” and implemented as applicable to organizations.
Guidestar, a nonprofit that provides information on other 501(c)(3) organizations, put it succinctly, “The focus on accountability and transparency is not going away, and this compilation by the Panel shows how charities can improve their governance themselves, without the addition of more federal and state laws.”The nonprofit sector has the opportunity to implement best practices on its own terms. The 33 principles continue an effort by the nonprofit sector to be vigilant, self-monitoring and to keep board members and senior staff informed. As stated in A Guide for Charities and Foundations, “self regulation begins with good governance.”
Nonprofits working throughout the world to fight corruption and promote transparency and accountability must exemplify the characteristics they are promoting. Credibility is a cornerstone in the transfer of skills from one organization to another, and such credibility is gained through example, not words. Recent events have set a tone in the business world of transparency, good governance and accountability. Before federal regulators dictate the terms of this tone for the nonprofit sector, it should continue and expand its efforts to be proactive, inform the public and put regulators on notice that it plans to lead this effort and not to follow.
Published Date: January 22, 2008