Principles May Have a Dangerous Journey
posted on: Monday, December 10, 2007
The Independent Sector has issued its “Principles for Good Governance and Ethical Practice: A Guide for Charities and Foundations”. These principles were largely an outgrowth of pressure from the chairman and ranking member of the Senate Finance Committee who identified some critical issues in the charitable sector.
There has been surprisingly little written about the guide outside of the charitable literature. I have been an ardent critic of the document. I wrote about my concerns that self-regulation of the industry failed to address the multitude of issues that currently compromise the nonprofit sector. I shared my distress that it took the government (Congress and the IRS) to raise the issues to the level that the document needed to be written. I have raised concerns if an expenditure of nearly $3.5 million to develop the document is an appropriate us of charitable dollars. I’ve expressed concern that the sector basically rolled over to quiet the outsiders. But my biggest disappointment was that the nonprofit leadership failed to even attempt self-regulation and ultimately found itself partnering with government. It took the most expedient solution.
Except for few other lone soldiers, I felt alone in my criticism. Others, however, are seemingly coming to the fore with similar conclusions.
The well-respected organization, The Philanthropy Roundtable, has indicated its displeasure with several aspects of the IS Principles. It notes that it does “not recommend the Independent Sector document as a whole as a guide to improving governance and accountability among foundations”. The organization has a multitude of reasons for their decision.
First, The Philanthropy Roundtable believes that the principles take an “arbitrary and one-size fits all approach”. To that point, I have written that the IS guidelines are going to be onerous for small and medium agencies---about 70% of the sector. Those are the agencies that are not typically members of IS and therefore not represented at the negotiating table. Small and medium nonprofits are already taxed to the max and these additional burdens may exacerbate the already accelerated exodus of staff leaving the sector.
The Roundtable secondly felt the “principles imply improperly that foundations act unethically or practice misgovernance unless their boards include members from diverse backgrounds”.
And third, the Philanthropic Roundtable has concerns that the “principles represent ‘standards of practice that organizations are encouraged, but not required to meet’”. The encouragement by of IS has turned into a first step toward regulation. The Roundtable’s apprehension has already been borne out in testimony of the IS President. She requested, in testimony, that the equivalent of the federal Small Business Administration be created for the charitable sector. This would, in fact, become a regulatory apparatus to implement new stipulations that are put on the sector.
Several other reforms offered by IS will strengthen the government-charitable sector relationship. One IS’ request is for government assistance for board members and professional leaders because they are incapable of understanding that what is expected of them.
The IS report suggests more involvement by the Internal Revenue Service particularly in the areas of improper self-dealing and excessive compensation whether the board knew or “should have known” that it was improper. They may have gotten their wish. In a recent speech, the IRS’ commissioner of the agency’s tax-exempt and government-entities division told a group of foundation officials that the IRS is readying itself to make sure “that a contribution to an organization is put to good use and not squandered.”
IS indicates that a couple of hundred organizations have signed off on the principles. This is far fewer than the 600 charities, foundations and corporate philanthropic programs that make up the IS coalition and is a small fraction of the 1.6 million nonprofits in the U.S.
Those agencies and individuals that did give approval are many of the same people who helped develop the Guide. Even those that did sign off on the Principles face no financial or regulatory repercussions by not implementing them. A guide without teeth. A plan that is a subterfuge to keep the regulators at bay?
Independent Sector says it is the leadership forum for charities, foundations, and corporate giving programs committed to advancing the common good in America. With so few on board with the Principles, whom are they leading? IS says it serves as the premier meeting ground for the leaders of America's charitable and philanthropic sector. Others apparently disagree.
Gary Snyder is the author of Nonprofits on the Brink. He can be reached at gary.r.snyder@gmail.com or 248.324.3700.
Labels: accountability
The Independent Sector has issued its “Principles for Good Governance and Ethical Practice: A Guide for Charities and Foundations”. These principles were largely an outgrowth of pressure from the chairman and ranking member of the Senate Finance Committee who identified some critical issues in the charitable sector.
There has been surprisingly little written about the guide outside of the charitable literature. I have been an ardent critic of the document. I wrote about my concerns that self-regulation of the industry failed to address the multitude of issues that currently compromise the nonprofit sector. I shared my distress that it took the government (Congress and the IRS) to raise the issues to the level that the document needed to be written. I have raised concerns if an expenditure of nearly $3.5 million to develop the document is an appropriate us of charitable dollars. I’ve expressed concern that the sector basically rolled over to quiet the outsiders. But my biggest disappointment was that the nonprofit leadership failed to even attempt self-regulation and ultimately found itself partnering with government. It took the most expedient solution.
Except for few other lone soldiers, I felt alone in my criticism. Others, however, are seemingly coming to the fore with similar conclusions.
The well-respected organization, The Philanthropy Roundtable, has indicated its displeasure with several aspects of the IS Principles. It notes that it does “not recommend the Independent Sector document as a whole as a guide to improving governance and accountability among foundations”. The organization has a multitude of reasons for their decision.
First, The Philanthropy Roundtable believes that the principles take an “arbitrary and one-size fits all approach”. To that point, I have written that the IS guidelines are going to be onerous for small and medium agencies---about 70% of the sector. Those are the agencies that are not typically members of IS and therefore not represented at the negotiating table. Small and medium nonprofits are already taxed to the max and these additional burdens may exacerbate the already accelerated exodus of staff leaving the sector.
The Roundtable secondly felt the “principles imply improperly that foundations act unethically or practice misgovernance unless their boards include members from diverse backgrounds”.
And third, the Philanthropic Roundtable has concerns that the “principles represent ‘standards of practice that organizations are encouraged, but not required to meet’”. The encouragement by of IS has turned into a first step toward regulation. The Roundtable’s apprehension has already been borne out in testimony of the IS President. She requested, in testimony, that the equivalent of the federal Small Business Administration be created for the charitable sector. This would, in fact, become a regulatory apparatus to implement new stipulations that are put on the sector.
Several other reforms offered by IS will strengthen the government-charitable sector relationship. One IS’ request is for government assistance for board members and professional leaders because they are incapable of understanding that what is expected of them.
The IS report suggests more involvement by the Internal Revenue Service particularly in the areas of improper self-dealing and excessive compensation whether the board knew or “should have known” that it was improper. They may have gotten their wish. In a recent speech, the IRS’ commissioner of the agency’s tax-exempt and government-entities division told a group of foundation officials that the IRS is readying itself to make sure “that a contribution to an organization is put to good use and not squandered.”
IS indicates that a couple of hundred organizations have signed off on the principles. This is far fewer than the 600 charities, foundations and corporate philanthropic programs that make up the IS coalition and is a small fraction of the 1.6 million nonprofits in the U.S.
Those agencies and individuals that did give approval are many of the same people who helped develop the Guide. Even those that did sign off on the Principles face no financial or regulatory repercussions by not implementing them. A guide without teeth. A plan that is a subterfuge to keep the regulators at bay?
Independent Sector says it is the leadership forum for charities, foundations, and corporate giving programs committed to advancing the common good in America. With so few on board with the Principles, whom are they leading? IS says it serves as the premier meeting ground for the leaders of America's charitable and philanthropic sector. Others apparently disagree.
Gary Snyder is the author of Nonprofits on the Brink. He can be reached at gary.r.snyder@gmail.com or 248.324.3700.
Labels: accountability
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