You Asked for It
posted on: Monday, April 28, 2008
You Asked For It
Gary Snyder
For years, I have written that if the leadership of the nonprofit sector didn’t self-regulate, others would. Well hear it comes…and it’s coming from an unexpected player and on issues that are quite unexpected.
The Independent Sector has spent millions of dollars producing a document addressing governance and ethical problems facing charities. In doing so, they invited the government to assist them in resolving them. In spite of IS’s protestations that they wanted to self-regulate they have embraced the Internal Revenue Service inaugural efforts to regulate, educate and enforce new rules on charities.
On April 23, 2008, Steven Miller, Commissioner, Tax Exempt and Government Entities of the Internal Revenue Service in an address that the IRS “will educate, engage and, yes, irritate…” He noted that the IRS is going to go full bore on the issue of governance.
It starts with the revised Form 990 that virtually all nonprofits must fill out. The IRS wants to know about the composition and independence of the governing body, about policies and procedures and how and whether governance and financial information is available to the public. It has even developed a tutorial on its website. To date they have concentrated on board composition.
The rules are going to be a hit across the bow of the charitable sector. Accordingly, no agency is too small to not have an active, engaged board of directors overseeing the organization.
Miller further noted that the IRS, will focus on internal financial controls and large-scale decision-making.
Apparently, some have asked the IRS to prove the relationship between good governance and tax compliance. They “will be working on that”. In the enforcement area, Senate Finance Committee Tax Counsel, Theresa Pattara, said, “To ensure that filers answer Form 990’s governance questions, Congress might formulate stronger penalties for organizations that file incomplete Forms 990.”
He assured that all charities should look forward to a more broadly based program in the future.
While there is a compelling need for a broad and in-depth intervention into nonprofit governance, I am perplexed as to why the IRS is making such suggestions. I cannot understand why organizations such as Independent Sector, state associations, Board Source and others could not pick up the mantle and institute a program that meets the needs of the charitable sector.
The issues have been apparent for the past decade. All have seen stabilizing or diminishing contributions based on the cost of living, an increase in poor governance resulting in fraud and abuse at an astounding rate; a pounding on the charitable sector by the press; and, a consistent loss of confidence by donors.
The IRS was invited to the party. As a guest with little confidence that the sector has the capacity to resolve it’s own internal problems, the IRS, with the imprimatur of Congress, will gladly show charities the right road…by regulating them.
Best guess: the consequences will be profound.
Gary Snyder is managing partner of Nonprofit Imperative and author of Nonprofits: On the Brink and Nonprofit Imperative. He can be reached at gary.r.snyder@gmail.com. His website is: www.garyrsnyder.com.
Gary Snyder
For years, I have written that if the leadership of the nonprofit sector didn’t self-regulate, others would. Well hear it comes…and it’s coming from an unexpected player and on issues that are quite unexpected.
The Independent Sector has spent millions of dollars producing a document addressing governance and ethical problems facing charities. In doing so, they invited the government to assist them in resolving them. In spite of IS’s protestations that they wanted to self-regulate they have embraced the Internal Revenue Service inaugural efforts to regulate, educate and enforce new rules on charities.
On April 23, 2008, Steven Miller, Commissioner, Tax Exempt and Government Entities of the Internal Revenue Service in an address that the IRS “will educate, engage and, yes, irritate…” He noted that the IRS is going to go full bore on the issue of governance.
It starts with the revised Form 990 that virtually all nonprofits must fill out. The IRS wants to know about the composition and independence of the governing body, about policies and procedures and how and whether governance and financial information is available to the public. It has even developed a tutorial on its website. To date they have concentrated on board composition.
The rules are going to be a hit across the bow of the charitable sector. Accordingly, no agency is too small to not have an active, engaged board of directors overseeing the organization.
Miller further noted that the IRS, will focus on internal financial controls and large-scale decision-making.
Apparently, some have asked the IRS to prove the relationship between good governance and tax compliance. They “will be working on that”. In the enforcement area, Senate Finance Committee Tax Counsel, Theresa Pattara, said, “To ensure that filers answer Form 990’s governance questions, Congress might formulate stronger penalties for organizations that file incomplete Forms 990.”
He assured that all charities should look forward to a more broadly based program in the future.
While there is a compelling need for a broad and in-depth intervention into nonprofit governance, I am perplexed as to why the IRS is making such suggestions. I cannot understand why organizations such as Independent Sector, state associations, Board Source and others could not pick up the mantle and institute a program that meets the needs of the charitable sector.
The issues have been apparent for the past decade. All have seen stabilizing or diminishing contributions based on the cost of living, an increase in poor governance resulting in fraud and abuse at an astounding rate; a pounding on the charitable sector by the press; and, a consistent loss of confidence by donors.
The IRS was invited to the party. As a guest with little confidence that the sector has the capacity to resolve it’s own internal problems, the IRS, with the imprimatur of Congress, will gladly show charities the right road…by regulating them.
Best guess: the consequences will be profound.
Gary Snyder is managing partner of Nonprofit Imperative and author of Nonprofits: On the Brink and Nonprofit Imperative. He can be reached at gary.r.snyder@gmail.com. His website is: www.garyrsnyder.com.
posted by Gary at
10:01 AM
1 Comments:
I don't see the harm in the IRS regulating the nonprofit industry. With blinding instances of abuse and fraud (especially by well-known charities), its now become necessary for nonprofits to be scrutinized. And what's the harm in doing this? There's a price to pay for everything and to think that our industry should reap the benefits of tax exemptions but be free of checks and balances is proof that we have become way too spoiled. Both foundations and nonprofits need greater scrutiny. If the public puts their trust (and their money) in us, then the least we can do is show them how we operate...
By
Tamar, at 8:41 AM
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