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Recent Trends in U.S. Nonprofit Governance Marilyn Wyatt.

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Presentation on theme: "Recent Trends in U.S. Nonprofit Governance Marilyn Wyatt."— Presentation transcript:

1 Recent Trends in U.S. Nonprofit Governance Marilyn Wyatt

2 Topics to be covered  Structure of U.S. nonprofit sector and charitable orgs  New regulatory and voluntary approaches to accountability and good governance  Ongoing issues

3 Main points  Despite the sector’s size and diversity, increasingly rigorous standards for nonprofit accountability and governance are gaining traction  The key challenge: striking the right balance between government regulation (which must be flexible) and self-regulation (which must be reliable)

4 Structure of US nonprofit sector * 501(c) Tax-exempt orgs Public charitiesPrivate foundations Public institutions Supporting organizations Publicly supported charities *Abbreviated 501(c)3 Charitable, educational, religious, scientific, literary orgs Public safety testing orgs Operating foundations Non-operating foundations

5 Life cycle of a public charity * Starting Out -- organizing documents; bylaws Applying to IRS -- exemption application Required filings -- Annual Form 990 Ongoing compliance -- jeopardizing exemption (inurement/private benefit; intermediate sanctions; lobbying/political activity); taxes; disclosure requirements Significant events -- audits; termination *Abbreviated

6 Life cycle of a private foundation * Starting Out -- organizing documents; bylaws Applying to IRS -- exemption application Required filings -- Annual Form 990 Ongoing compliance -- jeopardizing exemption (inurement/private benefit; lobbying/political activity); private foundation excise taxes (self-dealing, failure to distibute income, jeopardizing investments); disclosure requirements Significant events -- audits; termination *Abbreviated

7 Typical structure of a charitable org. Board of directors Chief executive Finance committee Governance committee Executive committee Audit committee Fundraising committee, etc. Finance manager Program manager Administrative manager, etc. Development manager Advisory groups Advisory groups GOVERNANCE MANAGEMENT

8 Recent developments re: nonprofit governance Congress passes Sarbanes- Oxley Act Congress conducts hearings on abuses; Independent Sector convenes blue-ribbon panel IS Panel issues Principles for Good Governance and Ethical Practice IS Panel recommends reforms to Senate Finance Committee Internal Revenue Service posts discussion draft of revised Form 990 Revised Form 990 introduced for fiscal year Enron collapse triggers corporate governance crisis 2003 Widely reported scandals shake nonprofit sector

9 Impact of Sarbanes-Oxley  Directly applicable: Document retention Whistle blower protection  Recommended best practices: Separate audit committee Outside auditor, rotated regularly Certification of financial reports Disclosure of financial information No loans to board members and senior executives Conflict-of-interest policy

10 Recommendations from Panel on Nonprofit Sector  Report to Congress, 2005 Regulatory steps to improve accountability Balance between appropriate regulatory oversight and independence of nonprofit sector  Principles for Good Governance and Ethical Practice, 2007 Steps nonprofits should take voluntarily Primacy of good governance and board oversight

11 New IRS reporting requirements  Revised Form 990 issued in 2008  Governance focus: Mission Organizational documents Governing body Governance and management policies Financial statements and Form 990 reporting Transparency and accountability

12 Conclusions  New expectations for public accountability  Import of standards from business sector  Self-regulation vs government regulation  Boards as active steward of mission and programs vs guard against malfeasance (Ostrower)  Good governance in time of economic downturn


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