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
501(c)3 Charitable, educational, religious, scientific, literary orgs
Public charities
Private foundations
Public institutions
Supporting
organizations
Non-operating
foundations
Operating
foundations
Public safety
testing orgs
Publicly supported
charities
*Abbreviated

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
Advisory
groups
Executive
committee
Finance
committee
Governance
committee
Audit
committee
Fundraising
committee, etc.
GOVERNANCE
Chief executive
MANAGEMENT
Advisory
groups
Finance manager
Development
manager
Program
manager
Administrative
manager, etc.

8. Recent developments re: nonprofit governance
2001
2002
2003
2004
2005
2007
2007
2008
Enron collapse triggers corporate governance crisis
Congress passes Sarbanes- Oxley Act
Widely reported scandals shake nonprofit sector
Congress conducts hearings on abuses; Independent Sector convenes blue-ribbon panel
IS Panel recommends reforms to Senate Finance Committee
IS Panel issues Principles for Good Governance and Ethical Practice
Internal Revenue Service posts discussion draft of revised Form 990
Revised Form 990 introduced for fiscal year 2008

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