Commentary: Legislating Accountability and Reforms in Nonprofits

Article excerpt

In July, the U.S. Senate Finance Committee, headed by Sens. Charles Grassley, R-Iowa, and Max Baucus, D-Mont., began the process of drafting legislation for Charity Oversight and Reform.

The committee has produced a white paper entitled Tax Exempt Governance Proposals. It has received high interest and debate from such organizations as Independent Sector, BoardSource, Council on Foundations, the Alliance for Nonprofit Management and the National Council of Nonprofit Associations.

Concern for oversight and reform stems from abuses that are well known in the corporate sector and in the nonprofit sector as well. Some of the proposed provisions are welcome - for example it proposes $25 million in funding for state and national management support organizations, along with local capacity building organizations. It also recommends $10 million to support accreditation programs.

It's obvious from the abuses we see that there's been no check on charities, Grassley said. Big money, tax-free, and no oversight have created a cesspool in too many cases. It's alarming to see tax- exempt organizations become willing partners in tax shelters used by corporations and wealthy individuals to avoid or minimize their taxes. We see powerful insiders using the assets of charities to line their own pockets instead of to help the needy. Donations and assets are being used for things like private jets and European vacations. We have to clean this up so charities keep the trust of the American people.

An Iowa expert testified that reforms of nonprofits should improve accountability without imposing more federal regulations that cash-strapped, under-staffed charities can ill-afford. Willard L. Boyd is professor of law and president emeritus of the University of Iowa, director of The Larned A. Waterman Iowa Nonprofit Resource Center, and chair of the Iowa Governor's Task Force on the Role of Nonprofit Organizations in Iowa.

Grassley said he understood the importance of preventing the manipulation of nonprofits while not overwhelming the ability of charities, especially small charities, to achieve their important missions.

Finding that balance will be the task in the weeks ahead, Grassley said. My hope is to work with the nonprofit sector to find that balance. Then I hope to introduce legislative reforms this fall, and maybe even earlier for some provisions. …