Posted on December 30, 2005

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Accountability Debate Cools

As 2005 opened, issues of accountability and ethics again dominated public discussion and media coverage of the nonprofit sector. But as the magnitude of the tsunami disaster became clear, as the war in Iraq continued to exact a bloody toll, and as hurricanes Katrina and Rita caused billions worth of damage along the Gulf Coast, Congress turned its attention to other issues.

The year opened with the Panel on the Nonprofit Sector releasing a set of recommendations designed to strengthen nonprofit governance, establish clearer codes of ethical conduct for nonprofit organizations and executives, and improve accountability within the sector. While generally well received by legislators and nonprofit leaders, the panel's work was criticized by some for avoiding a number of controversial issues, including excessive compensation paid to foundation trustees, insufficient regulation of self-dealing by foundation insiders, and the 5 percent payout rate.

Building on the work of the panel, Independent Sector sub- sequently released a Checklist for Accountability designed to help nonprofit organizations improve their account- ability and develop a culture of transparency. Released in August, the checklist encourages individual nonprofits to reassure their stakeholders by adopting a statement of values, a code of ethics, and a conflict of interest pol- icy; making sure their boards of directors understand and can fulfill their financial responsibilities; conducting regular independent financial reviews; ensuring the accuracy of and making public their Form 990; and remaining current with all laws and regulations governing the sector.

But with Hurricane Katrina, vacancies on the Supreme Court, and the alleged ethical lapses of certain members unexpectedly disrupting its fall agenda, Congress seemed to lose its enthusiasm for pushing through a comprehensive package of nonprofit reforms. As the year came to a close, provisions that incorporated many of the panel's recommendations — including changes to financial disclosure rules and the role of the IRS in regulating tax-exempt organizations — were removed from a comprehensive bill and inserted into legislation that, in the eyes of its sponsors, had a better chance of being passed before Congress recessed for the holidays. Against that backdrop, Steve Gunderson, president and CEO of the Council on Foundations and a former congressman, noted that "Charitable reform efforts need to balance the goal of addressing abusive practices with the need to strengthen and support the sector."

Pittsburgh Medical Center Seeks to Become First Nonprofit to Comply With Sarbanes-Oxley (11/02/05)

Nonprofit Boards 'Significantly Involved' in Governance, Study Finds (10/22/05)

Nonprofits Are Embracing Corporate-Style Compliance, Report Finds (10/19/05)

Panel on Nonprofit Sector Solicits Comments on Supplemental Report Draft (9/27/05)

United Way Urges Agencies to Check Employees Against Terrorist Lists (8/22/05)

Independent Sector Issues Accountability Checklist (8/18/05)

Faith-Based Programs Receiving Federal Funds Lack Oversight, Study Finds (8/07/05)

Despite Concerns, Nonprofits Are Implementing Sarbanes-Oxley (7/29/05)

Ohio Nonprofit Leaders Doubt Panel's Proposals Will Become Reality (7/19/05)

Panel Presents Proposals to Strengthen Nonprofit Accountability (6/23/05)

Watchdog Group Says Recommendations on Nonprofit Accountability Fall Short (4/07/05)

U.S. Nonprofits Already Disclose Financial Practices, Survey Finds (4/06/05)

Children's Charities Open Door to Independent Inspectors (3/11/05)

Panel Proposes Measures to Strengthen Nonprofit Accountability(3/02/05)

Panel Invites Comment on Nonprofit Governance and Oversight (1/25/05)