Over the past nine months, the Panel on the Nonprofit Sector (www.NonprofitPanel.org) has provided the charitable community an unparalleled opportunity to demonstrate many of our most admirable features. Our efforts to build more transparent and accountable organizations can only help to strengthen our sector's greatest quality: our ability to provide indispensable services to communities across the country and around the world.
Since the panel first convened in October 2004, thousands of people from across the country have come together to develop ways to improve the sector's governance, transparency, and ethical standards. There have been wide-ranging debates about the best approaches—how could there not have been in a sector of 1.3 million wonderfully diverse organizations?—but the collaboration that made these discussions possible has surprised no one who knows our community's willingness to work together or our skill at addressing problems.
There are real problems to address. Even though the vast majority of charitable organizations pursue their missions openly and ethically, the abuses chronicled in the press have called for a strong and swift reaction from our sector. We need to ensure that violations are confronted, punished, and, best of all, prevented.
How do we ensure those goals? How do we ensure that those who deliberately violate the law are prosecuted and that those who are not aware of good practice are better informed? How do we maintain the crucial balance between legitimate oversight and protecting the independence that charitable organizations need to remain innovative and effective? How do we develop policies and practices that are appropriate for a community as varied as ours? And how do we build on the good work already underway by outstanding organizations like GuideStar?
The 175 participants in the panel, as well as the thousands of people who joined its conference calls and attended its 15 field hearings, have spent months coming up with solutions to these challenges. The culmination of this effort came in the panel's Final Report, which was presented to the leaders of the Senate Finance Committee and the commissioner of the IRS at the start of the summer. It recommends a carefully integrated set of actions by the sector itself, by Congress, and by the IRS.
The Final Report underscores the importance of transparency in strengthening accountability. Several of its recommendations would substantially improve the Forms 990, clarifying their reporting requirements and making them easier for the public and charitable organizations to use. The report also supports requiring all but the very smallest organizations to provide more complete financial information to the IRS and the public.
The panel recognizes that a key part of improving ethics is adequate enforcement of current law. It supports amending laws that restrict the ability of the IRS to move forward with mandatory electronic filing of the returns filed by charitable organizations and to share information with state charity officials about investigations of possible wrongdoing.
Those steps alone are not enough, however, to protect the sector from those who try to use it for their own benefit. In situations where the lack of clear legal standards may have provided a loophole for some individuals to enrich themselves, the panel recommends clarifying and strengthening the law to reduce the possibility of abuse.
The panel also recognizes that charitable organizations should take specific steps to improve their practices. It calls on governing boards to have clear policies in such crucial areas as conflicts of interest and whistleblower protection.
The Final Report, and the panel in general, has been one of our sector's most effective educational tools. It has enabled us to show policymakers the indispensable role that public charities, private foundations, and religious congregations play in our society, making them much more aware of what we do and how their actions can either support or hinder our work.
This initiative has also made an unmistakable statement about our sector's commitment to strengthening accountability. In April, IRS commissioner Mark Everson told Congress, "It is heartening to see leading members of the nonprofit community taking steps to address abuses. ... I wish that the accounting, legal and business communities had been as enthusiastic."
The panel's work has also been invaluable as a way to help staff and board members of charitable organizations learn how to improve their organization's ethics and governance. At the field hearings, the most common appeal from people in the field was "Tell us what to do." The report's detailed recommendations respond to that request, and they also offer the opportunity for a dialogue that will encourage further improvements.
Charities and foundations are already taking action. Leaders from our sector regularly tell me about the changes their organizations have already made, such as the two very large foundations that recently described how they had altered their travel policies to align them with the recommendations in the Final Report.
As Congress prepares the legislation it will likely introduce in September, our community's hard work has created a thoughtful, positive set of recommendations for ensuring ethical conduct. This constructive approach has again demonstrated our sector's commitment to the highest possible standards and to continuing the independence that has enabled charities and foundations to serve so many different people and missions.