The International Journal
of Not-for-Profit Law

Volume 8, Issue 1, November 2005

Diana Aviv is the President and CEO of Independent Sector, https://www.independentsector.org, a Washington-based nonprofit, nonpartisan coalition of more than 500 organizations that leads, strengthens, and mobilizes the charitable community:

Pablo Eisenberg has identified one of the key problems facing the charitable sector today: accountability. It is unfortunate that his accuracy declines so sharply when he claims that the people who work at and volunteer for America’s nonprofit organizations have been “burying their heads in the sand” on this issue. Nothing could be further from reality.

The most recent illustration of our sector’s work to strengthen governance, transparency, and ethics came in the tax reconciliation bill the Senate passed just before Thanksgiving. This legislation included reforms to areas such as donations of property, donor-advised funds, and Type III supporting organizations. Independent Sector and organizations across our community have worked hard in support of such provisions, which help correct abuses by taxpayers who claim excessive deductions and by individuals who use charitable organizations for personal gain.

This legislation continues our community’s longstanding dedication to accountability. The most striking and comprehensive example of this active engagement is the Panel on the Nonprofit Sector, which Independent Sector convened more than a year ago to examine ethics and accountability. The Panel has been a remarkable collaboration among thousands of people involved with charities – staff, board members, volunteers, donors, and government officials. It brought together people from all types and sizes of organizations, from across the country, and from a wide range of perspectives, all of whom volunteered their time in order to come up with ways to improve the conduct of all organizations.

The experts, practitioners, and academics who participated in this work recognized how vital the maintenance of high ethical standards is to our sector. Our success depends in large part on maintaining the public’s trust, which we will receive only if we demonstrate that we are responsible stewards of the time and money donated to support the missions of our organizations.

The culmination of the Panel’s detailed discussions and analyses came in the Final Report it released in June. The report – a vailable at www.nonprofitpanel.org– recommends more than 120 closely integrated actions to be taken by charitable organizations, Congress, and the Internal Revenue Service. It recognizes that successful reform must include all three of those actors, and no single action can achieve the necessary results by itself.

The recommendations embody a series of important principles:

• They emphasize transparency and the importance of giving government officials and the public the information needed to make thoughtful decisions. For example, they call on the government to make electronic filing mandatory, and on organizations to make tax and other financial information available to the public through the web and other methods.
• They strike the proper balance between providing oversight and protecting the independence that is a key element of the charitable community’s effectiveness. It is possible – in fact, it is essential – to stop abuses without stifling innovation.
• They also take into account the differences in size and capacity among the various charities and foundations. The thousands who participated in the development of the Panel’s recommendations agreed that every charitable organization should be expected to operate ethically and serve as a worthy steward of the resources entrusted to it. Fraud or abuse cannot be condoned in any organization, for any reason, since each breach of the public trust can damage the reputation of the entire sector. But the methods we require to demonstrate compliance with high standards of ethical conduct should be commensurate with the size, scale, and resources of the organization.

The Panel’s work has already led to improvements in how charities and foundations operate, and we know that others are now considering how to implement similar changes. The Panel is also completing a set of supplemental recommendations on issues such as unrelated business income and charitable solicitation.

Our sector must continue to work on these areas. Senator Grassley has already announced his intention to offer more legislation next year, and we expect that some state legislatures will be considering their own bills in these areas. Our organizations need to continue to work with lawmakers and explain to them how new rules can either support our efforts or impede them.

Charities and foundations also must continue to improve their practices. One theme that ran throughout the Panel’s field meetings was the desire of people across the country to learn how to strengthen their organizations’governance. Independent Sector’s website already offers many resources, including a checklist for accountability and a model code of ethics, and we are developing model policies for areas such audits and whistleblowers. We are far from alone in this effort: scores of organizations offer model policies and assistance to charities and foundations interested in improving their practices.

Our sector is taking these steps for one basic reason: so we can better fulfill our missions. Our organizations nurture our spiritual and creative aspirations, care for vulnerable people, protect our natural and cultural heritage, spread democracy, and find solutions to medical and scientific challenges. We are the launching pads of civic engagement and the architects of a decent society. And dedicating ourselves to maintaining the highest possible ethical standards is central to fulfilling those missions.