In the past I have raised the question: would Sarbanes-Oxley work for the non-profit sector and for charities?
My conclusion: probably not because the needs and constituencies of companies and non-profits is just so different.
Still, the non-profit sector is one area that is coming under enormous pressure from attorneys general at the state level, and from the media and general public to lift its game. Generally, the concern boils down to a desire to see non-profits, particularly charities and foundations, protect themselves from potential abuse. Charities rely on public trust so anything that enhances their accountability is a plus.
The Better Business Bureau Wise Giving Alliance has some good governance guidelines for charities that should be looked at closely.
These include some basic common sense rules: a board of directors that provides adequate oversight of the charity's operations, finances, fund-raising practices and its staff, with a minimum of five voting members, holding a minimum of three evenly spaced meetings per year of the full governing body with a majority in attendance, with face-to-face participation, restricting the number of paid officers as directors and having policies in place to prevent conflicts of interest. At least 65 per cent of its finances should be spent on program activities, accumulating funds for use in current program activities should be avoided, and the accounts have to be made available on request in accordance with generally accepted accounting principles, and those accounts should detail all expenses. A comprehensive annual report should be available and any benefits from the sale of products or services need to be disclosed.
It would be interesting to see how many charities follow these guidelines.
First, the IRC needs to be rewritten and updated so that billion-dollar healthcare enterprises are not subject to the same general section as a Cub Scout pack.
Second, the ‘charities” that routinely spend 90%+ of revenue or more fundraising and administration should be shut down as frauds.
Also, never assume good governance just because an organization is a “charity,” remember NYSE?