Accountability and Oversight

Promoting Accountability: How Nonprofit Organizations Are Strengthening Accountability in Their Field

Public trust is the foundation of the nonprofit sector. Without this trust, people would not donate to their favorite causes and volunteers would not give their time. Recognizing that the practices of one organization can affect trust in all nonprofit organizations, many of the nation’s leading nonprofit organizations have joined together to promote improved government oversight of and greater accountability and self-regulation within the nonprofit field. 

1. Most charitable organizations with annual revenues of $25,000 or more are required to file detailed annual information returns (Form 990) with the Internal Revenue Service and to provide copies of those returns on request to the public.

• INDEPENDENT SECTOR is working with other nonprofit associations to assist the Internal Revenue Service in implementing electronic filing of the Form 990 returns to make this information available to the public more quickly and to reduce the costs of processing returns. This, in turn, would make more resources available for education and for investigation of possible fraudulent or otherwise illegal activities.
• INDEPENDENT SECTOR is working with the nonprofit community to encourage Congress to increase funding for the Exempt Organizations Division of the IRS to assist in their education and oversight activities. 
• With support from private grantmakers, GuideStar makes copies of the annual information returns filed by over 850,000 charitable nonprofits available free of charge on its website www.GuideStar.org. 
• Many individual nonprofit organizations also make financial information easy to access by posting it on their websites.
  
  

2. Most state governments and many local authorities require nonprofits based in or raising funds in their area to register and file comprehensive reports on their fundraising activities.

• In the 1980s, INDEPENDENT SECTOR worked with an advisory group of nonprofit leaders who worked with state charity officials in designing a comprehensive set of statutes that state officials can use to regulate charitable solicitations conducted within their jurisdictions. Many of those recommendations have been adapted and implemented by over 40 state governments.
• INDEPENDENT SECTOR was a leader in lobbying for new federal legislation that allows the Internal Revenue Service to impose penalties and recoup charitable assets when an individual misuses his or her position with a charity for private gain. The “Intermediate Sanctions Rules” (so called because they provide for targeted sanctions short of revoking a charity’s exemption) were enacted in 1996.
• The National Center for Charitable Statistics at the Urban Institute is working with charity officials in 12 states to implement an electronic registration and filing system that would help to make information about charitable solicitors available to the public more quickly and to reduce the costs of processing returns. This, in turn, would make more resources available for education and for investigation of possible fraudulent or otherwise illegal activities.
  
  

3. There are privately funded “watchdog” organizations that evaluate charitable organizations and provide reports to the public.

• The Council of Better Business Bureaus Wise Giving Alliance is the oldest and most experienced of these organizations. It evaluates more than 500 nonprofit organizations and issues regular reports to the public. The BBB Wise Giving Alliance has developed 23 standards to measure the accountability of a nonprofit organization, including its use of funds, fundraising practices, how well it follows donor intentions and donor privacy, disclosure, and governance. This information is available at www.give.org and through its Wise Giving Guide. The public can also contact the BBB Wise Giving Alliance and ask them to investigate a particular organization.
  
  

4. Many nonprofit organizations have developed standards and guidelines for their members and affiliates, as well as their own board and staff members.

• INDEPENDENT SECTOR has developed an online compendium of the standards of more than 60 nonprofit organizations from charity watchdogs, nonprofit associations and professional associations, and foundations (available at www.IndependentSector.org).
• The United Way of America recently revised its accountability standards with more stringent guidelines to ensure that the highest standards of fundraising, accounting, and donor communications are met. United Way has also established a monitoring and operations assessment process to ensure that all member organizations comply with reporting standards and submit requested information and will issue a report card to the community on its accountability practices.