February 22, 2007 | Read Time: 1 minute
TAX WATCH
As charities debate whether to create ways to police their own behavior, the Internal Revenue Service has come forward with its ideas to improve accountability.
The tax agency has released an unofficial “discussion draft” of nine principles for charity boards to follow. The principles have not been formally adopted by the revenue service and would not be enforced even if the agency made them official, it says. The agency says it is offering them because it believes that “an organization that adopts some or all of these practices is more likely to be successful in pursuing its exempt purposes and earning public support.”
Among the IRS’s suggestions:
- Charity directors in most cases should not be compensated for their service on a nonprofit organization’s board.
- A charity should have a written code of ethics, establish a policy that encourages charity officials to report abuses, and protect whistleblowers from retaliation.
- Boards should approve a charity’s annual budget and ensure it complies.
A copy of the discussion draft is available online at http://www.irs.gov/pub/irs-tege/good_governance_practices.pdf.
