Independent Sector Panel on the Nonprofit Sector

The Independent Sector Panel on the Nonprofit Sector has been convened to address the Senate Finance Committee (SFC) staff proposals on ways to improve the governance and the oversight of nonprofit charitable organizations.

Independent Sector (IS) is a national coalition of leading nonprofits, foundations, and corporations committed to strengthening, empowering, and partnering with nonprofit and philanthropic organizations in their work on behalf of the public good.

On January 25, NPCC co-hosted a town hall meeting with Michael Seltzer of NYRAG (New York Regional Association of Grantmakers), Edward Skloot from the Surdna Foundation, and Jon Small of NPCC. The meeting was to inform NPCC and NYRAG members of the background of events leading to the creation of the Panel and its work to date.

IS formed the Panel at the urging of Senate Finance Committee Chair Charles Grassley and Ranking Member Max Baucus to provide feedback to the Committee’s “white paper” entitled Tax Exempt Governance Proposals: Staff Discussion Draft. SFC has asked the Panel to provide a report of its initial findings and recommendations by February and a final report in the spring.

The IS Panel consists of the Panel itself, an Expert Advisory Group (Victoria Bjorkland of NPCC’s Government Relations Committee is a member), and five work groups: Governance and Fiduciary; Legal; Oversight and Self-Regulation; Small Organizations (Jon Small is a member); and Transparency and Financial Accountability. The Expert Advisory Group will vet all the recommendations of the work groups. There is also a citizen advisory panel.

In March or April, IS will hold meetings around the country to review and discuss the Panel’s initial report.

Seltzer, Skloot and Small reviewed how we have gotten to this point. First, there were the for-profit corporate scandals at Enron, Tyco, and other well-covered cases of corporate malfeasance that led to the creation of the federal Sarbanes-Oxley laws. Then, directors of nonprofits familiar with Sarbanes-Oxley started talking about how these laws might benefit nonprofits, some of which are also receiving major media coverage for their own scandals. The second major turning point was that New York’s Attorney General Eliot Spitzer proposed his own version of laws similar to Sarbanes-Oxley designed for not-for-profit corporations. Finally, last year, the Senate Finance Committee staff released its set of proposals now under consideration that would govern nonprofits nationwide.

This is an historic moment; we are at a crossroads in the history of nonprofit governance: The SFC proposals would federalize a great body of law governing charities that has until now, been left up to the states. What is the agenda that we would like to set? Are more laws and regulations really needed or do the existing laws just need to be enforced? This is the first time since the Tax Reform Act of 1969 that the sector itself has been able to get a toehold on Congress’ work. Diana Aviv of IS has been able to convince Senators Grassley and Baucus that the sector is a serious player. It was also noted that New York Senator Charles Schumer is now a member of the Senate Finance Committee.

What’s Next?

We’re asking members to provide feedback: your insights, thoughts, and feelings on the SFC proposal. One point to consider in reviewing the proposals is, “what is it going to cost to deal with the details of the various proposals?” For example, if you have to change auditors every five years, there are some positive aspects to that requirement. Specifically, that you have a fresh set of eyes taking a look at your organization’s finances. But, the downside is that it’s probably going to cost more money to change auditing firms.

NPCC members will be invited to join NYRAG members to visit legislators on the Hill in D.C. in March.

Diana Aviv from Independent Sector is expected to be in New York City in March or April to lead a meeting about the proposals and the IS-led response.

Go Online to Read More

The Senate Finance Committee staff paper, Tax Exempt Governance Proposal, can be downloaded at http://finance.senate.gov/hearings/testimony/2004test/062204stfdis.pdf.

Information on the Panel on the Nonprofit Sector can be accessed at www.nonprofitpanel.org.  IS has just posted “the Small Groups’” Recommendations which have been reviewed by the Expert Advisory Group, but not by the top-level panel.

Also check out the IS website at www.independentsector.org.