Tuesday, March 20, 2007

IRS releases "Good Governance Practices" for charitable organizations

I meant to post this earlier, but the posts have been few and far between this month, and Davis & Tremaine beat me to the punch, so I have to give them credit for this one: The IRS has announced the release of a staff discussion draft of "Good Governance Practices for 501(c)(3) Organizations." Major sections of the draft include these topics: Mission Statement, Code of Ethics, Due Diligence, Duty of Loyalty, Transparency, Fundraising Policy, Financial Audits, Compensation Practices, Document Retention Policy. It's about three (3) pages long and its content shouldn't surprise anyone with a passing familiarity with the law of exempt orgs.

The IRS seems to be saying that adoption of these good governance practices is not a criterion for obtaining or retaining exempt status, but that an organization that departs to a significant degree from them is more likely to engage in practices that put its exempt status in jeopardy. Interestingly, if somewhat bizarrely, the Service inserted a comment about board size into its introduction that doesn't appear -- either implicitly or explicitly -- in the Good Governance Practices themselves. It's the trite-but-true "Goldilocks" principle that boards that are too small have difficulty representing "a public interest" and boards that are too large "may be less attentive to oversight duties." Presumably boards that are "just right" are more likely to see that their duties are carried out in a manner that promotes, in the case of exempt hospitals, community benefits.
posted by Tom Mayo, 9:35 PM

Health care law (including public health law, medical ethics, and life sciences), with digressions into constitutional law, poetry, and other things that matter