To strengthen governance, the Panel recommends that charitable organizations adopt, implement, and publicize audit procedures and policies on travel expenses, conflicts of interest, and whistleblower protection.
To make financial information more reliable, the Panel recommends that Congress require audits by charitable organizations with annual revenues of $1 million or greater and an independent accountant’s review for organizations with annual revenues between $250,000 and $1 million. The Panel also calls for Congress to require mandatory electronic filing of charitable organizations’ annual information returns, the Forms 990; the IRS to improve the design of and instructions for Forms 990; and charitable organizations to have their CEOs or CFOs certify the accuracy of their information returns.
To prevent abuse of charitable entities, the Panel recommends that Congress establish clearer legal guidelines for donor-advised funds, Type III supporting organizations, and participation by tax-exempt entities in potentially abusive tax shelters. It also urges Congress to tighten up rules and strengthen penalties to help prevent transactions that benefit donors, rather than the public.
To ensure that non-cash contributions support charitable causes, rather than provide improper tax deductions for donors, the Panel recommends that Congress establish clearer rules for valuing donated property and mandate stricter guidelines for appraisals of land and other appreciated property.
To address instances of excessive executive compensation, the Panel recommends that Congress strengthen the penalties on board members who approve and executives who receive excessive compensation, that the IRS revise the Forms 990 to make the total compensation of executives clearer to the public and regulators, and that charitable organization boards approve executive compensation each year.
The Panel will offer supplemental comments in the fall on issues of financial reporting and transparency, accreditation and standard setting, and possible changes in the legal framework, including federal and state regulations of fundraising activities.