Sunday, April 10, 2005

Congress Proposes to Take Control of Charities

And Heather Higgins, who I met a number of years ago when she was called Heather Randolph and running her own family foundation, writes on OpinionJournal - Extra that she doesn't like the idea:

The added costs are easily absorbed by the huge charities that already employ large bureaucracies, but they will devastate small shops with limited budgets and largely volunteer non-professional staff. New rules would limit board size--another blow to fund-raising--and prescribe governance policies, duties and composition.

The proposals would require the IRS to grade each charity against its definition of 'Best Practices.' The IRS already receives annual 'Form 990s' from most nonprofits (detailing officers, revenues and expenditures), and can audit any nonprofit at any time. These proposals may clarify that process, and if so that's all to the good. But some now propose an expanded process that could put most, if not all, charities through an extensive review as frequently as every five years. This would involve submission of massive documentation to the IRS justifying the charity's compliance, restating its charitable goals and offering detailed narratives about its policies and operations, all to be made public.

Moreover, the IRS could require accreditation for the maintenance of tax-exempt status, and could contract out some of these powers to private accrediting entities. There is already deep concern on both sides of the political aisle that the IRS, despite denials, has had its auditing powers used for political purposes. Accreditation is an area where Congress must proceed with great caution. Accreditation by private organizations can be an excellent idea if voluntary and competitive, but mandatory and monolithic accreditation as a substitute for IRS oversight could stifle diversity while doing nothing to alleviate fears of misuse.