The following sentences appeared in an article I reprinted yesterday from the Philanthropy Journal, a publication of the Institute for Nonprofits at N.C. State University:
“Most of the sector cooperates willingly with the IRS in its efforts to ensure nonprofits are complying with federal regulations, [Lois Lerner] says, while a handful are confused about how to comply and an even smaller number have ‘bad intentions.’
“‘The nonprofit sector wants to do the right thing, and if they know what to do they will do it,’ she says. ‘The combination of greater transparency, governance and accountability are absolutely necessary.’ And with the new Form 990, and the oversight role of a handful of watchdog agencies, nonprofits have been doing a better job of ‘self-regulating,’ which could prevent further regulation by lawmakers at the federal level.”
Sparkle Plenty had this reaction to Lois’ remarks:
“It may be the case (though this is debatable) that MOST organizations cooperate willingly. However, plenty of organizations ask their lawyers and CPAs who they are consulting on EO tax mandates, ‘what do I need to do to stay below the radar screen?’, which translates to ‘how much of this crap can I ignore’? Regardless, there can be no debate that way more than a handful (or is that the hand of ‘he’s got the whole world in his hands’?) are indeed confused. With no precedential guidance on tons of things — what is UBIT-reachable, what is ‘electioneering’, what comprises ‘private benefit’? — the c3 sector (and plenty of advisors) have no choice but to be confounded….”
I will add Gary Snyder, editor of Nonprofit Imperative (www.garysnyder.com), as another who probably suspects Lois’ rosy scenario may be too rosy. His newsletter is dedicated to “exposing the crisis in nonprofit fraud leadership … a crisis of pervasive and monumental waste, fraud, abuse, mismanagement, and malfeasance throughout the charitable sector which costs taxpayers and contributors tens of billions of dollars annually.”
My take: So who is right? Was it Don Rumsfeld who said we don’t know what we don’t know? That may be the case here. On what does Lois base her rosy scenario? Has the IRS done a project on compliance in the EO sector? How has Lois divined that “an even smaller number have ‘bad intentions’?” Perhaps we need a new question on the Form 990, “Does the organization (and its managers) have bad intentions, or is the organization just confused?”
I vaguely recall the IRS once reporting on which types of organizations they had audited in a given fiscal year, what areas of noncompliance were discovered, and the number of organizations in each category: (c)(3)s, (c)(4)s, (c)(5)s, etc. I’m not aware of the IRS releasing a report of this nature in recent years. If this is true, why not? A reader recently asked me how many private foundations had been audited in the last few years. I said I had no idea, although we both agreed zero might be a good guess. I assume Nan Downing, Director of EO Examinations, has reports on her desk telling her which types of organizations are being audited, what the issues being uncovered are, and the number of each type of organization being audited. Unless I have somehow missed these reports, why aren’t they being released to the public? No names, just data.
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