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Self-regulation

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Nonprofits should be more accountable, transparent.

By John McGee

[05.25.04] — The nonprofit sector finally has been discovered by regulators.

After years of regulatory dictates that have been poorly explained and disseminated, regulators at all levels of government are turning their attention to nonprofits.

I regularly research news within the sector and have stopped being surprised by the number of legal actions being brought against agencies for failing to do due diligence or implement credible internal controls.

I could suggest many reasons for this but the bottom line is the entire sector is now in the line of fire for greater scrutiny.

Whether you want to think it is a bi-product of corporate scandals or the fallout from too many years of expanding governmental budgets without tax increases, nonprofits are being looked at with a suspicious eye.

To remove the suspicion, I think it is necessary for each nonprofit entity, through its staff and board, to realize that, by our special tax status, we are expected to operate at a higher level of integrity and transparency.

Our unique tax status does not provide us with a license to be secretive or ‘creative’ in our fiscal management style.

We are individually and collectively responsible to the public for our actions.

We should therefore be reaching for this higher level of accountability and transparency without needing government to legislate such behavior.

If we are not prepared to demand accountability of ourselves and our colleagues, then outside entities will.

We demonstrate our commitment either through the management of our own organizations or the reporting we provide our government, corporate, foundation or individual funders.

I believe if and when the public becomes convinced that our sector provides more benefits to the agencies and their employees or volunteers than it provides to the community as a whole, all of us will be in trouble.

I also believe that the only way to prevent that perception from occurring is for each agency and organization to adopt best standards for internal controls, regulatory compliance and public accountability and transparency.

In addition to creating them for your own organization, you need to advocate that your colleagues adopt the same type of standards and practices.


John C. McGee is executive director of the Family Relations Program in Gainesville, Ga.

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