Nonprofits Scramble Under New Scrutiny

The National Law Journal recently published Nonprofits Scramble Under New Scrutiny, an article describing nonprofits’ search for meaningful guidance on corporate governance standards in the wake of recent scandals at several nonprofits.  Congressional investigations, regulatory attention, and media scrutiny of loose financial controls at nonprofits have prompted several, including the American Red Cross, to undertake detailed reviews of their governance practices.

This is a difficult task in light of the absence of substantive statutory or regulatory guidance as to what is expected of nonprofit boards.  Directors of public companies who have experienced governance overhauls in the wake of Sarbanes-Oxley, however, are apparently using SOX standards for guidance as they reform governance at the nonprofits they serve.  The Article explains: 

Congressional committees, state attorneys general and now the Internal Revenue Service (IRS) are placing nonprofit organizations under scrutiny and sending them scrambling for legal advice on sound governance practices. . . .

Nonprofit board members who are also public company executives have lived through their corporation’s governance overhauls, and they are realizing that the organizations they volunteer for need to make changes.

The full Article is available here.