IRS Good Governance Principles
In February 2007, the Internal Revenue Service issued a document entitled “Good Governance Principles for 501(c)(3) organizations” which recommends that governing boards should be composed of individuals who are informed and active in overseeing a charity’s operations and finances. Also, successful governing boards include individuals not only knowledgeable and passionate about the organization’s programs, but also those with expertise in critical areas involving accounting, finance, compensation, and ethics.
In order to accomplish this, the IRS suggests that organizations review a number of “principles” to assist trustees with understanding their various roles and responsibilities.
These principles include having the following:
- Mission Statement
- Code of Ethics
- Policies that ensure trustees can meet their duty of care and due diligence
- Duty of Loyalty that addresses a director avoiding conflicts of interest that are detrimental to the charity
- Complete and accurate information about its mission, activities, and finances
- Fundraising Policy
- Financial audits annually or otherwise as appropriate
- Compensation practices that are documented and followed
- Document Retention Policy
While adopting any of these practices is not a requirement for exemption, the IRS is making suggestions that could have a greater impact on governance practices at some point in the future.
If you need assistance in reviewing your current governance principles for your Board,
Yaffe & Company, Inc. can help. Please contact us for more information.