On February 4, 2008, the IRS posted Governance and Related Topics - 501(c)(3) Organizations, a document that updates an earlier IRS discussion draft, Good Governance Practices for 501(c)(3) Organizations. The policies and practices recommended by the IRS for a charity's consideration are divided into the following topics:
- Organizational Documents
- Governing Body
- Governance and Management Policies
- Executive Compensation
- Conflicts of Interest
- Governing Body Minutes and Records
- Document Retention and Destruction
- Ethics and Whistleblower Policy
- Financial Statements and Form 990 Reporting
- Transparency and Accountability
Some interesting points in the document:
- The discussion on board size and independence (e.g., nonemployees).
- Recommendation that a parent organization with subordinates have procedures and policies in place to ensure that the activities and operations of the subordinates are consistent with those of the parent.
- Recommendation that charities rely on the rebuttable presumption test of Section 4958 of the Internal Revenue Code and accompanying regulations when determining executive compensation, including the use of comparables.
- Recommendation that a charity's governing body consider adopting a code of ethics.
- Statement that "even if an audit is not required, a charity with substantial assets or revenue should consider obtaining an audit of its financial statements by an independent auditor."