Sunshine and Shadows on Charity Governance: Public Disclosure as a Regulatory Tool

Abstract

As legislatures turn to disclosure as the primary tool of nonprofit regulation, we should ask some basic questions: Why isn't it enough that charities report information to the authorities - why further require those filings to be disclosed to the public? Is information collected by regulators who worry primarily about financial self-dealing useful to a public worried about charity effectiveness? Ideally, the prospect of disclosure should improve not just the accuracy of filings, but also board monitoring and governance: Boards will become sensitive not only to how operations look, but how well the charity is really doing. If mandated disclosures focus on the wrong questions or paint an incomplete picture, engaged boards can ensure that charities tell their stories through additional, voluntary forms of disclosure. At the same time, increased public disclosure of the IRS's exemption determinations and revocations reveals the need for formal guidance from the tax regulator about acceptable governance structures and practices.