Policing the Good Guys: Regulation of the Charitable Sector Through a Federal Charity Oversight Board

Cornell Journal of Law & Public Policy, Vol. 19, No. 1, 2009

82 Pages Posted: 24 Nov 2009 Last revised: 10 May 2010

Terri Lynn Helge

Texas A&M University School of Law

Date Written: December 4, 2009

Abstract

Recently, public confidence in the charitable sector has eroded due to a barrage of media reports on scandals and abuses. The principal parties charged with regulation of the charitable sector, the Internal Revenue Service and state attorneys general, are saddled with bureaucratic constraints that make it difficult to enforce the laws governing the fiduciary responsibilities of charity managers. Substantial reform in the regulation of charitable organizations is necessary to curb the reported abuses that have undermined confidence in the charitable sector.

Some advocate expanding private regulation of the charitable sector to improve enforcement of the fiduciary responsibilities of charitable managers. While some of these private regulatory alternatives have had success in isolated situations, none are satisfactory in providing comprehensive and effective oversight of the charitable sector. Overall, the policies underlying oversight of charitable organizations support maintaining primary responsibility for their regulation in a centralized authority. However, the financial, political, institutional, and agency constraints imposed on the Internal Revenue Service and state attorneys general make them unlikely to implement enough internal reform to be an ongoing, effective enforcement presence in the charitable sector.

This Article advocates the creation of a new, federal, quasi-public agency that would be the principal regulator of the charitable sector. The new agency would be a self-funded, independent, and proactive regulator that would serve the dual purposes of curbing the abuses that have eroded public confidence in the sector and educating charity managers of their obligation to be responsible stewards of charitable resources. The proposed agency would be primarily responsible for enforcing federal tax laws aimed at influencing fiduciary behavior of charity managers and preserving charitable assets for public benefit. Its formation, therefore, would separate oversight of charity governance from the tax collection function, thus harmonizing the United States with other countries that have established independent charity oversight agencies.

Keywords: charitable organizations, regulation

Suggested Citation

Helge, Terri Lynn, Policing the Good Guys: Regulation of the Charitable Sector Through a Federal Charity Oversight Board (December 4, 2009). Cornell Journal of Law & Public Policy, Vol. 19, No. 1, 2009. Available at SSRN: https://ssrn.com/abstract=1511796

Terri Lynn Helge (Contact Author)

Texas A&M University School of Law ( email )

1515 Commerce St.
Fort Worth, TX 76102
United States

HOME PAGE: http://law.tamu.edu

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