According to an Exempt Organizations (EO) 2012 Annual report, the IRS says it’s all about the Form 990. Below is what it says specifically about governance issues:
EXCERPT from the Exempt Organizations (EO) 2012 Report
EO added a series of governance questions to the Form 990 when the 2008 revisions were completed and in FY 2012 completed some research on which practices reported on the 990 were associated with compliance and which were associated with noncompliance. The sample of organizations used included only those that already had been selected for review (that is, something already looked wrong on their returns), but the IRS found that compliance was associated with:
- a written mission statement;
- use of comparability data for compensation decisions;
- controls in place to protect charitable assets; and
- review of the Form 990 by the entire board before filing.
The characteristic associated with noncompliance was the concentration of control of an organization in one or a small number of individuals.
EO will be repeating this research using a statistically representative sample of charities to confirm these findings and see if other factors are also predictive.
Click on the link below for the entire EO report: