DOROTHY RIDINGS CALLS FOR A PARTNERSHIP BETWEEN NON-PROFITS AND THEIR REGULATORS

Dorothy S. Ridings, the President and Chief Executive Officer of the Council of Foundations delivered the opening speech at this past Monday's NAAG/NASCO public conference in Washington, D.C. Ms. Ridings gave a stirring speech, calling for a strong...

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partnership between the independent sector and those who regulate it.

Ms. Ridings noted that the past couple of years have been difficult for grantmakers, with their resources hurt by a weak stock market and lackluster economy. She also noted that there has been a lot of press coverage focusing on foundations that have misbehaved. She left little doubt that the charitable sector must expose these bad actors. Having pointed out the problems, Ms. Ridings then indicated that her preference is for self-regulation. To be meaningful, self regulation must be transparent and responsive. She pointed to a number of "principle-setting" projects that the Council has undertaken.

Ms. Ridings then noted the increased public interest in the non-profit sector, expressing concern about the public's skepticism and cynicism. To the public, every governance failure looks as if it were intentional. This makes dealing with conflicts of interest and ethical lapses particularly important.

Ms. Ridings then went on to talk about IRS funding. She recently paid a visit to Commissioner Mark Everson, and was pleased to learn that he intended to be the "enforcement" Commissioner. However, intentions are not enough. Ms. Ridings noted that the IRS is under funded when it comes to exempt organizations. She pointed to the excise tax on private foundation investment income. As originally conceived, the revenue from this tax was to be used to fund IRS oversight of the tax-exempt sector. However, that has never been the case. Ms. Ridings pointed out that the IRS's budget for exempt organizations would increase tenfold if revenue from the investment income excise tax were allocated to the IRS's exempt organization division. Ms. Ridings clearly sees the IRS as a partner for exposing and weeding out bad behavior.

Ms. Ridings then discussed the regulation of non-profits at the state level, describing state regulators as woefully understaffed. She cited a seven-state survey by the Michigan Attorney General that shows that the ratio of attorneys to regulated-non-profits often exceeds several thousand non-profits per regulator. For example, Michigan has one attorney for 4,125 registered charities. Ms. Ridings apparently would like to see more funding at the state level.

Ms. Ridings concluded by discussing the role of the Council of Foundations. So far this year, the Council has responded to over 4,000 requests from its members asking for advice on what they can and cannot do. This high level of inquiry reflects the attitude held by the vast majority of the foundation community's to act in an ethical manner.

Ms. Ridings concluded by saying that "It is indeed a true partnership."

 

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