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Sen. Charles Grassley, (R-Iowa), ranking member of the Senate Finance Committee, has been singularly focused on nonprofit accountability and transparency. This fall, he sent letters to a half-dozen nonprofits requesting answers to questions about expenses, executive compensation and amenities, including fancy cars and private jets.

Grassley issued a statement that said his allegations "involve governing boards that aren't independent," as well as the more visible issues of gold-plated perks at religious-affiliated groups.

Last spring, Grassley requested the Congressional Budget Office to review the practice of universities borrowing tax-exempt debt while maintaining a portfolio of untaxed assets and receiving the economic benefits of tax-exempt athletic programs, according to a Sept. 3, 2007, report in National Law Journal Online.

Grassley and Finance Committee Chairman Max Baucus, (D-Mont.), reportedly are eyeing the practices of tax-exempt groups and seeking input from the IRS about charitable organizations' abuses of tax-exempt status. In particular, the lawmakers also have been scrutinizing university endowment practices. A USA Today column on Oct. 18 declared, "College tuitions rise while endowments simply swell." Columnist Lynne Munson noted that "the Senate Finance Committee recently jump-started a discussion on a long-overlooked remedy for making college more affordable: Tapping higher-education endowments."

"The Internal Revenue Service believes that governing boards should be composed of persons who are informed and active in overseeing a charity's operations and finances."

Back at the IRS, spokeswoman Peggy Riley said in an interview that the agency has been providing guidance to nonprofit organizations "so they file the right information. In the past, we've seen some of the information isn't exactly what they need to be reporting."

That's one of the main reasons, she said, for the proposed revisions of Form 990.

"We've gotten a lot of comments on Form 990 and we're taking all of those into consideration," Riley said. The IRS also is awaiting congressional approval of its budget, which seeks more funding for enforcement measures and an additional 109 employees in its tax-exempt and government entities division, Riley said.

"One thing we want to focus on in the nonprofit arena is enforcement because we've been a little lax in the past," the IRS spokeswoman said.

When it released draft guidelines for good governance practices early this year, the IRS made its intent loud and clear: "The Internal Revenue Service believes that governing boards should be composed of persons who are informed and active in overseeing a charity's operations and finances."

"If a governing board tolerates a climate of secrecy or neglect," the statement continued, "charitable assets are more likely to be used to advance an impermissible private interest."

And governing boards should "include individuals not only knowledgeable and passionate about the organization's programs, but also those with expertise in critical areas involving accounting, finance, compensation and ethics."

The IRS' guidance has been heeded by those large nonprofits that have brought in outside directors and increased their group's financial transparency.

But with nearly two million players involved, there's still plenty of work to be done to meet the higher standards, experts said. Small-to-midsized organizations typically "have the harder time finding needed financial expertise," Heinrich said. While smaller organizations may lack the staff and training to implement better controls, she said, "The standards for transparency and governance are all the same no matter what the size."

Heinrich recommended that it is an "appropriate time for all organizations to do a self-assessment of governance practices, and especially before embarking upon a major campaign fundraising effort, accreditation effort, or launching an aggressive board recruitment phase."

Marts & Lundy performs assessments and audits of the governance practices of nonprofit organizations, and includes these elements and reviews in its plans for fundraising campaigns, and in development program assessments.

And Marts & Lundy has appointed two independent directors to its nine-member board (see sidebar).