Last year the IRS published a preliminary staff discussion draft of possible good governance practices for charitable organizations. [1] On February 14, 2008, the IRS posted a significantly revised finalized version of this document: “Good Governance Practices for 501(c)(3) Organizations.”

The revised Governance Practices contains greatly expanded commentary from the IRS on how 501(c)(3) organizations should be operated. The topics discussed in the revised Governance Practices document are broken into six broad categories as follows:

1. Mission

2. Organizational Documents

3. Governing Body

4. Governance and Management Policies

A. Executive Compensation

B. Conflicts of Interest

C. Investments

D. Fundraising

E. Governing Body Minutes and Records

F. Document Retention and Destruction

G. Ethics and Whistleblower Policy

5. Financial Statements

6. Transparency and Accountability

The revised Governance Practices provides more extensive explanation of these issues, adds entirely new issues (e.g., the section on “Organizational Documents” is new), and includes cross-references to related questions and reporting requirements in the new Form 990. In this revised Governance Practices document, the IRS recommends numerous practices and policies for exempt organizations related to the six categories above.

Exempt hospitals and health care entities should closely review this document and the IRS’s recommended practices and policies.