The Internal Revenue Service is not backing away from its controversial efforts to promote good governance by charities, according to its top nonprofit regulator.

The federal tax code does not explicitly set out governance standards for the IRS to enforce, but the tax agency in the past two years has been keeping an eye on charities’ governance practices — a move that has drawn criticism from some observers.

Sarah Hall Ingram, in remarks to a conference in Washington on Wednesday, noted that some people believe the IRS “should just be sticking to the [tax] code and the exact words of the code and get out of the governance business.”

Instead, she said, “we are in this discussion to stay.”

Not ‘Off the Hook’

Even with state oversight of nonprofit groups and self-regulation by charities, Ms. Ingram said, “Congress is not going to let the IRS off the hook for its job of regulating the [nonprofit] sector and ensuring that the sector is not only equipped to do the deeds that it sets out to do but also that the federal tax subsidy is used correctly.”

Ms. Ingram said she views good governance practices “as being all about risk management,” both for charities and for the IRS.

“I won’t say everybody agrees with me, but it’s pretty obvious to me that if [a charity] has safeguards, checks and balances, sound procedures in place, the likelihood of the organization getting in trouble is reduced,” she said. “If you aren’t paying attention, the likelihood that something accidental or otherwise could go wrong, or a bad actor could get in and mess around with the organization — the risks are higher.”

Ms. Ingram said that “in these economic times, it’s important not only to do good governance to keep from getting in trouble, to keep from wasting resources that you could spend on mission, but it’s also important not to take hard times and cut corners on governance. So in these times when we’re all tightening our belts, good governance has still got to have a place in your organization.”

Policies and Procedures

While no one set of governance principles fits all charities, said Ms. Ingram, “I continue to believe strongly that this is one of the key topics that every board, every organization, must keep on its agenda.” She added that “building procedures and habits into the fabric of the organization actually makes it less expensive, less alarming, and less disruptive.”

Ms. Ingram said she was pleased by a recent survey by Grant Thornton, an accounting and business advisory group, that showed a sharply increased focus on governance matters by nonprofit groups in 2009. Grant Thornton attributed the trend in part to the IRS’s revised Form 990 informational tax return for the 2008 tax year that includes new questions for charities about governance and oversight.

“That heartens me,” said Ms. Ingram, who noted “the general intense push for transparency across not just the nonprofit sector but the profit sector and Wall Street — you name it.”

The IRS is not auditing charities for their governance practices, Ms. Ingram said, but is using charities’ answers to governance questions on the Form 990 to help “target and calibrate our level of attention” to nonprofit groups.

“If we look at the 990 and we see no, or very lax, governance practices, procedures, and answers, then we’re going to worry more,” she said.

Ms. Ingram spoke at a seminar on “Top Issues in Nonprofit Governance” that was co-sponsored by the IRS and Independent Sector, a national coalition of charities and foundations. The seminar was held through Georgetown University Law Center’s Continuing Legal Education Program.