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Abstract: The stakes for proper nonprofit governance are extremely high. Over 1.5 million nonprofits are registered with the Internal Revenue Service (IRS), collectively employing twelve million people and accounting for 5.6% of U.S. gross domestic profit. Yet whereas for-profit companies have significant checks on the behavior of boards and management, nonprofit firms lack many of the same types of internal and external governance control mechanisms. COVID-19 is just the latest shock to expose the lack of preparedness and capability of many nonprofit boards in fulfilling their essential governance functions. This Article contributes to the corporate governance literature by identifying aspects of nonprofit governance that create unnecessary risk to nonprofit entities and to society overall. Currently many governance failures that would be corrected in traditional for-profit entities go unaddressed among nonprofits. We make unique contributions to addressing these governance shortcomings by suggesting an enforcement reorientation by both public and private actors. our novel solutions encompass disclosure, certification, oversight by state attorneys general, and federal actors.
INTRODUCTION
The size and scope of nonprofit enterprise is staggering. Nonprofits account for over a trillion dollars-or 5.6%-of U.S. gross domestic product,1 employ twelve million people,2 pay $670 billion in wages annually,3 and pro- vide immeasurable benefit to people's lives. Unfortunately, nonprofits' success can be accompanied by extreme cases of managerial misconduct. In one of the most famous examples, William Aramony, the longtime leader ofthe nonprofit United Way organization, served six years in federal prison after he was convicted of twenty-three felony charges.4 His activity included using nonprofit funds to buy homes in New York City and Miami, to pay for limousine service and transatlantic business class flights, and to fund extramarital affairs in Paris, London, and Cairo.5
The past year has been a busy one for nonprofit governance issues. The New York Attorney General filed suit against the National Rifle Association (NRA), alleging self-dealing and fraud, including a $17 million post-employment contract for its head Wayne LaPierre, expensive clothing at Beverly Hills shops, and lavish foreign travel. These actions may help to explain how NRA leadership turned a $27.8 million surplus in 2015 into a $36.3 million net deficit in 2018.6 The University of Southern California (USC) also was rocked by a series of highly publicized scandals. In one,...