The Office of Foreign Assets Control of the U.S. Treasury Department has issued voluntary best practice guidelines for U.S. charities that cover governance, disclosure, transparency and financial practices for all charitable activities. In addition, special procedures for groups that distribute funds to foreign organizations are listed. While the guidelines are labeled voluntary, it is not clear to what degree the Internal Revenue Service, another agency of the Treasury Department, will expect charities to adopt them to show they exercise “control and discretion” over funds. Normally the Tax Exempt & Government Entities Operating Division of IRS develops guidelines affecting charities. However, in this case, the Office of Foreign Assets Control developed them. It is unclear how much consultation occurred with the TE/GE division. The guidelines include issues generally governed by state law, such as the contents of governing instruments, composition and meetings of boards of directors and solicitation of funds. Its conflict of interest rules exceed IRS requirements by recommending charities not “engage in transactions with entities in which a board member has a conflict of interest.” IRS rules allow charities to engage in “reasonable transactions” where someone with a conflict of interest may receive an economic benefit, but prohibits the individual from voting or participating in debates relating to the transactions. In addition, the guidelines take the view that an organization that compensates 20% of its board is not independently governed. IRS rules require that no more than 35% of voting board members be “disqualified persons” -- those who have substantial influence over the organization, or family members of these disqualified persons. The area of public disclosure is the most problematic section of the guidelines, duplicating information that must be made public in IRS reporting in Form 990 (the annual information return filed by nonprofits), without the definitions and protections included in the IRS disclosure regulations. In other cases the guidelines exceed current disclosure rules by saying charities should “provide upon request an annual report” and maintain records of “all decisions made” that are made available for public inspection. No opportunity for public comment on these “best practices” has taken place. If charities will be expected to follow these guidelines, or face questions about why they do not, an opportunity for input and comment should be provided so that the final product does not create inconsistent standards, infringe on the privacy of internal charity operations, and preempt state law. In related action, Treasury asked the United Nations Security Council to block assets of the Benevolence International Foundations (BIF) and two affiliates. BIF, an Illinois-based nonprofit, had its assets blocked in December 2001 and its CEO has been indicted for racketeering and providing material support to terrorism.