Some measures proposed in the discussion draft, especially those intended to address problematic areas like inappropriate tax shelters, were favorably received at the June 22 hearings. Yet the broader proposals to expand federal involvement in the activities of nonprofits and private foundations were severely criticized, both then and in subsequent discourse, as too intrusive and micromanaging, unmindful of the regulatory burdens already borne by nonprofit organizations, inadequately appreciative of the diligence exercised by most nonprofit boards, and underestimating the merits of self-regulation in a heterogeneous and overwhelmingly public-spirited sector. For example:

Finance Committee Chairman Senator Charles Grassley has indicated the need for caution regarding comprehensive legislation and has stated that any legislation in the near term will likely focus on tackling specific abuses. The outcome of ongoing activity by the committee remains uncertain, however, and the issues at stake for foundations and nonprofits generally are momentous.

Foundations have also received attention from state officials. Incorporated under state law, foundations are held accountable by states for certain standards of behavior.⁽²⁾ Using the Sarbanes-Oxley legislation as their springboard, attorneys general in several states—including California, Connecticut, Hawaii, Massachusetts, and New York—have introduced legislation that would tighten state regulation of the nonprofit and foundation sectors. With varying degrees of success, nonprofit organizations in each of those states have worked to help ensure that any new legislation promotes best practices by governing boards, while neither undermining the ability of nonprofits to attract able board members nor adding burdensome new regulations.

Foundations have also been the subject of considerable negative press recently. Major newspapers, the Boston Globe in particular, have devoted substantial coverage to questionable practices in the nonprofit sector, including foundations. Although the Wall Street Journal ran an insightful story on how health care foundations like The Commonwealth Fund are stimulating quality improvement in health care—and the media sometimes report the results of foundation programs—the focus of the press has generally been on foundations' expenses, particularly trustee and executive compensation, and examples of misconduct.