Massachusetts Attorney General Thomas F. Reilly has proposed strict new rules for charities, including a requirement that board members sign off on financial audits, limits on executive compensation, and fines of up to $5,000 for violations, the Boston Globe reports.

If implemented, the legislation proposed by Reilly would require that most board members on a charity's audit committee be independent and would require all charities to pay their executives "reasonable" compensation, as measured against other nonprofit executives doing the same work. It also would establish protections for employees who flag financial problems. "We want the boards and the management of charities to watch their money much more closely and make sure the fiscal decisions they make are sound and are in the best interest of the charitable mission," said Reilly.

A Globe investigation in 2003 uncovered financial abuses at some foundations, including excessive compensation paid to executives who worked relatively few hours, over-generous perks for directors, and board members who directed legal and investment management contracts to their own companies. In December, Paul C. Cabot Jr., a former co-trustee for the Needham-based Paul & Virginia Cabot Charitable Trust, struck an agreement with Reilly's office to return more than $4 million to a family foundation after Reilly released documents showing that Cabot used foundation money to make mortgage payments and pay bills at his yacht and golf clubs.

Paul Grogan, president of the Boston Foundation, said he would look at Reilly's proposal with two main questions in mind: whether it would burden smaller groups and whether it makes more sense to step up enforcement of existing standards. "You could argue, if people were made an example of, that might be as effective as new legislation," said Grogan. "That's a question I will have, if new legislation isn't going to add a lot of value compared to what else might be done."