Who’s Watching You?
The Impact of Accountability on Your Bottom Line
Seth Perlman – Senior Partner, Perlman and Perlman LLP
Art Taylor – President & CEO, BBB Wise Giving Alliance
Moderator: Lisa Maska, CFRE – Partner, Lautman Maska Neill & Company
WHO’S WATCHING YOU?
Why is fundraising regulated and how does it impact accountability?
What role do the states play?
What role does the federal government play?
What about watchdogs and the media?
How extensive is fraudulent fundraising in the charitable sector?
Does registration and reporting help prevent fraud?
How has technology changed the landscape?
How will it change in the future?
HISTORY OF FUNDRAISING
In 1955, New York established the Office of Charitable
Registration to administer new fund raising regulations.
Eventually over 40 other states established charity offices
modeled after New York, in response to:
Growth of mass marketing technology
Proliferation of charities
Increased presence and use of commercial fundraisers
PROLIFERATION OF CHARITIES
501(c)(3) Entities Registered with IRS
As of 12/2012: 1,072,746
(973, 961 public charities and 98,785 private foundations)
WHAT ACTIVITY IS REGULATED?
In short, solicitation is the affirmative act of asking for a gift or
selling goods or services that will benefit a charitable organization.
Historically, governance was within the purview of the states;
starting in 2008, the new Form 990 put the IRS in the position
of regulating the governance of nonprofits.
REGULATION OF GOVERNANCE
“The IRS has a clear, unambiguous role to play in governance …
[w]here an organization has adopted good governance practices, we
can reasonably expect that it poses less risk that it will misuse its tax-
exempt status or its charitable assets.…”
-Sarah Hall Ingram, Commissioner,
Tax Exempt Division, 2009
First Amendment - General Principles:
The states have the power to compel charitable solicitors to
identify themselves to the public before they solicit
However, the First Amendment otherwise protects this
activity and narrow tailoring of the laws is essential
Solicitation of charitable contributions is fully protected,
even by professional fundraisers with profit motives
The Trilogy: Schaumburg, Munson and Riley
Supreme Court struck down state and local regulations
limiting the percentage of fees that charities could pay to
Pre-solicitation disclosures of fundraising percentages
The Court questioned the states’ attempts to connect
high fundraising costs to fraud
Federal Trade Commission
United States Treasury (Anti-Terrorism)
U.S. Senate Finance Committee
U.S. House Ways and Means Committee
U.S. House Committee on Oversight and Government Reform
State Trade Commissions
County and Municipal Registration Offices
AND THE MEDIA
BBB Wise Giving Alliance
CharityWatch (f/k/a The American Institute of Philanthropy)
Guidestar - Philanthropedia
Print, Television, Internet
LIST OF WATCHDOG GROUPS 2013
And some with a religious focus:
www.ministrywatch.com (part of
And of course:
CHARITY DEFENSE COUNCIL
Our goal is singular and bold: to change the way people think
about changing the world.
To let them know that low overhead is not the way the world gets changed. That poor
executive compensation is not a strategic plan for ending hunger and poverty or
curing disease. That inadequate, donated resources are not the path to global
The Charity Defense Council has five functions:
Brave and Daring Public Ad Campaigns
Legal Defense Fund
The National Civil Rights Act for Charity and Social Enterprise
Don’t forget to visit the
Many of the ideas discussed today are on display at the
Seth Perlman Seth@perlmanandperlman.com
Art Taylor ATaylor@council.bbb.org