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Who's watching you Bridge 2014

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Who’s Watching You?
The Impact of Accountability on Your Bottom Line
Seth Perlman – Senior Partner, Perlman and Perlman LL...

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WHO’S WATCHING YOU?
States
IRS
Other Federal
Agencies
Watchdog
Organizations News
Media
Legislature
Donors

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THRESHOLD QUESTIONS
 Why is fundraising regulated and how does it impact accountability?
 What role do the states play?
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Who's watching you Bridge 2014

  1. 1. 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 #Bridge14
  2. 2. WHO’S WATCHING YOU? States IRS Other Federal Agencies Watchdog Organizations News Media Legislature Donors
  3. 3. THRESHOLD QUESTIONS  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?
  4. 4. HISTORY OF FUNDRAISING REGULATION  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 competition  Increased presence and use of commercial fundraisers
  5. 5. PROLIFERATION OF CHARITIES 501(c)(3) Entities Registered with IRS _______________________________________________________________________ 1940: 12,500 1980: 320,000 1996: 654,186 2009: 1,135,626 _____________________________ As of 12/2012: 1,072,746 (973, 961 public charities and 98,785 private foundations)
  6. 6. WHAT ACTIVITY IS REGULATED? SOLICITATION In short, solicitation is the affirmative act of asking for a gift or selling goods or services that will benefit a charitable organization. GOVERNANCE 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.
  7. 7. IRS 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
  8. 8. CONSTITUTIONAL FRAMEWORK  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
  9. 9. CONSTITUTIONAL FRAMEWORK  The Trilogy: Schaumburg, Munson and Riley  Supreme Court struck down state and local regulations limiting the percentage of fees that charities could pay to raise funds  Pre-solicitation disclosures of fundraising percentages held unconstitutional  The Court questioned the states’ attempts to connect high fundraising costs to fraud
  10. 10. OTHER GOVERNMENT REGULATORY AGENGIES  Postal Service  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
  11. 11. WATCHDOG ORGANIZATIONS AND THE MEDIA  BBB Wise Giving Alliance  Charity Navigator  CharityWatch (f/k/a The American Institute of Philanthropy)  Guidestar - Philanthropedia  News Media  Print, Television, Internet
  12. 12. LIST OF WATCHDOG GROUPS 2013  www.americanfund.info  http://charitymetrics.weebly.com  www.charitywatch.org  www.givewell.org  http://greatnonprofits.org  www.myphilanthropedia.org  www.standardsforexcellenceinstitute.org And some with a religious focus:  www.ministrywatch.com (part of Wall Watchers)  www.ncdc.org/fundraising  www.ecfa.org And of course:  www.give.org  www.guidestar.org  www.charitynavigator.com
  13. 13. 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 transformation.  The Charity Defense Council has five functions:  Anti-Defamation Force  Brave and Daring Public Ad Campaigns  Legal Defense Fund  The National Civil Rights Act for Charity and Social Enterprise  Organize Ourselves
  14. 14. Thank you! Don’t forget to visit the Solutions Showcase! Many of the ideas discussed today are on display at the Solutions Showcase! #Bridge14 Seth Perlman Seth@perlmanandperlman.com Art Taylor ATaylor@council.bbb.org

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