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#AfpFC presentation 2016

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Who's Watching You

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#AfpFC presentation 2016

  1. 1. Who’s Watching You? The Impact of Accountability on Your Bottom Line Seth Perlman – Senior Partner, Perlman and Perlman LLP Art Taylor – CEO, BBB Wise Giving Alliance Lisa Maska – CFRE, Partner, Lautman Maska Neill & Company
  2. 2. Seth Perlman Senior Partner Perlman & Perlman, LLP @SJPerlman #WhosWatchingYou
  3. 3. WHO’S WATCHING YOU? States IRS News Media Donors Other Federal Agencies Social Media “Swarms” Watchdog Organizations Legislatures Data Conglomerators #WhosWatchingYou
  4. 4. • How are fundraising and overhead expenses regulated and how does regulation impact accountability and your bottom line? • What role do the states play? • What role does the federal government play? • What about watchdogs and the media? How do they interface with federal and state regulators? • How has technology changed the landscape and how will it change in the future? • How does all this interplay impact relationships with donors and funders? THRESHOLD QUESTIONS #WhosWatchingYou
  5. 5. • In 1955, New York established the Office of Charitable Registration to administer new fundraising 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 DAWN OF THE AGE OF FUNDRAISING REGULATION #WhosWatchingYou
  6. 6. PROLIFERATION OF CHARITIES 501(c)(3) Entities Registered with the IRS _____________________________ 1940: 12,500 1980: 320,000 1996: 654,186 2009: 1,135,626 _____________________________ As of 12/2014: 1,272,746 (1,073,961 public charities and 108,785 private foundations) #WhosWatchingYou
  7. 7. 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. USE OF CHARITABLE ASSETS Are charitable assets used for charitable purposes? WHAT ACTIVITY IS REGULATED? #WhosWatchingYou
  8. 8. “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 IRS REGULATION OF GOVERNANCE #WhosWatchingYou
  9. 9. • 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 • Thus, solicitation of charitable contributions is fully protected speech, even by professional fundraisers with profit motives CONSTITUTIONAL FRAMEWORK #WhosWatchingYou
  10. 10. OTHER GOVERNMENT REGULATORY AGENCIES • 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 WHO ELSE IS WATCHING? #WhosWatchingYou
  11. 11. • BBB Wise Giving Alliance • Charity Navigator • CharityWatch (f/k/a The American Institute of Philanthropy) • Guidestar - Philanthropedia • News Media • Print, Television, Social Media, Self-appointed Commentators WATCHDOGS AND THE MEDIA #WhosWatchingYou
  12. 12. • www.americanfund.info • http://charitymetrics.weebly.com • www.charitywatch.org • www.givewell.org • http://greatnonprofits.org • www.myphilanthropedia.org • www.standardsforexcellenceinstitute.org LIST OF WATCHDOG GROUPS 2014 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 #WhosWatchingYou
  13. 13. • 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 CHARITY DEFENSE COUNCIL #WhosWatchingYou
  14. 14. Art Taylor President & CEO BBB Wise Giving Alliance give.org #WhosWatchingYou
  15. 15. BBB Wise Giving Alliance • Seeks to verify charity trustworthiness • 20 holistic BBB Standards for Charity Accountability • Rigorous evaluations #WhosWatchingYou
  16. 16. • Governance & Oversight • Effectiveness Reporting • Finances • Fund Raising & Info Materials BBB Standards for Charity Accountability #WhosWatchingYou
  17. 17. BBB Charity Report Process • Draft reports & correspondence • No charge to charity for accountability evaluation • Free access to resulting reports #WhosWatchingYou
  18. 18. Meets BBB Charity Standards #WhosWatchingYou
  19. 19. Does Not Meet Standard(s) #WhosWatchingYou
  20. 20. Nondisclosure #WhosWatchingYou
  21. 21. 1. Overhead Myth #WhosWatchingYou
  22. 22. OverheadMyth.com #WhosWatchingYou
  23. 23. OverheadMyth.com 2013 Letter to Donors: Overemphasis on financial ratios 2014 Letter to Not-for-Profits: Demonstrate ethical practice Understand true costs Help educate funders #WhosWatchingYou
  24. 24. 2. Impact #WhosWatchingYou
  25. 25. Impact • One aspect of trust, not full picture • No common definition • Causality problem • Challenge of charity diversity • Subjectivity of impact comparisons #WhosWatchingYou
  26. 26. Impact • BBB WGA approach (2003) – “reporting results” to board • Ensure alliance with mission • Public reports may be too promotional #WhosWatchingYou
  27. 27. 1. What is your organization aiming to accomplish? 2. What are your strategies for making this happen? 3. What are your organization’s capabilities for doing this? 4. How will your organization know if you are making progress? 5. What have and haven’t you accomplished so far? #WhosWatchingYou
  28. 28. 3. Millennials #WhosWatchingYou
  29. 29. Millennials • Generation Y Born 1981 – 1995 Age 20 - 34 • 11% of total giving* • 60% give* (*SOURCE: Blackbaud, The Next Generation of American Giving, 2013) #WhosWatchingYou
  30. 30. 4. Trust #WhosWatchingYou
  31. 31. Trust • Most don’t check charities (Money for Good, Hope Consulting) • Spillover trust interest from corporate sector • Millennials trust individuals over institutions #WhosWatchingYou
  32. 32. Trust • BBB WGA view – charity trustworthiness is not a single issue but a holistic concept #WhosWatchingYou
  33. 33. 5. $187 Million Fraud #WhosWatchingYou
  34. 34. $187 Million Fraud • On May 19, 2015 FTC & all 50 states charged 4 cancer charities with bilking $187 Million (2008 – 2012) • Allegations of misleading telemarketing, direct mail, website statements #WhosWatchingYou
  35. 35. $187 Million Fraud • BBB WGA invited to speak at press event • All 4 charities subject of BBB WGA reports showing either nondisclosure or did not meet standards #WhosWatchingYou
  36. 36. 6. Can meeting standards impact your bottom line? #WhosWatchingYou
  37. 37. BBB Wise Giving Alliance Significance of Standards • Objectivity • Clarity of recommendations • Changing charity practices • Going beyond legal requirements #WhosWatchingYou
  38. 38. BBB Wise Giving Alliance 2013 Study by Baruch College, City University of New • Meeting all 20 BBB Charity Standards was positively associated with an 8% increase in public support #WhosWatchingYou
  39. 39. Questions #WhosWatchingYou
  40. 40. Seth Perlman seth@perlmanandperlman.com Art Taylor ataylor@give.org Lisa Maska lmaska@lautmandc.com Thank you! Perlman+Perlman, LLP www.perlmanandperlman.com BBB Wise Giving Alliance www.give.org Lautman Maska Neill & Company www.lautmandc.com #WhosWatchingYou

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