Who's Watching You

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. Seth Perlman
Senior Partner
Perlman & Perlman, LLP
@SJPerlman
#WhosWatchingYou

3. WHO’S WATCHING YOU?
States
IRS
News
Media
Donors
Other Federal
Agencies
Social Media
“Swarms”
Watchdog
Organizations
Legislatures
Data
Conglomerators
#WhosWatchingYou

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. • 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. 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. 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. “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. • 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. 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. • 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. • 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. • 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. Art Taylor
President & CEO
BBB Wise Giving Alliance
give.org
#WhosWatchingYou

15. BBB Wise Giving Alliance
• Seeks to verify charity
trustworthiness
• 20 holistic BBB Standards for
Charity Accountability
• Rigorous evaluations
#WhosWatchingYou

16. • Governance & Oversight
• Effectiveness Reporting
• Finances
• Fund Raising & Info Materials
BBB Standards for Charity Accountability
#WhosWatchingYou

17. BBB Charity Report Process
• Draft reports & correspondence
• No charge to charity for
accountability evaluation
• Free access to resulting reports
#WhosWatchingYou

18. Meets BBB Charity Standards
#WhosWatchingYou

19. Does Not Meet Standard(s)
#WhosWatchingYou

20. Nondisclosure
#WhosWatchingYou

21. 1. Overhead Myth
#WhosWatchingYou

22. OverheadMyth.com
#WhosWatchingYou

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. 2. Impact
#WhosWatchingYou

25. Impact
• One aspect of trust, not full picture
• No common definition
• Causality problem
• Challenge of charity diversity
• Subjectivity of impact comparisons
#WhosWatchingYou

26. Impact
• BBB WGA approach (2003) –
“reporting results” to board
• Ensure alliance with mission
• Public reports may be too
promotional
#WhosWatchingYou

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. 3. Millennials
#WhosWatchingYou

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. 4. Trust
#WhosWatchingYou

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. Trust
• BBB WGA view – charity
trustworthiness is not a
single issue but a holistic
concept
#WhosWatchingYou

33. 5. $187 Million Fraud
#WhosWatchingYou

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. $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. 6. Can meeting standards impact
your bottom line?
#WhosWatchingYou

37. BBB Wise Giving Alliance
Significance of Standards
• Objectivity
• Clarity of recommendations
• Changing charity practices
• Going beyond legal
requirements
#WhosWatchingYou

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. Questions
#WhosWatchingYou

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