Self Regulation as the Bridge to Nonprofit Sustainability

Self Regulation as the
Bridge to Nonprofit
Sustainability
Minnesota Council of Nonprofits
a ce a
and
d Susta
Sustainability
ab ty Co
Conference
e e ce
Finance
April 19, 2012
1
Attention Drawn
High profile charity scandals rock the sector each
decade
The 90s and 00s versions included
Bill Aramonyy / United Wayy of America, Nature
Conservancy, Hersey Foundation
Getty Museum, Smithsonian
2
Beginnings of Government Regulation
of Charities
The Federal Government had no interest in
regulation of charities until the Twentieth Century
Not until 1954 was a charity required to complete an
exemption application. It was one page
In 1965 Congress added complicated private
foundation rules to the Code
3
The Changing Legal Landscape
In 1996 the Intermediate Sanctions regulations were
added to the Code, allowing
g imposition of excise
taxes for bad behavior
In 2003-2010 Senator Chuck Grassley changed the
exempt organizations scene
4
Can Government respond?
„ Proposals considered by Congress in 20042004
05 included mandatory review of tax exempt
status every five years;
„ Limitations on administrative expenses
„ Doubling
g excise taxes,, increasing
g charitable
spending percentages
5
Can Government respond?
Congress passed the Pension Protection Act of
2006 which doubled certain excise taxes
2006,
taxes, and
impacted supporting organizations and DAFs, credit
counseling organizations and non-cash donations
From 1995 through 2005, there was an increase of
nearly 50 percent in the number of exempt
organization returns filed, yet IRS staffing of the EO
function steadily declined
6
IRS Ability to Impact Limited
Out of an EO universe of 1.8 million entities, 1.2
million are (c)(3)s
In 2011,, approximately
pp
y 2,000
,
charities per
p yyear will
be subject to IRS audit and 1,000 are subject to
compliance checks. This is a .2 percent audit rate
7
IRS Ability to Impact Limited
The IRS announced it could only impact the sector
g transparency,
p
y and the new IRS form 990
through
became reality
Upon his departure,
departure Marcus Owens calls for
establishment of an additional regulatory agency,
independent of the IRS, to regulate charities
8
State Regulators
„ State Attorneys
y General have traditionallyy
been solely charged with oversight of
charitable assets
„ Registration
R i
i llaws are enforced
f
d iin varying
i
degrees
„ In 2005
2005, Marcus Owens said “there
there are
probably fewer than 15 states that even have
one attorney charged with monitoring
nonprofits full time.”
„ Priorities and Politics
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Asia
„ In Asia many governments contract with
private nonprofit organizations to require and
fund accreditation of nonprofits
„ Found to disadvantage newer, less tested
and less popular organizations
„ Autonomy of the sector limited
10
2009 EU Study
„ Public and self-regulation
g
initiatives g
go hand- in-hand
and there is no blueprint to determine which would
more effectively address certain areas of regulation
„ Newly
N l emerging
i co- regulatory
l t
models
d l are notable,
t bl
whereby authorities rely on self-regulatory bodies to
effectively implement regulation (UK, Ireland,
Netherlands, Estonia)
„ Recommendation: Establish a Centre governed
jointly by the NPO sector and EU/member states –
established on the foundations of a broad agreement
and buy-in from all interested parties
11
U.S. Waves of Self regulation
„ A 2005 Chicago Kent Law Review Article
surveyed the United States nonprofit selfregulation marketplace
„
Mandatory Accreditation like JHACO and
many education associations had market and
enforcement power
12
U S Waves of Self regulation
U.S.
In 2005, Voluntary accreditation models were found to
be weaker and less common
Independent Sector
National Council of Nonprofit Associations
Charities Review Council of MN
MN Council of Foundations
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U S Waves of Self regulation
U.S.
Council of Michigan Foundations
BBB Wise Giving Alliance Standards
Charity Navigator
American Association of Museums
Association of Fundraising Professionals
14
15
Panel Discussion
“Hand in hand with government enforcement of a
strong framework of laws and regulations
regulations, the
nonprofit community has a responsibility and
opportunity to regulate itself,”
Diana Aviv, Panel on the Nonprofit Sector
16
Panel Participants
Brad Kruse, Program Director, SRI/Hugh J.
Andersen Foundation, Bayport, MN
Armando Camacho,, President,, Neighborhood
g
House, St. Paul, MN
y Wilder,, Faculty,
y, Universityy of St. Thomas,,
Patty
St. Paul, MN
Robert Pickering, Vice President of Finance
and Administration, Lifetrack Resources, Inc,
St. Paul, MN
17
Thank you
you.
Heidi Christianson
Moore, Costello & Hart, PLLP
651 602-2605
[email protected]
1155786
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