Nonprofit Law Prof Blog

Swiss Court Orders Charities Cannot Receive Haitian Dictator’s Money

According to Philanthropy Today and the Washington Post, the Swiss high court published an opinion on Wednesday requiring that $4.6 million previously committed to charities by the Swiss government, be returned to the family of former Haitian dictator Jean-Claude "Baby Doc" Duvalier.  The former dictator is thought to have stolen millions in public funds before fleeing in exile in 1986.  The $4.6 million is a portion of the millions that Haiti alleges Duvalier stole during his time in power.  

The Haitian government first requested the return of the money to Haiti in 1986; however, Swiss law only permits the return of funds when asked for by a national government that is pursuing its own criminal investigation (Haiti was not pursuing such an investigation against Duvalier at that time).  The funds have been frozen since 1986 and the Swiss government had proposed giving them to aid groups working in Haiti.

The high court’s decision overturned a recent lower court ruling permitting the release of the funds to aid organizations working in Haiti, in accordance with the Swiss government’s proposal.  The high court stated that while it was not happy about the decision, its hands were legally tied because the lower court’s ruling was barred by the statute of limitations, which had expired on Duvalier’s crimes.

The high court reached its decision on January 12, prior to the devastating earthquake, but the opinion was not reported until this week.  The Swiss government is deeply concerned about the court’s decision and has issued an emergency decree freezing the return of any funds to Duvalier pending passage of a law to undo the high court’s ruling.

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Haiti – Leader of Baptist Group Has History of Ignoring the Law

Laura Silsby is currently in jail in Haiti awaiting trial for leading a group of 10 Baptists trying to take 33 children to the Dominican Republic.  According to the Sydney Morning Herald, Ms. Silsby has had trouble following the law prior to this incident.  Ms. Silsby was sued 14 times between March and July of 2008 for failure to pay wages as chief executive of PersonalShopper.com.  These lawsuits resulted in 9 liens against PersonalShopper.com; the other 5 lawsuits are on appeal or have been dismissed.  Ms. Silsby’s trial in Haiti is scheduled for February 22.

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UK – Centre for Policy Studies Suggests Two Key Changes Aimed to Increase Charitable Giving

The Centre for Policy Studies published a paper by Paul Palmer advocating two key changes that Palmer argues could increase annual giving in the UK by up to £74bn or more.  The paper, A Step Change in UK Philanthropy, argues for the creation of remainder trusts and personal charitable trusts.  The remainder trusts would be similar to charitable trusts but could be controlled and accessed directly by donors.  The personal charitable trusts are a new type of charitable trust based on US and Canadian models that permit donor anonymity.  The goal of both suggestions is to increase charitable giving among the middle class.

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Intelligent Giving Comes Back Online

Intelligent Giving (IG) is set to come back online this April.  IG is a charity whose primary purpose is maintaining a website with information for donors about charitable organizations.  The website’s purpose is to increase transparency through dissemination of data and to train and encourage other charities to become more transparent.  To that end, IG maintains profiles on a number of charities.

Third Sector reports that IG closed and deregistered as a charity in August 2009.  The charity think tank New Philanthropy Capital (NPC) has acquired IG and is scheduled to have it working again in the spring.  NPC intends to give IG a tronger focus on how well, and to what extent, charities are keeping the general public informed about meeting targets and effectiveness.

The new site isexpected to launch inApril 2010.

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Zimbabwe – NGO Agreements

According to NGO News Africa, the Zimbabwean government is calling for NGOs operating in Zimbabwe to regularize operations and follow Zimbabwe's laws.  Specifically, the government wants more formal signed agreements between NGOs and the government.  The government stated that "[t]he signing of the agreements is an important step towards the attainment of a comprehensive and sustainable regulatory framework for NGOs operating in Zimbabwe.”  This comment came during the signing of agreements between Zimbabwe and two NGOs, World Vision and Terre Des Hommes Italia.  Representatives from both NGOs responded positively to the move because it adds structure and credibility to the work already being performed.

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Conference of INGOs 2009 Activity Report

The Conference of International Nongovernmental Organizations (part of the Council of Europe) recently published its 2009 Activity Report at its Winter Session in Strasbourg.  The 18-page report reviews the Conference of INGOs’ work on the three main aspects of its activities: 1) promoting the Council of Europe’s fundamental values, 2) fostering civil society in Europe and 3) strengthening the political and institutional presence of the Conference of INGOs.  It details the work of five committees dedicated to specific themes: 1) The Civil Society and Democracy Committee, 2) The Culture, Science and Education Committee, 3) The Human Rights Committee, 4) The Social Cohesion and Eradication of Poverty Committee and 5) The Sustainable Territorial Development Committee.  One of the committee highlights was the Civil Society and Democracy Committee’s ongoing work to develop and revise a Code of Good Practice for Civil Participation in the Decision-making Process.

Finally, the report briefly discusses the work of two transversal Groups: 1) The Europe and Global Challenges Transversal Group and 2) The Gender Equality Transversal Group.  The Europe and Global Challenges Transversal Group was partially responsible for the Draft Co-operation Agreement between the Conference of INGOs and the North-South Centre that we blogged about on November 27^th.

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New Publication on Nonprofit Finance

A timely new book entitled Nonprofit Finance for Hard Times: Leadership Strategies When Economies Falter by Susan Raymond, has recently been publishedThe book is meant to be a tool for nonprofit organizations seeking to reassess strategies for managing their financial health.  It provides information and guidance on a variety of subjects including responding to the economic crisis, change in stability interests, financial support strategies, and a systems approach to revenue strategy. 

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IRAQ—NEW NGO LEGISLATION PASSES PARLIAMENT

ICNL announced the passage of a new Law on Non-Governmental Organizations for the Republic of Iraq.  The new law, which awaits the final signature of Iraqi President Jalal Talabani, will replace Coalition Provisional Authority Order Number 45.  According to ICNL’s analysis the new Law on Non-Governmental Organizations is a significant improvement upon both CPA Order 45 as well as the draft law first introduced in the Iraqi parliament in March 2009.  ICNL has produced a table that summarizes several of the most important provisions.  This is available at http://www.icnl.org/knowledge/news/2010/01-25.htm

 

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ECNL Response to the Public Consultation on the Review of the Financial Regulation

The European Center for Not-For-Profit Law (ECNL) has published a 39 page response to proposed new EU financial regulations that would apply to nonprofit organizations (NPOs).  ECNL raises concerns about our key issues: (i) a cap on indirect expenses; (ii) treatment of in-kind contributions; (iii) treatment of exchange rate changes; and (iv) information about upcoming and awarded grants and paperwork for applicants.  ECNL’s report indicates that the proposed regulations on these issues  may  deter NPOs from engaging with the EC on important matters.

First, ECNL’s report states that the EC’s 7% cap on indirect (administrative) expenses is in direct conflict with the EC’s goal of increased transparency and accountability because it constrains the resources that NPOs can devote to professional financial management, accounting and reporting.  The report suggests that the EC raise the flat rate and introduce new methods of calculating NPO direct costs to allow for full reimbursement of legitimate direct costs.

Second, the report suggests that the EC provide appropriate guidance and criteria on how NPOs should record and report in-kind contributions.

Third, the report lays out several difficulties regarding exchange rate changes.  ECNL suggests that the regulations classify exchange rate losses as project expenses and exchange rate gains as project income.  Such classification would permit recovery of losses and offsetting of gains (either through reduced EC funding or payments to the EC).

Finally, the report identifies major inefficiencies in the dissemination of information regarding available grant funding.  The inefficiency is caused by late reporting by the various EC Directorates-General and a failure to categorize and organize grant data.  The ECNL proposes aggregating all of the grant award information in one well-structured portal with information from all Directorates-General and financial instruments.  Specifically, ECNL suggests that the portal should contain information on (1) annual work programs of departments and financial mechanisms; (2) calls for proposals and tender opportunities; and (3) awarded grants and contracts.

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An End to Checking in the UK Raises Concerns for Charities

In a major shift from traditional financial policy, the UK will end the use of checks as a valid payment method by October 31, 2018.  The Payments Council of the UK (an independent body that sets strategy for the UK payments system) provides a brief overview of this decision and links to more detailed reports on its website.  The end of checking in the UK will potentially have a negative impact on the UK’s voluntary sector for several reasons; convention, security and fund-raising practices.

According to RL Glassspool Charity Trust, a grant-making charity, more than half of the grants it transacted in 2009 were paid out by check.  RL Glasspool says that it is only one of many grant-making charities whose infrastructure is built on the assumption that checking will continue to exist.  The security concern is not unfamiliar in transitions to e-commerce.  Specifically, RL Glasspool is worried about weakening financial controls caused by the switch from requiring two signatures on a check to requiring the entry of two passwords into a computer system.  The consequences of changing the grant payment infrastructure sound grim according to RL Glasspool’s chief executive Frances Moore who told Third Sector that “no practical payment method exist[s]to replace checks.” The issue of fund-raising concerns donor practices.  Given the age demographics of their donor-base, many UK charities are concerned that an end to checking may be an end to a large amount of funding.  Third Sector reports that the Payments Council and the Institute of Fund-raising will meet this week to discuss concerns.Specifically, the Institute does not believe that there has been sufficient consultation on the move and wants to ensure that acceptable alternatives are in place well before banks stop using checks.

Responding to concerns about the phase out of checks without adequate alternatives, Sarah McCarthy-Fry, parliamentary secretary to the Treasury, stated that "the Government believes it is imperative that adequate alternatives be in place for all users of cheques, including small businesses, the elderly and the third sector, ahead of any potential closure of the check clearing system."

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World Bank Finalizes Transparency Plan

We posted previously that the World Bank was working to increase transparency through its new disclosure policy.  The Bank has finalized the details of its new policy which is to take effect on July 1, 2010.  According toa World Bank press release, the new disclosure policy will set the standard for international financial institutions who are expected to revise their policies to match the Bank. 

The type of documents that the Bank is focused on making more available largely concern key decisions during the process of project development and implementation including concept review meetings, project supervision missions, and mid-term project reviews.  However, the new policy will not change the disclosure of documents containing confidential client information; therefore, legal agreements defining project governance may or may not be more available under the new policy.  As noted in the previous post, confidential information will become available as it becomes less sensitive over time.  Confidential information will become available after a period of 5, 10, or 20 years depending on the nature of the information. 

Finally, the new policy spells out the appeals process by which requesters can challenge Bank decisions to withhold information as unreasonable.  Appeals will go through a two-stage process; first under an internal mechanism at the Bank; then, if necessary, by a panel consisting of three international experts who will make final binding decisions on disclosures.

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Florida – Clawback of Charitable Donations

The Miami Herald recently reported that more than $2 million in donations made by attorney Scott Rothstein’s firm, Rothstein Rosenfeldt Adler, to Florida charities must be given back.  Mr. Rothstein’s firm went into bankruptcy and Mr. Rothstein has been disbarred because of his involvement in a $1 billion Ponzi scheme.

The clawback affects 30 local Miami charities including hospitals, schools, and charities benefiting battered women that Mr. Rothstein’s firm donated to in 2009.  Some of the charities have voluntarily returned the money.  However, many organizations have already spent the donations and at least one charity is at risk of losing $1.5 million in federal matching grants if it cannot raise sufficient funds to replace the donations that must be returned.  Many charities affected are working with the lawyers overseeing the bankruptcy to determine the correct amount that must be returned so that creditors affected by the collapse of a $1 billion Ponzi scheme can recoup some of their losses.

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