Thursday, July 3, 2014
Nicholas Mirkay previously wrote in this space about the new California law that requires disclosure of donors and other information for nonprofits engaged in certain political communications in that state. New York also recently enacted new disclosure requirements for "independent expenditures" and then issued emergency regulations to implement these new rules that will impact nonprofits engaged in certain political communications in that state.
For purposes of the New York law, the range of communications that trigger disclosure is much broader than the federal definition of "express advocacy" or "electioneering communications". More specifically, those communications are defined as follows:
- Type of Communication: Audio or video communication via broadcast, cable, or satellite, written communication via advertisements, pamphlets, circulars, flayers, brochures, or letterheads, or other published statements (including paid Internet advertising), if the communication is conveyed to 500 or more members of a general public audience.
- Content of Communication: Either contains words such as "vote," "oppose," "support," "elect," "defeat," or "reject" that call for the election or defeat of a cleary identified candidate or refers to and advocates for or against a clearly identified candidate or ballot propoal; whether a communication advocates for or against is based on an all relevant facts and circumstances test.
- Timing of Communication: Anytime for communications that contains the express advocacy words; on or after January 1 of the election year for other communications that advocate for or against.
All groups covered by these rules, including nonprofits, must register before making any independent expenditures and then must file reports disclosing both expenditure details and identifying information for any person providing a contribution of $1,000 or more.
In related news, according to a Politico report Citizens United recently announced it plans to sue the New York Attorney General over his issuance of earlier regulations imposing new disclosure requirements on nonprofits engaged in election-related spending. It is not clear if the lawsuit will be expanded to also encompass the recently enacted disclosure rules.
Tuesday, July 1, 2014
CNN reports that Quadriga Art, a for-profit charity fundraising company, has resolved an investigation by the New York Attorney General's office by agreeing to pay almost $10 million in damages and to forgive another almost $14 million in debt owed to the company. Nick Mirkay previously posted in this space on the still ongoing congressional investigation into this situation.
The CNN report states the focus of the investigation and settlement was the relationship between Quadriga and the Disabled Veterans National Foundation, a charity that Quadriga Art apparently helped set up in 2007 by fronting the charity's initial printing, mailing, and other fundraising costs. The relationship eventually led to the charity raising $116 million, but paying $104 million of that amount to Quadriga and owing Quadriga the debt forgiven in the settlement. As part of the settlement the Foundation also agreed to take a number of steps, including having its founding board members resign, creating a committee to reexamine its business model, and refraining from using Quadriga or a particular direct marketing company for three years.
Thursday, May 29, 2014
As reported in Sunday's The New York Times, a trend among hospitals around the country is to reduce financial assistance to uninsured patients with the intent of forcing such patients to obtain coverage under the Affordable Care Act. The criticism is obvious - uninsured lower- and middle-income citizens without coverage will not take advantage of the ACA due to perceived, and perhaps actual, unaffordability and therefore forgoe health care all together. The push-and-pull for hospitals centers on the ACA's reduction of federal payments to hospitals that treat large number of uninsured patients (again, hoping to force such patients to seek coverage in online marketplaces) and the actual need to provide free or reduced-cost health care to those most in need of it.
The Times article illustrates hospitals' various policies to address this real problem:
In St. Louis, Barnes-Jewish Hospital has started charging co-payments to uninsured patients, no matter how poor they are. The Southern New Hampshire Medical Center in Nashua no longer provides free care for most uninsured patients who are above the federal poverty line — $11,670 for an individual. And in Burlington, Vt., Fletcher Allen Health Care has reduced financial aid for uninsured patients who earn between twice and four times the poverty level.
Continuing charity care for the uninsured, argues some health care providers, defeats the very purpose of the ACA. However, uninsured advocates argue that many uninsureds forgoe coverage under the ACA inaugural enrollment because the plans are expensive, even with government subsidies. Some argue that it is still a matter of message - encouraging people who now have access to coverage under the ACA to take advantage of the opportunity.
The article further states:
Many hospitals appear focused on reducing aid only for patients who earn between 200 percent and 400 percent of the poverty level, or between $23,340 and $46,680 for an individual. Many of those people presumably have jobs and would qualify for subsidized coverage under the new law.
The Times further reported that financial challenges for uninsureds are "particularly daunting" in the states that have not yet expanded their Medicaid programs, which currently totals over 24 states.
An issue not addressed by the Times Article is how these emerging charity care policies, to best comply with and take advantage of the new ACA reimbursement rules, will affect these tax-exempt hospitals' Form 990 Schedule H reporting? Has Congress and the IRS contemplated the changes to charity care numbers in light of the above-referenced ACA rules?
Friday, May 9, 2014
The National Association of State Charity Officials has submitted comments to the Treasury Department objecting to the proposed IRS Form 1023-EZ. The form would permit certain types of nonprofits with relatively low expected annual revenues and total assets to submit a streamlined application for recognition of exemption under IRC § 501(c)(3). NASCO reiterated concerns expressed in the 2012 Report of Recommendations by the Advisory Committee on Tax Exempt and Government Entities (ACT), in which ACT recommended against the development of such form because it viewed any benefits from doing so as being "outweighed by the loss of educational value to the applying organization and the loss of effectiveness to the IRS."
Friday, April 25, 2014
According to an Associated Press report, the New York Attorney General's Office intends to appeal a decision by a New York trial court that the $199,000 salary cap imposed by executives at nonprofit contractors with the Health Department by executive order exceeded the Governor's authority. Further coverage of the court decision in Agencies for Children's Therapy Services v. New York Dept. of Health can be found at the New York Nonoprofit Press. That article notes that another trial court ruled in favor of New York and upheld the salary cap, so the matter will ultimately need to be resolved by a higher court. It also notes that the salary cap also applies to nonprofits that contract with 12 other agencies.
Wednesday, April 23, 2014
“Crowdfunding” appears to be all the rage. Investopedia defines crowdfunding on the most basic level as the “use of small amounts of capital from a large number of individuals to finance a new business venture.” In the earliest days, crowdfunding was basically a plea for money – see the artistic ventures funded primarily through Kickstarter. The problem with that model, of course, is that one could not get equity in return for your contribution – after all, that starts to look an awful lot like a securities offering, and the SEC has issues with that. The Jumpstart Our Business Startups (or, pithily, JOBS) Act of 2012 was designed in part to loosen the securities regulations on small business, so that there will be greater flexibility in the ability to offer equity in return for contributions through crowdfunding (or at least there will be when the SEC gets around to issuing regulations on the matter.)
Crowdrise.com (note: it’s a for-profit site) allows you to “create a fundraiser” for your event. It appears that it isn’t limited to charities, although the site links to Guidestar.org in order to filter the bona fide Section 501(c)(3)s from the merely well-intentioned. There seems to be a lot of fundraising teams for fun runs and the like, as well as fundraisers for sick individuals and medical expenses. Some of these might qualify for a Section 170 deduction if given directly to the organization; other, such as the fundraisers for medical expenses, wouldn’t qualify for a deduction, no matter how well intentioned. Crowdrise does state:
Your donation to a US-Based 501(c)3 charitable organization through CrowdRise is 100% tax deductible to the extent allowed by law. We will email you a receipt that meets all IRS requirements for a record of your donation. If you are asked to provide a paper receipt for IRS purposes, please print out a copy of your email receipt. If you lose your receipt, email firstname.lastname@example.org and we'll send you a duplicate. Be sure to include your first and last name and the email address you used to make the donation. Donations to indviduals [sic] are not tax-deductible.
Crowdrise receives a transaction fee for each contribution made, which varies depending on the manner in which the transaction is consummated.
From a regulatory stand point, should we worry about this? In the for-profit world, we have the SEC and its state law counterparts. The IRS won’t (and shouldn’t) get involved, it seems to me, unless we are worried about charitable deduction issues. That being said, is this high tech direct mail, and should it be regulated as such? Take, for example, the Illinois Solicitation for Charity Act, which defines a professional fund raiser as one who receives “compensation or other consideration… on behalf of a charitable organization residing within this State for the purposes of soliciting, receiving or collecting contributions…”
Or is Crowdrise just an intermediary – it makes no legal representations that what is does is charitable or tax-deductible, necessarily. I’d be curious to know how state regulators are approaching sites like Crowdrise from a solicitation regulation stand point, and how the Charleston principles would apply to such a website?
Tuesday, April 22, 2014
A tax-exempt nonprofit that solicit contributions in California is challenging a demand from the California Attorney General's office that they provide unredacted copies of their IRS Form 990 Schedule B, which lists major donors. As most readers of this blog likely know, while Schedule B is submitted to the IRS the IRS is required to keep the names and other identifying information of the donors listed confidential. Similarly, while tax-exempt organizations are generally required to provide copies of their Forms 990 upon request, they can redact this donor identifying information before they do so. The organization that is challenging the demand is the section 501(c)(3) Center for Competitive Politics, which has filed a lawsuit in federal district court as detailed at the link above.
In a separate challenge to compelled disclosure of donors, according to a Washington Examiner article the section 501(c)(4) Campaign for Liberty, which is associated with Ron Paul, is challenging the ability of the IRS to require disclosure of donor information on Schedule B even if that information is not (supposed to be) disclosed publicly. While not completely clear from the article, it appears that the group is refusing to provide the required information and refusing to pay any fines imposed by the IRS as a result, presumably for filing an incomplete Form 990. These two challenges join an earlier challenge by the Tea Party Leadership Fund, a PAC and therefore presumably a section 527 tax-exempt organization, to donor disclosure required by the Federal Election Commission, as reported by NPR.
Monday, March 17, 2014
One of these days I am going to finish my way too early draft on the theoretical implications arising from a nonprofit's "voluntary" agreement to make "payments in lieu of taxes." In short, I think the making of a PILOT, voluntary in name only, is the tax exempt analog to "statements against pecuniary interests" in evidentiary proceedings. PILOTS impliedly admit that property tax exemptions are unjustifiable in the first place and are usually only paid because the taxing authority is threatening to challenge property tax exemption. Why not accept the challenge? Probably because there is such a good chance that the property owner will lose, that's why.
I am moving at a snail's pace in my research but I wanted to pass along this interesting "PILOT Agreement" between the University of Iowa and its local city municipality. The news article from which I obtained the agreement raises some interesting issues, the most remarkable of which is that the University agreed to pay the PILOT in consideration for the land on which it would build a clinic. According to the article, the city would not sell the land unless the University agreed to what the parties are calling a PILOT. Is this even a PILOT or would first year contract [or tax] students think of this as more a part of the purchase price? Since the PILOT agreement has no ending date, the purchase price -- assuming the PILOT is actually part of the city's amount realized -- would be indefinite and perhaps even unknowable. Does it even matter? I guess it is a way to easier call something that looks like . . . well, a payment in the place of a tax not a tax (and therefore no admission that property tax exemption is unjustifiable in the first place!). Regardless, this circumstance demonstrates the problems with PILOTS, not only for the nonprofit making the admission, I mean "payment," but for the local governments extracting the PILOT. Its basically an ad hoc exercise of taxing power that seems violative of the equal protection clause. But that argument will have to await a later date, at least if it is to come from me. After all, the payment that takes the place of taxes is entirely voluntary so it can't be a disguised tax. Can it?
Thursday, February 6, 2014
Over two years ago we noted that the Pearson Foundation, the charitable arm of major educational publisher Pearson, had allegedly paid for international trips by state education commissioners whose states did business with Pearson. The NY Times recently reported that the Foundation has now had to pay $7.7 million to resolve an inquiry by New York Attorney General Eric Schneiderman into whether the Foundation had been inappropriately aiding its for-profit counterpart. The funds will primarily go to 100Kin10, an effort to train more teachers in high-demand subject areas. The Foundation also agreed to program and governance changes to reduce its ties to Pearson.
According to the AG's press release, the inquiry focused not only on the international trips but also on whether the Foundation had been developing course materials aligned to the Common Core that Pearson then intended to sell commercially. After the inquiry began, the Foundation sold the partially developed courses to Pearson for $15.1 million. For its part, the Foundation's press release states that the Foundation fully cooperated with the investigation and always acted with the best intentions and in compliance with the law, but recognized that "there were times when the governance of the Foundation and its relationship with Pearson could have been clearer and more transparent."
Tuesday, November 19, 2013
Tax Analysts’ State Tax Today (subscription required) reports an interesting decision of the Ohio Board of Tax Appeals. In Talbert Services, Inc. v. Testa, an outpatient clinic provided assessment, treatment, case management, and referral services for clients suffering from substance abuse and mental health disorders on property that included an apartment. When the clinic bought the property in 2008, an individual lived in the apartment, and he continued to do so for several years. The Tax Commissioner denied property tax exemption for the apartment on the grounds that it was not used for charitable purposes because it was leased to an individual. Reversing this determination, the Ohio Board of Tax Appeals found that the apartment was used by for charitable purposes. It accepted testimony that, although the tenant was not an official client of the clinic, a director “provided one-on-one informal counseling and referral services to the tenant, just as [the clinic] … provided to its other clients.” Further, the clinic did not lease the apartment with a view to profit, but merely used the rent to cover its expenses.
The electronic citation of this decision is 2013 STT 223-22.
Tuesday, October 22, 2013
According to the Detroit Free Press, Michigan Governor Rick Snyder is closing his NERD (that's New Energy to Reinvent and Diversify Fund) Fund. The NERD Fund was formed to raise funds to defray the cost of Detroit's emergency manager, Kevyn Orr. The Fund reportedly also paid the salary of a Snyder aide, Richard Baird.
The NERD Fund apparently qualified as a Section 501(c)(4) organization, and as a result, does not have to disclose its donors. Synder has gotten some heat from watchdog groups and the press, who accused him of using the NERD Fund as a way back door way for special interests to give to Snyder. Query whether it could have been formed as a Section 501(c)(3) for the purpose of lessening the burdens of government?
Sadly, this arises at the same time that The Chronicle of Philanthropy (Sub required) raises the question "Can Philanthropy Save Detroit?" It sort of boggles the mind that the closing of the NERD Fund is in the same issue of The Chronicle.
And, most importantly, who the heck thought that The NERD Fund was a good name? Someone FOIA that, stat.
Thursday, October 17, 2013
Tax Analysts’ State Tax Today reports on two advisory opinions involving nonprofits and New York’s mortgage recording tax.
In the first, a municipal urban renewal agency, also deemed a public benefit corporation by state law, contracted to sell real estate to a not-for-profit corporation and extend a purchase money loan to the buyer to facilitate its acquisition of the property. The agency will also hold a purchase money mortgage on the property. The general statute imposing a mortgage recording tax contains no exception expressly exempting entities such as the agency. Nonetheless, New York State’s Department of Taxation and Finance ruled that, because (1) the General Municipal Law provides that the property, income and operations of a municipal urban renewal agency are exempt from taxation; (2) this statutory exemption was enacted after the enactment of the general taxing statute; and (3) the exemption is specific as to municipal urban renewal agencies, the exemption statute takes precedence over the taxing statute. The ruling is available electronically at 2013 STT 201-20.
The second advisory opinion involves more complicated facts, and is probably more surprising in view of the economic realities of the series of contemplated transactions. Here, the issue was similar to that in the first opinion: whether a mortgage recorded by New York City Land Development Corporation ("LDC"), a not-for-profit local development corporation chartered under New York law, is exempt from New York’s mortgage recording tax. The petitioner proposed to lease real property from the LDC and then develop it with funds borrowed from banks. The bank loans will be secured by mortgages against petitioner's leasehold interest. The LDC initially will be a named mortgagee and will record the mortgages, but all of the rights under the mortgages will inure to the benefit of the banks. After recording the mortgages, the LDC will assign to the banks all of its mortgage interests. The general statute imposing a mortgage recording tax contains no exception expressly exempting entities such as the LDC. However, the New York Not-For-Profit Law exempts from taxation "[t]he income and operations” of a corporation incorporated thereunder. The New York Department of Taxation and Finance concluded that the earlier-enacted provisions of the mortgage recording taxing statute “must yield to the exemption provisions contained in the 1969 law creating not-for-profit local development corporations.” The tax, therefore, “does not apply where LDC as mortgagee records the LDC mortgage, nor does it apply to the recording of the eventual assignment of the Mortgage by LDC to Lenders.” The ruling is available electronically at 2013 STT 201-21.
Friday, August 2, 2013
As reported by The Chronicle of Philanthropy, effective yesterday, August 1, 2013, Delaware joined 19 other states with laws on the books permitting the formation of public benefit corporations. Delaware Governor Jack Markell signed Senate Bill 47 into law on July 17, 2013. The new law provides:
A public benefit corporation is a for-profit entity which is managed not only for the pecuniary interests of its stockholders but also for the benefit of other persons, entities, communities or interests. Delaware General Corporation Law Sections 362(a) and 365(a) create and impose on directors of public benefit corporations a tri-partite balancing requirement. Public benefit corporations must be managed in a manner that balances (i) the stockholders’ pecuniary interests, (ii) the interests of those materially affected by the corporation’s conduct, and (iii) a public benefit or public benefits identified in the corporation’s certificate of incorporation.
Wednesday, July 31, 2013
It appears that the difference between the Internal Revenue Code defintion of "charitable" and that applied by state and local taxing authorities continues to affect nonprofit organizations, this time outside of the health care arena. As reported by The Chronicle of Philanthropy, two organizations in Kittery Maine are disputing the town's revocation of their property tax exemptions on the basis that their art and dance activities do not comport with Maine's "charitable and benevolent" standard.
(For additional coverage, see "Kittery art organizations to fight town tax in court" (Seacoastonline)).
Friday, July 19, 2013
Lost in the IRS storm was the news that New York recently adopted new regulations that will require many nonprofit groups, including Internal Revenue Code § 501(c)(4) organizations, to disclosure their contributions and expenditures relating to sate and local electioneering. NY Attorney General Eric T. Schneiderman announced the rules, which are effective immediately. The activities reached by the rules are "election related expenditures," which include both "express election advocacy" and "election targeted issue advocacy," by any organization that is tax-exempt under Internal Revenue Code § 501(c) except for 501(c)(3) organizations. More specifically, according to the AG's summary of the regulations:
- Express Advocacy means "advertisements and other communications that call specifically for (or are susceptible of no reasonable interpretation other than as a call for) the election or defeat of a particular candidate, referendum, or party."
- Election Targeted Issue Advocacy means "communications made within 45 days of a primary election or 90 days of a general election that identify or depict particular candidates, referenda, or parties by name, but do not explicitly call for their election or defeat."
Covered communications include essentially all paid advertising, as well as telephone communications that reach 1,000 or more households, mailings that reach 5,000 or more recipients, and other printed materials that exceed 5,000 copies. If the amount spent reaches $10,000 in a year, then each expenditure of $50 or more and each contributor who gives $1,000 or more must be disclosed. Exceptions exist for candidate forums and certain member communications, as well as for information already publicly disclosed through another agency. There will also be a waiver application process in the event there is a reasonable likelihood that disclosure of donors "will cause undue harm, threats, harassment or reprisals."
Thursday, July 18, 2013
The N.Y. Times reports that New York Attorney General Eric T. Schneiderman is demanding that some of the large charities that received donations for Hurricane Sandy relief explain how they have handled those donations, including why almost half of the more than $575 billion raised has not been spent as of April 2013. He documented his concerns in a report issued this week that found charities reported as of April not having spent $238 million, or 42 percent, of these donations. The N.Y. Charities Bureau has also posted the responses of the charities to November 2012 and March 2013 inquiries regarding their Hurricane Sandy fundraising and spending. Among the charities that received the largest amounts, the Robin Hood Foundation stands out because it reported as of March 21, 2013 having made grants representing 97% of the $70.5 million in Hurricane Sandy funds it raised, and according to the NY Times article it has now given out all of those funds. In contrast, the American Red Cross reported on April 15, 2013 that through the end of March it had raised $323.5 million and spent $153.5 million.
Of course, there are many legitimate reasons why such funds would remain unspent even five months after Hurricane Sandy hit the Northeast in late October 2012. For example, the American Red Cross' response notes that it is still providing emergency relief in the form of food and mental health counseling to some hurricane victims while also providing long term assistance that can extend over a period of months or years, such disaster clean up, individual case work, financial assistance relating to housing, and grants to local organizations designed to help communities recover. Nevertheless, this high profile criticism shows the need for groups involved in disaster relief to explain why such relief is necessarily spread out over a significant amount of time as individuals and communities struggle to recover.
Monday, July 15, 2013
A Maine Superior Court has overruled the decision by the Town of Limington to deny or limit property tax exemption for several parcels of land identified as either "Tree Growth" or "Open Space" properties under the applicable state law. In Francis Small Heritage Trust v. The Town of Limington, the court briefly described the broader context of tax exemptions for charitable institutions under both federal and state law before providing a detailed recitation of the law relating to Maine's property tax exemptions (including a reference to the Elizabethan Charitable Uses Act of 1601!). It both concluded that the Francis Small Heritage Trust "is operated for purely benevolent and charitable purposes in good faith" and rejected the Board of Property Tax Review's argument that permitting logging, farming, and other compatible commercial activities was disqualifying given that so such activities had never in fact taken place and even if they had limited, purely incidental such activities did not undermine exemption. The fact that the properties at issue were indisputedly used to conserve wildlife habitat and were open to the public year-around at no cost also contributed to the court's decision.
Wednesday, June 19, 2013
Just as a follow up to yesterday's post on the Oregon spendig requirement, I took a quick look again at the Form 990 (go to page 10) and its instructions regarding the allocation of program service expenses (go to pages 41 through 43). My personal favorite is the instruction on how to allocate indirect costs, which requires the charity to list everything as an administrative cost in column C (that being not a program service expense) and then to add a separate, self-created line under "Other" in which the charity is instructed to place a negative number in column C in order to allocate indirect costs to program service in B or to fundraising expenses in D. So that's clear as mud -- no chance of error there.
Also, take a look at the list of administrative expenses to be reported in column C and think about a smallish charity - one that does a full Form 990 but is still relatively small in terms of revenue and expense - for example, a small medical clinic. The list in the instructions includes the CEO and staff by default (unless directly involved in program service oversight) as well as "costs of board of directors' meetings; committee meetings, and staff meetings (unless they involve specific program services or fundraising activities); general legal services; accounting (including patient accounting and billing); general liability insurance; office management; auditing, human resources, and other centralized services; preparation, publication, and distribution of an annual report; and management of investments." I wouldn't be surprised if such a charity had issues, or at least is forced into taking a fairly aggressive position on indirect cost allocations.
When we think about fradulent charities, I don't think most of us think of these types of expenses.
Just a thought. EWW
Tuesday, June 18, 2013
H.B. 2060 was signed into law by Governor Kitzhaber on June 4, 2013 and goes into effect 91 days after the 2013 regular session of the Oregon Legislative Assembly ends. Specifically, the Oregon Attorney General can disqualify an organization from receiving state income tax deductible contributions if
the organization has failed to expend at least 30 percent of the organization's total annual functional expenses on program services when those expenses are averaged over the most recent three fiscal years for which the Attorney General has reports containing expense information. The calculation of program services expenses and total functional expenses shall be based on the amounts of program services expenses and total functional expenses identified by the organization in the organization's Internal Revenue Service Form 990 return or other Internal Revenue Service return required to be filed as part of the organization's report to the Attorney General.
Oregon H.B. 2060, Section 2(1) (emphasis added). There is an appeal procedure that would allow the charity to show that payments were made to affiliates, were being accumulated for capital campaigns, or "such other mitigating circumstances as may be identified by the Attorney General by rule." Section 2(2)(c). A disqualified charity is required to notify its donors that donations to it are not deductible. Interestingly, a disqualification order may not be issued to "an organization that receives less than 50 percent of the organization's total annual revenues from contributions or grants identified in accordance with Internal Revenue Service Form 990 or an equivalent form" (fee for service charities, rejoice!) Section 2(4)(g). The legislation can be found here.
There are a number of issues that first came to mind when I read this legislation.
The first, of course, is the fallacy that a certain level of "program service" expenditures is an appropriate indicator of a charity's effectiveness. Even if it were an appropriate measure, why set it at 30%? Why exempt fee-for-service charities? Why exempt small charities? (On this topic, see GuideStar, BBB Wise Giving Alliance, and Charity Navigator on the “Overhead Myth”).
At least in the short term, this legislation punishes the wrong party - a charity's donors - by disallowing the state income tax charitable deduction. It does appear to also take away the ability of the charity to be tax exempt and, of course, in the long term, the charity's donor base could essentially disappear.
Along those same lines, I am concerned that you could have a charity that is disqualified due to a temporary blip in financials and is then required to send a donor notice. Even if that charity is subsequently rehabilitated, it is permanently damaged. The state has now devalued one of the charity's most valuable assets: its donor list. The Oregon Attorney General's press release talks about targetting bogus charities - I'm not convinced initially that its scope will be so limited.
Finally, as is pointed out in this commentary by Nonprofit Quarterly, the error rate on preparing the Form 990 is ridiculously high. I am somewhat troubled by the assertion by the Nonprofit Association of Oregon that organizations that make a reasonable attempt to allocate expenses won't get caught in this trap. In my experience, even sophisticated clients with paid accountants regularly misstate program service expenditures. (I note that the Nonprofit Association takes the position that only full Form 990 filers (not N or EZ filers) would be affected by the legislation.)
Thoughts, especially from our Oregon friends? EWW
Wednesday, May 29, 2013
Pennsylvania Attorney General Kathleen G. Kane recently announced that her office had resolved an investigation into the administration of the Milton Hershey School and the Hershey Trust Company by entering into an agreement with the School and Trust that implements a variety of governance reforms for both entities. Attorney General Kane also noted that her office had not found any breach of fiduciary duty during its investigation. The agreed upon reforms included:
- Limiting overlapping board members between the School and Trust on one hand and the for-profit Hershey companies on the other hand.
- Reduced board compensation, new procedures for any future adjustment to such compensation, and a new, more restrictive policy for reimbursement of board member expenses.
- A strengthened Conflicts of Interest Policy.
- Required reports to the AG relating to compliance with the agreement, increased AG access to various materials, and advance notice to the AG for certain real estate transactions.
For previous posts about the concerns that led to this investigation, see Eisenberg on the Hershey School, Pressure Continues on Hershey Trust Board of Directors, and Milton Hershey School Trust - Excessive Trustee Compensation? It is far from clear that the report and agreement will satisfy those critical of how their respective boards have managed these charities - Pablo Eisenberg has already written a negative assessment of the investigation's resolution.