Charity Governance

SHOULD AN HR EXECUTIVE BE ON YOUR NONPROFIT'S BOARD?

DATELINE: December 16, 2009, Chicago

By now, anyone who has thought about nonprofit governance has come the conclusion that every board should have at least one person with financial and accounting knowledge on the governing board.  Should it be a banker, CPA, or an investment manager?  Most would argue that if you can get all three, so much the better.

Although getting someone with financial experience to serve on a nonprofit board proves difficult for many organizations, we suspect finding an employment practices lawyer who is willing to serve is far more difficult.  Yet, we regularly advise nonprofit groups that if you can get...

PULLING BACK THE CURTAIN: IRS AUDIT CHECK SHEET

DATELINE: December 14, 2009, Chicago 

The IRS recently issued a Governance Check Sheet and a Governance Guide Sheet for completing the Check Sheet.  The Check Sheet is to be completed by IRS agents during audits of tax-exempt organizations. As its name suggests, the check sheet focuses on the organization’s governance.  This can be taken as an indication that the IRS is not backing off its focus on nonprofit governance.  This is not surprising given the fact that IRS officials have said that a well governed organization is more likely to be a tax-compliant organization. 

Although a good portion of the checklist focuses on factual matters that are now answered by the Form 990, the Check Sheet and guidelines suggest that agents will be asking for...

TOO MUCH INFORMATION: ACLU BOARD GIVES NEW MEANING TO THE WORD “NITWITS”

DATELINE: December 9, 2009, Chicago 

Today we awoke to news that the TSA has posted their top-secret security handbook online, providing a roadmap for terrorists who are still fascinated with airplanes and the destruction they can cause.  Whoever did this should be summarily fired.  That won’t happen, but expect to wait in longer and slower lines at the airport this holiday season.  

The ACLU had a similar mishap, which Stephanie Strom of the New York Times reports on today in Civil Liberties Group Loses $20 Million Donor.  The New York Attorney General should bring a lawsuit against the...

IRS TAKES TAXPAYER CONFIDENTIALITY SERIOUSLY

DATELINE: December 9, 2009, Chicago

Several weeks ago, we stumbled across an IRS legal memorandum that indicates just how seriously the IRS takes taxpayer confidentiality in the exempt organization area. ILM 200942039 (released October 16, 2009)  The IRS had conducted an examination of an exempt organization that touched on the intermediate sanctions and excess benefits.  It decided to issue a “no-change” letter.  In that letter, the IRS planned to include advisory concerns that transactions between the organization and a disqualified person could potentially result in excess benefits and private inurement.   The organization’s representative wrote to the IRS, informing them that the organization was considering releasing the advisory, which would...

EXAMINING THE MIND OF A CHARITY REGULATOR: THE L.B. RESEARCH FOUNDATION SETTLEMENT IS REVEALING

DATELINE: December 7, 2009, Chicago

The California Attorney General  settled its lawsuit against L.B. Research Foundation, Gerald Buckberg and five other directors earlier this month.  The case involved allegations that the defendants abused their authority, committed fraud, diverted funds, and engaged in unlawful business practices or acts.  The California Attorney General also alleged that the defendants filed and distributed false and incomplete reports.  Of note are allegations that extended to the Form 990, not just to reports required to be filed with the AG’s office.

It is not at all clear that the settlement constitutes a...

MISSOURI TAKES UPMIFA FOR A TEST DRIVE: DENIES STANDING TO A DONOR

Dateline: November 11, 2009, Chicago

Yesterday, the Missouri Court of Appeals (Western District, Division III) affirmed a trial court’s dismissal of lawsuit filed by a donor against a charity for lack of standing.  Hardt v. Vitae Foundation, WD 70525 (Nov. 10, 2009).  The case was properly decided.   It is worth noting because it required the court to interpret the Uniform Prudent Management of Institutional Funds Act (UPMIFA), which has swept the country almost as fast as...

STATE ATTORNEYS GENERAL SHOULD INVESTIGATE KIVA.ORG AND CONSIDER ENFORCEMENT ACTION IF THE FINDINGS WARRANT

DATELINE: November 9, 2009, Chicago

Stephanie Strom of the New York Times reveals an apparent violation of the public trust by Kiva.org, a charity that Strom describes as “the country’s latest celebrated charity.”  Confusion on Where Money Lent Via Kiva Goes (Nov. 8, 2009).  Kiva.org raises funds to finance international micro-lending programs.  The gimmick:  In the past, Kiva.org has seemingly informed individual lenders that they are lending money to specific individuals--at least that has been the perception.  Nicholas D. Kristof, the New York Times columnist, wrote in a 2007 column that:

I lent $25 each to the owner of a TV repair shop in Afghanistan, a baker in Afghanistan, and a single mother running a clothing shop in the Dominican Republic... .

According David Roodman, a research fellow at the Center for Global Development:

The person-to-person donor-to-borrower connections created by Kiva are partly fictional.

According to Strom’s reporting, dollars being lent are not actually...

NEW JERSEY ATTORNEY GENERAL BRINGS LAWSUIT IN WHAT COULD TURN OUT TO BE THE NONPROFIT CASE OF THE YEAR--PART II

DATELINE: September 30, 2009, Chicago

Read Part I of New Jersey Attorney General Brings Lawsuit in What Could Turn Out To Be the Nonprofit Case of the Year

Train wrecks always make for great photographs, but train wrecks only serve a purpose if we learn from them.  If the allegations made by the New Jersey Attorney General against those running the Stevens Institute of Technology turn out to be true, Stevens will become one of the great train wrecks in nonprofit history.  Already the story offers...

NEW JERSEY ATTORNEY GENERAL BRINGS LAWSUIT IN WHAT COULD TURN OUT TO BE THE NONPROFIT CASE OF THE YEAR—PART I

DATELINE: September 29, 2009, Chicago

A little under two weeks ago, New Jersey Attorney General Anne Milgram filed sued against the trustees of the Stevens Institute of Technology, Harold J. Raveche, Lawrence Babbio, and unnamed John and Jane Does in what, if the allegations prove true, could prove to be the story of the year in the nonprofit world.  The 90-page complaint is sweeping in its allegations.  Raveche is the CEO and Babbio is the chairman of the board and a member of the executive committee.  While there have been incidents involving excess compensation, violations of the terms of restricted gifts, deception, failed investment management, and breach of the duty of care, we can't...

IT’S EVERYBODY ELSE’S FAULT: FEDS INVESTIGATE ALLEGATIONS OF CORRUPT ILLINOIS STATE FUNDED CHARITY

DATELINE: September 28, 2009, Chicago

The Illinois Legislature was persuaded several years ago to fund the Let’s Talk, Let’s Test Foundation (LTLTF) to the tune of $3 million a year.  LTLTF's mission is to fight HIV/AIDS in the African American community.   In Illinois, charges of corruption flow from almost any government involvement in any activity.  The halo of charity apparently may offer no immunity, as Chris Fusco of the Chicago Sun-Times reports today in Chicago Aids Charity Facing Scrutiny Over Spending.  Federal prosecutors have...