Friday, May 11, 2012

Nonprofit Director Pleads Guilty

The head of a Washington, D.C.-based nonprofit pleaded guilty to lying about her 2009 tax returns and is cooperating with prosecutors in their investigation of former D.C. councilman Harry Thomas Jr.

Danita Doleman, who is the executive director of Youth Tech, received $110,000 from the D.C. Children & Youth Investment Trust in 2009, according to a report in The Washington Post. Doleman admitted to funneling $100,000 of that money, which was supposed to be used for drug prevention programs, to the D.C. Young Democrats.

Ayawana Chase Webster, a staffer for Thomas Jr. and head of the D.C. Young Democrats in 2009, used the money from Youth Tech to fund a ball at the John A. Wilson Building. Thomas Jr., who was sentenced to 38 months in prison last week for theft of public funds from the trust, admitted to steering the $100,000 to the ball.

The executive director of the D.C. Youth Investment Trust at the time, Millicent D. West, told prosecutors that she worked with Thomas Jr. and his staff to find a way to pay for the ball. She told them that a non-political group would have to pay for it. That's where Youth Tech came into play.

Doleman's role in the scandal had not been mentioned in the original court documents. A two-page charge filed Wednesday accused her of failing to report $20,000 in income she received from Youth Tech in 2009. Her lawyer, Michelle Peterson, said her client filed an amendment to reflect the $4,000 she owed in taxes and, as part of her plea agreement, would provide information for the government's investigation of Thomas Jr.

You can read the full story in The Washington Post.

Why Do Donors Give?

For years, fundraisers have been searching for the answer to a question that is the nonprofit equivalent of the Holy Grail: Why do donors give?

This is one of those questions that truly doesn't have a single right answer. Every donor who you talk to will likely give you a different reason for they decided to give money or other gifts to an organization. That doesn't mean people have given up trying to come up with a concrete answer to the question. Larry C. Johnson, author of "The Eight Principles of Sustainable Fundraising," thinks he has the answer: People give because they want to.

It may not be the profound answer that some in fundraising are looking for, but it does have some weight behind it. There is no denying that you can't force someone to give if they don't want to. 

In a study by the Center on Philanthropy at Indiana University, “Understanding Donors' Motivations,” the five most frequently occurring motivations for philanthropy were listed. They are:
  • To meet critical, basic needs;
  • To give back to society by making the community a better place;
  • A belief that those with more should help those with less;
  • To bring about a desired impact or result; and,
  • A request for money was made.
These reasons are sure to spark debate among fundraisers. Let us know what your thoughts are, and whether you have found a different answer to this intriguing question.

Wednesday, May 9, 2012

Senate Campaign Finance Bill Would Target Nonprofits

The New Hampshire State Senate is preparing to vote today on a bill that would require nonprofits and other groups to report the money they spend on state and national political races.

Nonprofits have long been under the microscope of the Internal Revenue Service (IRS) for contributions or statements made during campaign season but, as was reported by The Union Leader, Senate bill HB 1704 would expand the definition of a political committee to include tax-exempt organizations, specifically 501(c)(4)s, 501(c)(5)s, and 501(c)(6)s. These include social advocacy groups, labor unions, and business associations.

In the wake of the Supreme Court decision Citizen v. United, there has been a lot of concern about anonymous donors using 501(c)(4)s as a means to funnel huge contributions to what are known as Super Political Action Committees (PACs). Still, both liberal and conservative groups have expressed displeasure with the current bill.

New Hampshire ACLU Executive Director Claire Ebel told The Union Leader that she was particularly concerned about a section of the bill that requires disclosure when a group pays for “distribution of information critical of a member of the general court who has not filed for office.” Ebel believes this is in direct violation of the First Amendment. The Josiah Bartlett Center for Public Policy, a conservative organization based in Concord, N.H., also has issues with this section of the bill.

HB 1704 is being promoted by Concord-based Coalition for Open Democracy, whose program director, Olivia Zink, denied the bill would squash free speech. She said the bill was based on similar legislation that was passed in Maine that was upheld by the First Circuit Court of Appeals.

You can read the full story in The Union Leader.

How Much Surplus Do You Need?

What could possibly be bad about a nonprofit having a large surplus of cash? According to Lesley Rosenthal, author of "Good Counsel," there's a perfectly good reason why it's not necessarily a good thing to have too much money in reserve.

Rosenthal wrote that, while it's always a good thing to have some money saved up, nonprofits need to make sure there isn't too much. This is because a large surplus could indicate that the organization is not doing as much good as it could or should.

This raises another question: How much surplus is appropriate? Rosenthal explained that this question can be answered by weighing financial and legal matters. She suggested four things to consider with your counsel:
  • Insurance deductibles: Some organizations may carry insurance policies with sizable deductibles, where the policy does not cover attorneys’ fees or losses until they reach a certain size. Counsel should help the finance team understand whether coverages include or exclude defense costs, and whether these costs are necessary.
  • Self-insurance: Some large nonprofits may self-insure for medical, casualty, and workers’ compensation claims. Organizations with self-insured exposure must establish liability funds to cover known claims as well as incurred but not reported claims and the costs of the defense.
  • Pending threatened litigation: Counsel should be sure to update the finance staff on the status of these potential litigation matters, especially those for which insurance coverage or defense may not be available, and help calculate the material potential financial impact on the organization against which reserves should be held.
  • Compliance with matching fund requirements: Counsel should coordinate with finance and fundraising staff about the terms of governmental or foundation grants that require matching funding. Together they should establish appropriate levels of reserves to make sure that matching obligations are met.

Tuesday, May 8, 2012

Maurice Sendak's Legacy Of Philanthropy

Well known author and illustrator Maurice Sendak passed away today at the age of 83 after suffering a stroke. While Sendak was best known for books such as "Where the Wild Things Are," he also leaves behind a legacy of philanthropy.

The Huffington Post reported today that Sendak was quietly involved in a number of philanthropic causes. In 2010, he gave $1 million to the Jewish Board of Family and Children's Services, a New York City based agency that provides services to needy families in the state. Sendak decided to make the gift in honor of his partner, Eugene D. Glynn, who died in 2007 after working for the organization as a psychiatrist for 30 years. Sendak told The Wall Street Journal at the time that he was contributing to a cause that Eugene would have wanted to do.

Sendak's donations didn't always come in the form of money. Since the 1960s, he had been donating his books and illustrations to Philadelphia's Rosenbach Museum of Library. Sendak served on the museum's board of directors.

You can read the full story in The Huffington Post.

Michigan School District Lost Thousands To Fake Nonprofit

Newly unsealed federal court records show that the Highland Park, Mich. school district lost $170,000 to a fake nonprofit set up by a now indicted school board member.

The Detroit Free Press reported today on the records, which provide a deeper look at the government's case against Robert Davis, 32, who is charged with stealing from the already cash-strapped school district. Davis used money from the phony nonprofit, called Citizens United to Save Highland Park Schools, on personal expenditures. Records show he allegedly spent $84,000 on perks such as custom-made clothes, hotel rooms, bar and restaurant tabs, and spending sprees at malls. He is also accused of withdrawing $86,711 in cash from the organization.

Citizens United was set up in 2005 by Davis, who used his home as the address for the fake nonprofit. According to an FBI search warrant affidavit filed in the U.S. District Court in Detroit, Davis was listed as the sole signatory for the organization's account. Highland Park school officials reportedly had no idea the account existed.

Davis was indicted on April 5 on charges that he stole more than $125,000 from the school district by submitting false invoices for advertising between 2004 and 2010. He faces up to 10 years in jail if he is convicted.

You can read the full story in The Detroit Free Press.

Monday, May 7, 2012

National Museum Of Natural History Gets Major Donation

David H. Koch, executive vice president of Koch Industries, has made his mark on National Museum of Natural History by donating $35 million to the Washington, D.C.-based museum.

The major gift, which was announced by the Smithsonian Institute last Thursday, will be used to build a new dinosaur hall, according to a report in The Washington Post. It is the largest single donation the museum has ever received, and the fifth largest in Smithsonian history.

Koch, who might be best known for his support of conservative causes, has been a member of the museum's advisory board for the past 15 years. He told The Post that he made the donation because he believes the institution's current dinosaur hall is "obsolete." Many of the specimens included in the current dinosaur exhibit have been there since the museum first opened 100 years ago.

This is certainly not Koch's first experience with philanthropy related to dinosaur exhibits. He donated $20 million to the dinosaur hall in New York City's American Museum of Natural History in 2006. He also gave $100 million to the renovation project for the State Theater of New York at Lincoln Center.

The National Museum of Natural History's current dinosaur exhibit will close in 2014, with the renovated hall scheduled for completion in 2019. The total cost of the work is estimated at $45 million.

You can read more about this story in The Washington Post.

Game Changing Ruling On Tax Exemption?

A Pennsylvania Supreme Court ruling on the tax exempt status of a Brooklyn, N.Y.-based Orthodox Jewish school's camp could have the potential to set precedent for future legal challenges of charities.

According to a report in the Pittsburgh Post-Gazette, the Mesivtah Eitz Chaim of Bobov Inc. summer camp was ruled not to be a nonprofit, despite being owned by a religious institution. This is because most of the 61-acre property surrounding the camp does not meet the criteria for charities in Pennsylvania.

The ruling has some concerned that we could be returning to the times, mainly in the 1980s and 1990s, when the tax exempt status of nonprofits was regularly challenged by local governments. A spokesman for Pennsylvania state Senate Pro Tem Joe Scarnati openly raised the possibility that the state's constitution might need to be amended the clarify the section on purely public charities.

The court's decision, a narrow 4-3 ruling, had this kind of impact for a number of reasons. For one, it turned the notion of what qualifies as a nonprofit on its head. Yet even more telling was that the court cited its own 1985 ruling, Hospital Utilization Project v. Commonwealth, as the controlling point, not a 1997 law known as Act 55, which lays out what defines a public charity.

The 1985 ruling, also known as the HUP Test, states that a purely public charity must pass five tests to gain tax exemption: advance a charitable purpose; donate or render gratuitously a substantial portion of its services; benefit a substantial and indefinite class of persons who are legitimate subjects of charity; operate entirely free from private profit motive; and relieve the government of some of its burden. Mesivtah Eitz Chaim of Bobov Inc met every criteria except the last one.

We have already seen a number of legal challenges of tax exempt organizations in the past year, with the most famous example being the case of a number of nonprofit hospitals in Illinois.

You can read the full story in the Pittsburgh Post-Gazette

Comment On The News

One of the great things about the Internet is the ability to interact with a community. Sharing your opinion on the hottest stories is a lot of fun, and now you can do just that thanks to the new commenting feature on The NonProfit Times.

Make your voice heard on the latest issues in the nonprofit sector by signing up to our website today. Once you fill in all the required fields, you can start commenting on any of our news stories. We're really excited to hear your opinions and see some lively (but civil) debates on the hot stories affecting nonprofits.

To get things rolling, here's a link to one of our newest stories on the end of Public/Private Ventures. What are your thoughts on this organization closing its doors after 35 years?