Achieving Excellence in Fundraising. Группа авторов
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et al. 2015). State law supports prudent delegation of work to committees and independent counsel who are qualified and fulfill their assignments. A helpful resource for planning and evaluating governance and legal best practices is Independent Sector's The Principles for Good Governance and Ethical Practices: A Guide for Charities and Foundations.
Duty of Obedience
The duty of obedience requires a nonprofit corporation to carry out its legally stated charitable mission. The duty of obedience can be violated when fundraising is completed for programs and services that do not fulfill the organization's mission. This duty can also be violated if the nonprofit's founder prevents the board of directors from prudently fulfilling the mission by diverting attention to other projects. When directors are recruited to the board, they should be provided an orientation and manual that includes key documents such as articles of incorporation, bylaws, IRS determination letter, strategic plan, current budget, independent audit, and meeting minutes.
Duty of Loyalty
The duty of loyalty requires directors to avoid acting in any manner that may harm the nonprofit corporation or that may result in the directors' personal financial gain. The duty of loyalty is imposed by state law and involves federal oversight prohibiting excess benefits or private inurement by directors, officers, and staff. In the case of excess benefits, the IRS may impose excise tax penalties as an intermediate sanction pursuant to Internal Revenue Code Section 4958. More egregious cases of private inurement will result in loss of tax‐exempt status.
Conflicts of interest can arise in the context of fundraising if directors use charitable gifts to leverage personal financial contracts. Also, directors must agree to treat the names and information about donors and gifts as confidential, respecting all requests for anonymity. The board of directors should adopt a conflict‐of‐interest policy requiring that conflicts of directors be disclosed and appropriately managed.
IRS Form 990 and Governance
The IRS annual Form 990 information return for larger organizations asks substantive questions relative to charitable organization governance. Information concerning the board of directors, conflict‐of‐interest policies, charitable gifts and other data is now collected and subject to IRS review.
Board review of the Form 990 and the annual financial audit is a best practice. Smaller organizations may submit a simple postcard or other form requiring less information. The current versions of the Form 990 and instructions are available at www.irs.gov. Completed 990 forms are available for public inspection.
State Law Considerations
Oversight of charitable organizations often rests with the state attorney general. Other state offices with oversight may include the secretary of state (e.g., nonprofit incorporation and annual certification) and Department of Revenue (e.g., application for property, sales and other tax exemptions, charity gaming such as bingo).
The attorney general typically has the legal standing on behalf of the public to bring a lawsuit in court or to impose other relief (e.g., injunctions, asset receiverships, replacement of directors or trustees) in cases where claims have been made by donors, whistleblowers, or the public that the organization is acting imprudently, ignoring donor intent, or otherwise violating the law.
State Fundraising Registration
Fundraising registration requirements differ by state. The National Association of State Charity Officials (NASCO) has oversight of solicitation by charitable organizations. NASCO offers a model charitable solicitation law, including a unified registration form that has been used or modified by some states. Some states exempt from registration those charitable organizations domiciled in the state and that use their own staff or volunteers to fundraise. However, charitable organizations located in other states may be required to register at least once or must provide an annual registration.
NASCO provides recommendations for internet fundraising called the Charleston Principles that some states may adopt. See the NASCO website for extensive information and a state‐by‐state list of charity offices at www.nasconet.org.
Fundraising Consultants and Solicitors
Some charities hire consultants and/or solicitors to assist in fundraising activities. The regulations for consultants and solicitors vary by state. In many states, a fundraising consultant is defined as an independently contracted person or organization hired to advise and train the charitable organization on fundraising strategies – but not to directly solicit gifts. A fundraising solicitor is an independently contracted person or organization hired to directly solicit gifts.
Many states require annual registration with the attorney general or other state office by fundraising consultants and solicitors before conducting business. The registration may require provision of a copy of the contracts, disclosure of the fees paid, and verification whether the consultant or solicitor will have custody of donations.
Definition of a Gift and Donor Restrictions
State and federal courts have required both a subjective and objective test to determine the existence of a charitable gift, especially for qualification of a tax benefit. The subjective test requires that the donor's intent must be “disinterested generosity” to support a charitable mission. The objective test requires that the gift be received by a qualified charitable organization and does not include any financial benefit or quid pro quo returned to the donor in exchange for the gift. In addition, a donor cannot impose conditions on a gift that inappropriately restrict the duty of care owed by the board of directors over the use of the gift (e.g., sale or investment of donated assets).
Donors may include specific restrictions on the use of a gift by an organization such as a designation for endowment and/or for a particular program or purpose. Charities are expected to honor donor intent as a legal and ethical best practice unless the purpose becomes impossible, impractical, or illegal. A helpful resource for honoring donor intent and restrictions is Protecting Your Legacy: A Wise Giver's Guide to Honoring and Preserving Donor Intent, provided by The Philanthropy Roundtable. Court cases as well as statutory law known as the Uniform Prudent Management of Institutional Funds Act (UPMIFA) includes procedures for modifying the purpose or management aspects of a gift if impossible, impractical, and so on.
Charitable Pledges
Lawsuits to enforce charitable pledges are rare, but they may be deemed enforceable contracts pursuant to state law, particularly in cases where the charitable organization has acted in reliance on the pledge (e.g., building construction begins in reliance on a major gift pledge). The Financial Accounting Standards Board (FASB) requires charitable pledges to be booked as a receivable on the audited financial statement. Donors with active pledges may be requested to confirm their commitment by the independent auditor. Private foundations cannot fulfill the personal pledges of a director, officer, founder, or staff. A donor advised fund can fulfill pledges of the donor or advisor following special rules as explained in IRS Notice 2017‐73.
Charitable Endowments
All states except Pennsylvania have adopted a version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as the law governing endowments and other types of funds. Pursuant to UPMIFA and FASB an endowment is a gift designated as restricted by a donor, either in formal communication from the donor or in response to the marketing materials of the charitable organization. A gift that is not restricted as endowment by the donor but is treated as endowment by action of the board is deemed to be quasi‐endowment pursuant to FASB. Quasi‐endowments may be spent at any time by action of the board of directors.
A board of directors must approve