Storms Brewing on Legislative Front

As charitable giving continues its steady upward climb and more Americans value the crucial role nonprofit organizations play in sustaining our cultural, social, religious and economic life, a significant threat lingers.

It’s time to identify this threat, speak out against it and unite behind the common cause of advancing fundraising. If we don’t mobilize and speak out, we’ll have nobody to blame but ourselves when the most sweeping, intrusive and draconian federal regulation of nonprofit organizations takes effect.

Government getting involved
For the past three decades, many states — and some local jurisdictions — have attempted to prevent charitable fraud by regulating nonprofit organizations, professional fundraisers and consultants. The result is a hodgepodge of rules, regulations and fees that have done little, if anything, to prevent abuse. My agency retains a specialist attorney just to make sure we’re in compliance. Many nonprofits do the same.

The charitable-registration bureaucracy has grown exponentially, and yet nobody has been able to document its effectiveness. Do you believe that there’s less charitable fraud because of state and local regulation?

If you listen to the recent hysteria in Washington designed to justify more federal regulation, then these local efforts have been a total failure.

But despite what has been a dubious effort at the state and local level, the Senate Finance Committee, led by Sen. Chuck Grassley (R-Iowa), its chairman and driving force, is preparing to foist a new set of federal laws and regulations on nonprofit organizations.

Believe me, the heavy arm of the federal government will be quite a different experience compared to what state and local jurisdictions have been trying to do. Some already have suggested that, at a minimum, the majority of nonprofit organizations — and there are 1.2 million charities, churches and social welfare groups in our country (about 85,000 new ones each year) — will have to add accounting or legal staff to handle compliance.

Such an added burden will sink tens of thousands of our smaller, yet highly valuable, organizations.

We don’t need more regulation. We need more enforcement of existing laws.

Living up to bad rap? Hardly.
Closely tied to the whole question of government regulation is the general inability or unwillingness of government to take direct action against charity crime.

In nearly every case of charitable abuse that I’ve read about, existing criminal fraud and theft statutes were adequate for effective prosecution of self-dealing, abuse and misrepresentation. But police and prosecutors are extremely reluctant to investigate nonprofit organizations and their leaders, citing a lack of resources, more important cases and the inherent difficulties of pursuing such cases to successful prosecutions.

So registration, rules, regulations and fees are seen as good alternatives. The possible benefits of such increased federal oversight are far outweighed by the added costs, especially when there is a general reluctance to pursue criminal cases.

The perception of Grassley, and many others who favor tighter federal regulation of the nonprofit sector, is that America’s charitable organizations are rife with misconduct, corruption and ineffectiveness. Nothing could be further from the truth.

Of course, there are some organizations that raise money with fraudulent intent and others that are ineffective, sloppy and downright irritating in their approach. There are organizations that are poorly managed. There are some that could be wiser in their use of donor funds. But overall, America’s charities are effective, vibrant and vital players in our nation’s daily life, and Americans agree wholeheartedly — they gave an estimated $241 billion to charitable causes in 2003.

One recent study indicated that 89 percent of American households engage in charitable giving, the overwhelming majority through the mail, with $15, $20, $50 and $100 contributions. Nearly one-half of the adult population volunteers time each year.

Every day, people are giving their money and their time, sharing their ideas, and advocating for a wide variety of organizations that sustain our cultural and social fabric.

The homeless shelter caring for folks in far worse circumstances than most of us face. The food bank providing wholesome food to those in need. The local mission offering after-school computer classes. The arts group bringing music to our ears. The medical researchers inching closer to a cure for cancer. The churches, synagogues and mosques giving comfort and hope to our souls. The environmental protectors guarding our natural resources and caring for endangered animals. These are the good things being done every day in every corner of this land — and they are happening because Americans give their time and money so generously.

Federal regulation like what has been proposed and debated will not advance this good work. It will instead lead to the development of more bureaucracy and costs for nonprofit organizations.

If Grassley and his colleagues are truly concerned about the effectiveness and efficiency of charities, they should make certain that existing laws are enforced instead of creating new ones. They should fund the Internal Revenue Service and other government enforcement agencies so they can pursue the few bad apples who abuse their positions or engage in fraudulent activities, rather than impose new burdens on a whole class.

As they consider tax reform, they should make certain that donors continue to enjoy the full benefits of deductibility for their cash and in-kind gifts. They should work to strengthen our nonprofit organizations, not burden them with new federal regulations and fees.

But unless we speak out now, we are likely to see specific legislation that could very well change the fundraising environment as we know it today.

Get involved — now
Here are three action steps you and I can take right now:

1. Operate in a transparent, efficient and effective manner. The best argument against additional government regulation is a track record of service that reflects integrity and high ethical practices. How we go about our work is our best defense against unnecessary, costly and burdensome new government intrusion.

2. Know and honor donor intent. Be certain that your fundraising appeals are truthful and very clear on the use of your donors’ gifts.

3. Take advantage of the numerous resources available through the Association of Fundraising Professionals, the Direct Marketing Association’s Nonprofit Federation and other trade groups. Be informed so your voice can be heard.

Contact Grassley and tell him that you do not favor new federal regulation of the nonprofit community. You can reach him at 202.224.3744; or via e-mail at grassley.senate.gov/webform.htm. Encourage your colleagues to do the same. Share your thoughts with your own senators, too.

All of us involved in raising money for nonprofit organizations should speak out on this important issue and not assume that federal oversight is a fait accompli.

Timothy Burgess is co-founder of the Domain Group, an international direct-marketing firm serving nonprofit organizations in North America and Europe. A 27-year fundraising veteran, Burgess serves on the advisory council and ethics committee of the Direct Marketing Association’s Nonprofit Federation. He can be reached at 206.834.1480 or via e-mail at tim.burgess@thedomaingroup.com.