Charitable Solicitation: State Regulators Are Keeping Watch [Live from AICPA Not-for-Profit Industry Conference]

When soliciting for charitable contributions, it is imperative that nonprofits understand the various states’ regulatory obligations.

During a session at the AICPA Not-For-Profit Industry Conference in National Harbor, Md. Tracy Boak, partner with Perlman & Perlman, LLP, moderated a panel discussion with James Sheehan, Charities Bureau Chief of the New York Attorney General’s office and Robert Carlson, assistant attorney general in the Missouri attorney general’s office. Participants gained valuable first-hand insights from those who regulate fundraising activities.

Both Sheehan and Carlson shared key concerns that could lead to investigations and enforcement actions and offered best practices that can help organizations stay in compliance.

Carlson shared insights following actions filed by the Federal Trade Commission (FTC) and all 50 states against charities determined to be “sham” charities. Key learning points for organizations include: Having a solid governance structure in place, including strong board oversight; monitoring gifts in kind transactions and executive compensation; and, keeping a close watch on fundraising activities by professionals and taking steps to curb fundraising fees. He also discussed the attorney general’s role in enforcing restrictions imposed on restricted funds.

Sheehan focused his comments on the independent auditor’s role and responsibilities. He shared insights about how the attorneys general and their investigators use AICPA standards in their enforcement actions. He stressed the importance of the auditor’s independence and the professionals’ obligations to make certain disclosures concerning illegal acts and to report deficiencies and material weaknesses in internal controls identified during the audit.

They both stressed that with the federal Form 990 data and other publicly-available data, there is much more information that is visible to the public and the regulators. Sometimes “bad things happen to good people” but charities (and their CPAs) should not compound the problem by trying to conceal the conduct.

Immediately following the panel presentation by the attorneys general, Boak led a question and answer session where participants had the opportunity to ask follow up questions arising from the panel discussion, as well as any other questions regarding charitable fundraising compliance.