Coming Soon to a Regulator Near You (Apr 05)

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I seem to be writing to you every two weeks now instead of every month, but there is a lot happening right now that I feel we should share sooner rather than later.

This time I wanted to let you know about what is happening at the federal level regarding the regulatory environment for nonprofits. Actually, I want to give you something of a heads up now (because a hearing in the Senate Finance Committee is scheduled for April 5) and to make sure you know that we are releasing a special issue of the Nonprofit Quarterly on proposed changes in federal regulations on nonprofits. (This will be sent to all regular Nonprofit Quarterly magazine subscribers. Those of you who are not currently subscribers to the magazine should take this opportunity do so and get your own copy of the special issue as well.

This issue has been something of a labor of love for us. We aren’t naturally a bunch of policy wonks- but we do know life in the nonprofit trenches and we have been watching this tea kettle gather steam over the past five years. To make it short and sweet this is what we see:

In the wake of corporate scandals and Sarbanes Oxley, and with the press being newly-armed with increased access to information about nonprofits through such efforts as The National Center for Charitable Statistics and GuideStar, attention has been turned to governance and control issues in the nonprofit sector. Media coverage of recent scandals have helped to focus that attention. Those that have involved simple illegalities raise questions regarding the effectiveness of governance and financial controls. But there has also been coverage of questionable practices that aren’t now illegal but probably should be if we are to maintain public trust. Much of what is in that second category; fundraising scams, sweetheart deals between profit making institutions and nonprofits, and donors deducting excessive amounts for certain types of donations need to be attended to in law. Questions about the regulation of private foundations, which is minimal to say the least-relative to most of the rest of the sector, have also been raised both by the press and the Senate Finance Committee and it looks like at least some longstanding, worthwhile proposals may move after years of deadlock.

What this means is that most of the regulations now being seriously proposed are less about what most nonprofits are doing and more aimed at controlling unsupportable wealth building and profiteering of various types. But whenever there is a public push to make these kinds of things happen, there will be a portion of proposals made that are either ill informed and just plain silly, or ill informed and potentially harmful, or sometimes both. For instance, concern about effective governance led to a volley served in the Senate Finance Committee whitepaper that no board be allowed to have more than 15 members. This, we figure, will die an obscure death, but hey, we have seen a lot of silly laws be passed and endure.

That means you have to get involved in helping those lobbying at the national level make good decisions about what to support and what to oppose. We have attached two articles from the special issue here. One of them summarizes the positions of major nonprofit policy players and provides links where you can get more information about what is being proposed and how to get involved.

The other article, by former Massachusetts Attorney General Scott Harshbarger talks about some of the pressures involved in collaborating with the sector and making new legislation that responds to real needs in the sector rather than political maneuvering.

But we’re saving what everyone tells us is the issue’s tour de force which is a 22 X 34″ map of the overarching public regulatory landscape in which nonprofits function. When you think about the fact that demands for accountability only begin with this picture, and that you then must add in accountability to public and private funding sources and, by the way, your constituents, it reminds us once again how capable nonprofit leaders are in managing such complex entities. So if you are not a regular NPQ magazine subscriber, don’t forget to order your copy from us today at