Charity Governance

NEGOTIATING AWAY DONOR RIGHTS: IS PRESIDENT CLINTON SELLING OUT DONOR EXPECTATIONS TO PRIVACY WHILE VIOLATING HIS DUTY OF LOYALTY TO THE CLINTON FOUNDATION?

DATELINE: November 20, 2008, Chicago

The front page of today's New York Times carries the following headline:  Bill Clinton Said to Accept Terms of Obama Team.  Peter Baker and Helene Cooper report later in the article that former President Bill Clinton has agreed to reveal the names of major donors to the William J. Clinton Foundation, his charitable foundation.  We find this to be highly disturbing and potentially unethical.  It may also be a...

THE LATEST EXHIBIT AT THE SMITHSONIAN: AN INTERACTIVE BOARD MEETING

DATELINE: November 19, 2008, Chicago 

 

Yesterday, the Smithsonian Institution held its first public board meeting—sort of.  In the morning, the Smithsonian’s regents held a closed board meeting.  In the afternoon, they held a public forum.  Jacqueline Trescott of the Washington Post reports that the public meeting was almost as popular as the Air and Space Museum during Spring Vacation week.  Smithsonian Fields the People's Questions, November 18, 2008.  The Baird Auditorium was 80% filled, according to Trescott.  That puts attendance at well over 400.  The high turnout makes one thing clear: The public is...

SENATOR GRASSLEY WANTS JOE THE PLUMBER TO RUN NORTHWESTERN UNIVERSITY

DATELINE: November 17, 2008, Chicago

Senator Charles Grassley, ranking member of the Senate Finance Committee, was working hard this weekend.  Last night we found a new press_release on his Web site.  The Chronicle of Higher Education has just issued its annual survey of college and university president compensation.   For a summary, see Susan Kinzie, College Leaders’ Salaries Climb: Raises Outpace Rise in Inflation, Washington Post, Nov. 17, 2008.   For FY 2007, the average compensation of public university presidents increased 7.6%, to $427,400.  Similar pay at private colleges increased about 6%.  Of course, Senator Grassley thought these numbers were outrageous given what is happening in the economy.  There is one slight problem with Senator Grassley’s logic...

ACORN: “THIS IS ANOTHER FINE MESS YOU’VE GOTTEN US INTO, OLLIE”

DATELINE: November 16, 2008, Chicago

Last week, the Catholic Campaign for Human Development (CCHD), the national anti-poverty program of the U.S. Conference of Catholic Bishops, cut off its funding for ACORN, the controversial organization that was in the news during this just-completed election season because of allegations over voter registration fraud.  According to a November 13, 2008 press release CCHD cut off funding because of a major case of embezzlement which “raised serious concerns over ACORN’s financial accountability, transparency, governance, and organizational integrity.”  The press release then indicates that the allegations over voter registration fraud intensified CCHD’s concerns over ACORN's activities.  CCHD therefore extended its funding cut-off to any ACORN organizations.  We are not sure what the second cut-off adds to the first.  Maybe the first cut-off was similar to...

AND WHILE WE ARE ON THE TOPIC OF TROUBLED TIMES: ANOTHER REASON WHY NONPROFIT DIRECTORS SHOULD INSIST THAT TRUST FUND TAXES BE PAID

DATELINE: November 12, 2008, Chicago

Last month the Seventh Circuit Court of Appeals affirmed a lower court decision holding the president of the board of directors of a nonprofit day center liable for the unremitted trust fund taxes.  One thing is certain in these troubled times, some organizations, including nonprofits, that are facing creditor demands for payment WILL decide to “borrow” the income taxes withheld from employee paychecks, together with the employee’s share of social security and Medicare taxes (collectively, trust fund taxes).  This borrowing will be in good faith and well-intentioned.  In the case of nonprofits, the person doing the borrowing will plan to repay the stealth loan from the U.S. Treasury with the proceeds of a promised donation or grant. 

Time will pass, the donation or grant will not materialize, the organization will file for bankruptcy, and eventually the IRS will show up, looking for the responsible person.  You see, even though the corporation has the obligation to remit the trust fund taxes to the IRS, Section 6672(a) of the Internal Revenue Code permits the IRS to pursue...

THE PROBLEM WITH COUNTING AND SPENDING OTHER PEOPLE’S MONEY

DATELINE: November 12, 2008, Chicago

 

Senator Grassley, ranking member of the Senate Finance Committee, and his minions have had their eyes on Harvard University’s and other university endowments for the last several years.  They just couldn’t figure out why Harvard and others weren’t spending more on the current generation of students with all those gains from the stock market.

Well, with major market averages down over 30% this year and some of those much touted hedge funds liquidating due to losses, university endowments have undoubtedly taken a hit.   Ah, it was so easy to make money and it seemed like the machine would never stop spinning out dollar bills—sort of like Willie Wonka’s Chocolate Factory...

 

THE BOARD AT MOTOWN’S DIA HAD BETTER BE ON THE BALL

 DATELINE: November 11, 2008, Chicago

 

The Detroit Free Press carried an article this past Sunday about the Detroit Institute of Arts (DIA) that should be quite disturbing to its board of directors.  Money Troubles a Risk to DIA’s Status, Detroit Free Press, Nov. 9, 2008.  According to the article’s author, Mark Stryker, DIA recently spent $158 million to renovate its building, which by all accounts resulted in a vast improvement to the facility.  Although the renovation might have been necessary, one has to wonder about the wisdom of that move given the fact that DIA has racked up $100 million in operating shortfalls during the last decade.  We suspect the renovation was justified in chicken and egg fashion—“We must spend money to make money.”

 As we read Stryker’s article, DIA’s board had better get realistic fast.  In 2008, DIA lost...

OUR ABSENCE

DATELINE: OCTOBER 1, 2008, CHICAGO

We have received several e-mails asking why no posts lately.  We have been on hiatus since August. That is expected to continue through most of October.  Our Jack Siegel was commissioned to write a book on the role of auditors and accountants in nonprofit governance.  Writing a book requires large blocks of time, particularly at the outset of the project when the book’s voice and broad contours are being developed.  Jack should be finished with that stage in the next several weeks, permitting a more modular approach to bringing the book to completion.  Jack also has been inundated with several other projects that need to be completed by the end of October.

We are glad to know we are missed and will try to get back on track as soon as possible.  There may be occasional posts along the way.

Thank you.

IRS GIVES BIRTH TO FORM 990 AND THE INSTRUCTIONS: TAX-EXEMPT ORGANIZATIONS NOW KNOW THE RULES OF THE GAME—PART I

DATELINE: August 19, 2008, Chicago

What do Apple and the IRS have in common? Both launch new products that are the subject of rumors months before the actual product debut. As hard as it may be to believe, like the Apple second generation iPhone, the redesigned Form 990 has been the subject of rumors for much of this year. Just as Apple watchers monitored shipping containers to determine whether iPhones would be available for sale in early in June, tax lawyers have had a cadre of summer associates posted outside the Kinkos at 1612 K Street in Washington, D.C. watching for Steven Miller, Loris Lerner, and Ron Schultz as they drop off the final version of the Form 990 and the accompanying instructions for copying. This apparently resulted in much confusion because Miller, Lerner, and Schultz or people who look like them have been using Kinkos a lot this year, fueling speculation that the final form and instructions were about to be released.

We, with our limited resources, have been monitoring the IRS Web site for developments. Sometime around 2PM EST today, the IRS posted the forms and the instructions, captioned...

“WE DON’T GRILL PEOPLE:” MAYBE YOU SHOULD START

DATELINE: August 14, 2008, Chicago

Memories of St. Mary's College came rushing back this morning when we read in the Chronicle of Philanthropy's Elsewhere Online column about Westminster College's recent disappointment over what now appears to be a worthless $3.4 million pledge from am ostensible entrepreneur. According to Brian Maffly of the Salt Lake Tribune, Warren Kyle Foote, a 28-year old real estate developer, made the pledge to finance the Warren Kyle Foote Institute for New Enterprise. Once Hailed by College as Philanthropist-Entrepreneur Foote Spun Web of Deceit, August 12, 2008. According to Maffly, within a few months of his pledge, Foote...