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Cryptocurrency, Crooks, Clawbacks ... and Charities
08.29.2024 | Linda J. Rosenthal, JD
It’s the joyous season of goodwill, good deeds and generosity. Just ahead of the December 31st deadline for tax-deductible contributions, your 501(c)(3) charity is no doubt eager to snag some of the dollars floating around to fund important projects in the new year.
While you’re asking the general public for help, don’t be surprised if some of them ask you for … details, numbers, program specifics, who is on your board, what’s in your 5-year strategic plan, how much your CEO is paid, and – well, you get the idea.
File this under FYI. It’s not that these folks are suddenly turning feisty and impertinent. Experts are popping up everywhere warning your potential pool of supporters to dig deeply into your operations and activities, before digging out their checkbooks.
The attorneys general of many states are warning prospective donors to take a deep breath and think about how their charitable donations are used. For example, the California Attorney General – who has primary oversight authority for charitable organizations and funds in the Golden State – publishes the “Attorney General’s Guide to Charitable Giving for Donors. In that pamphlet, prospective charity donors are encouraged to ask questions and educate themselves about all aspects of any organization asking for financial support. After all, “having educated donors helps to prevent fraud and abuse.” People who are informed “…tend to be less vulnerable to high-pressure solicitation tactics and more wary of unsupported claims.” This publication includes a useful checklist for people thinking about supporting a charity.
There’s similar, helpful information from the Federal Trade Commission.
Those pesky experts present handy lists: for example, “5 things to consider before donating.” Some charitable institutions have their own suggestions: “8 Important Questions every donor can (and should) ask.”
The Association of Fundraising Professionals publishes the “Donor’s Bill of Rights”; point 10 asserts that donors should “… feel free to ask questions … and to receive prompt, truthful and forthright answers.”
While this guidance from officials and experts is geared primarily to donors with substantial amounts to give, it applies as well (although scaled down a bit) to those of lower means considering more modest charitable contributions. Distilled down to the basics, this “look-before-you-leap” advice focuses generally on three common themes:
The Identity Check
Donors are cautioned to verify certain important preliminary information. They are advised (in language something like this) to probe and consider:
Mission/Operations Check
In this category, your prospective supports are cautioned to check out:
Donation Destination Check
(Note: Many donors believe, incorrectly, that a high percentage of solicited funds must be paid out directly for program activities, and not for overhead, but – well – that’s a topic we’ll tackle later in a separate blog posting.)
These types of inquiries shouldn’t be viewed as nuisances. It’s in everyone’s best interests – yours as well as the donors’ – to make sure that you are a good fit for the long run. That can help ensure a long and satisfactory relationship and may avoid costly and upsetting problems and misunderstandings – like these, or these, or these – keeping lawyers like us very busy indeed.
— Linda J. Rosenthal, J.D., FPLG Information & Research Director