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January 2005 - Happy New Year!
Alert:
Last Chance -- Special Training and Education in Foundation Management
If you are a founder, director, or trustee, foundation manager, or an advisor who regularly consults with foundations, then you should attend the Foundation Management Certificate Program, offered by IFF Advisors, Inc., and the Fielding Graduate University. This program provides the most comprehensive, hands-on and practical training available in the country.
The curriculum is offered in three distinct modules, each of which is offered over a weekend with a two-day face-to-face group meeting that includes both lecture and small group work, followed by a six week on-line facilitated discussion. Nationally recognized experts at IFF will share their knowledge and skills during each module, while Fielding’s experienced Human & Organization faculty will facilitate the on-line follow-up discussions. Combining rigorous reading and preparation with case studies and field work, this certificate program provides an exciting combination of scholarship and real life experience, designed to enhance the effectiveness and efficiency of foundation management, and to respond to the unique challenges of family philanthropy.
Students will learn how to identify and select appropriate foundation structures and governance systems, develop comprehensive long-range strategic plans, interview and evaluate investment advisors and managers, and design administrative and grant management systems. They will experience the challenges of family dynamics and learn skills and strategies to respond. Students will also learn how to develop the foundation’s mission and vision, design grant criteria and procedures, and establish methods of monitoring and evaluating grants.
Upon completion of the program, students will receive a Certificate from the Fielding Graduate University. The certificate program begins on January 23 and runs through the end of July. Interested parties should contact Judith Stevens-Long, Ph.D. at Fielding Graduate University jslong@fielding.edu.
 Fielding Graduate Institute: Register Today!
Legislative Update (Part Two) & Important Reminder: California’s Nonprofit Integrity Act Is Now In Effect
California’s Nonprofit Integrity Act is now in effect, though some provisions won’t apply until after June 30, 2005. Here are a couple of the key changes that we discussed last month. Although this is a state-specific requirement, similar legislation is pending in several states, and you can anticipate broad changes in the oversight and accountability for both public charities and private foundations throughout the country. The California statute applies to foundations organized in another state, but doing business (e.g. holding meetings) in California.
- Public charities and private foundations which accrue gross revenues of $2.0 million or more in the year (which would include any contributions received, as well as earned income, investment earnings and realized gains), must now prepare financial statements that are audited by independent certified public accountants. So, a foundation that receives a substantial contribution in one year may be required to prepare an audited financial statement for that year, but not in future years, unless the revenue threshold is reached. The organization must also have an audit committee appointed by the Board of Directors.
- New charities and foundations must register with the State of California within 30 days of receipt of acquiring their first assets. This replaces the six month rule.
- The compensation of the two senior officers must be reviewed and approved by the board of directors of a charitable corporation, or the trustee of a charitable trust. The reviewing body must determine that the compensation is just and reasonable. Using an independent third party to review and analyze compensation of executives may be an appropriate way to meet this requirement.
The Nonprofit Integrity Act imposes new rules regarding contracts with commercial fundraisers and fundraising counsel:
- Each contract between a charitable corporation, unincorporated association, or trust and a commercial fundraiser must be in writing and signed by an official authorized by the governing board of directors (or trustees). The contract must include: (a) the legal name and address of the charitable organization; (b) a statement of the charitable purpose for which the solicitation campaign, event, or service is being conducted; (c) a statement of the respective obligations of the commercial fundraiser and the charitable organization; (d) if the commercial fundraiser is to be paid a fixed fee, a statement of the fee to be paid to the commercial fundraiser and a good faith estimate of what percentage the fee will constitute of the total contributions received; (e) if a percentage fee is to be paid to the commercial fundraiser, a statement of the percentage of the total contributions received that will be remitted to or retained by the charitable organization, or, if the solicitation involves the sale of goods or services or the sale of admissions to a fundraising event, the percentage of the purchase price that will be remitted to the charitable organization; (f) the effective and termination dates of the contract and the date solicitation activity is to commence in California; (g) a provision that requires that each contribution in the control or custody of the commercial fundraiser shall be either delivered to the charitable organization or deposited to a bank account over which the charitable organization has sole control, in either case within five days of receipt; (h) a statement that the charitable organization exercises control and approval over the content and frequency of any solicitation; (i) if the commercial fundraiser proposes to make any payment in cash or in kind to any person or legal entity to secure any person's attendance at, or sponsorship, approval, or endorsement of, a charity fundraising event, the maximum dollar amount of those payments must be specified in the contract; and (j) a provision that the charitable organization has the right to cancel the contract without cost, penalty, or liability within ten days after the contract is signed, or cancel with thirty days notice after the initial ten-day period, or cancel for cause at any time after the initial ten-day period.
- Each contract between a charitable corporation, unincorporated association, or trust and a "fundraising counsel" must be in writing and signed by an official authorized by the governing board of directors (or trustees). The contract must include provisions similar to those described above for contracts with commercial fundraisers. A fundraising counsel is a consultant who plans campaigns but does not itself raise money. The term "fundraising counsel" does not include employees, directors or trustees of the charity, nor its attorneys, bankers and investment counselors. In addition, there is a de minimus exception for a fundraising counsel whose total annual gross compensation does not exceed $25,000.
- A charitable organization may cancel a contract with a commercial fundraiser or a fundraising counsel as described in clause (j) above. If a charitable organization cancels a contract during the initial ten-day period, a copy of that cancellation notice must be provided to the Attorney General.
- A contract between a charitable organization and either a commercial fundraiser or fundraising counsel is voidable by the charity unless the commercial fundraiser or fundraising counsel is registered with the Attorney General's Registry of Charitable Trusts prior to the commencement of the solicitation.
Charitable Solicitation
- A charitable organization may not enter into a contract with commercial fundraiser unless the latter has registered, or agreed to register prior to commencing solicitation, with the Attorney General.
- The charitable organization and the commercial fundraiser cannot misrepresent the purpose of the charitable organization or the nature or purpose or beneficiary of a solicitation.
- The charitable organization must establish and exercise control over the fundraising activities conducted for its benefit, including approval of all written contracts and agreements, and must assure that fundraising activities are conducted without coercion.
- No representation may be made to the effect that a contribution is to or for the benefit of a particular charitable organization when that is not the case.
- No representation may be made to the effect that the person on whose behalf a solicitation or charitable sales promotion is being conducted is a charitable organization or that the proceeds of the solicitation or charitable sales promotion will be used for charitable purposes when that is not the case.
- No representation may be made to the effect that any other person sponsors, endorses, or approves a charitable solicitation or charitable sales promotion when that person has not given consent in writing to the use of the person's name for such purposes.
- No representation may be made to the effect that goods or services have endorsement, sponsorship, approval, characteristics, ingredients, uses, benefits, or qualities that they do not have or that a person has endorsement, sponsorship, approval, status, or affiliation that the person does not have.
- No representation may be made to the effect that the Attorney General has approved the solicitation.
- No representation may be made to the effect that a charitable organization will receive an amount greater than the actual net proceeds reasonably estimated to be retained by the charity for its use.
- No representation may be made to the effect that any part of the contributions will be given or donated to any other charitable organization unless that organization has consented in writing to the use of its name prior to the solicitation.
Commercial Fundraisers
- Commercial fundraisers must register and file annual reports with the Attorney General.
- Commercial fundraisers may raise funds for only those charitable organizations that are registered with the Attorney General (or are exempt from the registration requirement).
- Commercial fundraisers must notify the Attorney General at least ten days in advance of a solicitation campaign for charitable purposes (except in cases of disasters or emergencies). The notice must include: (a) the name, address, and telephone number of the charitable organization; (b) the name, address, and telephone number of the commercial fundraiser; (c) the fundraising methods to be used; (d) the projected dates when performance under the contract will commence and terminate; and (e) the name, address, and telephone number of the person responsible for directing and supervising the work of the commercial fundraiser under the contract.
- If requested by a solicited person, a commercial fundraiser must disclose the percentage of the total expenses of the fundraiser to the total revenue received by the fundraiser. If the request is made in writing, the commercial fundraiser must disclose in writing within five days. Disclosure must be made immediately if verbally requested, followed in writing within five days.
- Commercial fundraisers must maintain records relating to solicitation campaigns for ten years after the end of each campaign. Records are subject to inspection by the Attorney General.
Fundraising Counsel
- Fundraising counsel must register and file annual reports with the Attorney General.
- Fundraising counsel must notify the Attorney General at least ten days in advance of a solicitation campaign for charitable purposes (except in cases of disasters or emergencies). The notice must include: (a) the name, address, and telephone number of the charitable organization; (b) the name, address, and telephone number of the fundraising counsel; (c) the projected dates when performance under the contract will commence and terminate; and (d) the name, address, and telephone number of the person responsible for directing and supervising the work of the fundraising counsel under the contract.
California Registry of Charitable Trusts:  Guide to the Nonprofit Integrity Act of 2004.
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