NASCO: A BRIEF HISTORY
By David Ormstedt and Terry Knowles
There are two purposes for this brief history of the National Association of State Charity Officials (NASCO):
- First, at least some institutional memory of the organizations needs to be recorded before it is lost. Very few present at the creation are still in state service;
- Second, new and relatively new state officials should know they haven’t missed anything (except for some good times). The issues today are basically the issues of yesterday. Nothing much changes – it just gets more complicated.
BEFORE THE BEGINNING
1973: William J. Brown, Attorney General of Ohio, proposed the creation of a Charitable Trusts and Solicitations Committee for the National Association of Attorneys General. In support of his proposal, General Brown stated a committee of this type could lead to an exchange of information among state attorneys general, an exchange of information between the IRS and state charity officials, and referenced the Tax Reform Act of 1969 which, originally, “would entitle the various state charitable foundation divisions to receive federal funds for auditing programs.” The first meeting of the NAAG Subcommittee on Charitable Trusts and Solicitations was held in Atlanta, Georgia in January of 1974. Topics at the conference included regulation of public foundations, the Uniform Management of Institutional Funds Act, interstate cooperation between state attorneys general, structural aspects state agencies created to regulate charitable foundations, charitable solicitations, intergovernmental cooperation with the IRS and the United States Postal Service, direct mail campaign issues, and percentage limitations on fundraising activities.
Spring, 1977: The New York Board of Social Welfare (which registered charities before that function was transferred to the Department of State) convened a meeting of five northeastern states to explore uniformity in reporting. In attendance were Massachusetts, Connecticut, New York, New Jersey, and Pennsylvania. At a second meeting held that summer, these states agreed to accept the New York annual report form in lieu of their own from any charity wishing to file it.
Fall, 1977: David Ormstedt of Connecticut, representing the five states, makes a pitch to the 4th Annual NAAG Charities Seminar (held in San Diego) for uniformity among all states. By the next spring, 14 states had agreed to take the New York form.
Summer, 1978: While a sense of common purpose emerged among the people working on uniformity, officials from non-AG offices felt left out of the NAAG loop. Meanwhile, NAAG was reorganizing and assistance to even AG staff was minimal. The perception grew that a new, cross-agency organization was needed.
October, 1978: The Pennsylvania Charities Commission hosts a meeting in Philadelphia of states interested in forming a new trade association. Sixteen states show up. Larry Alexander (PA) and David Ormstedt (CT) (who created the NASCO name) agree to organize things.
THE EARLY YEARS 1979 – 1983
The organizational meeting of NASCO is held in January in New York City.
David Ormstedt of Connecticut is elected interim President pending the first annual meeting and seminar to be held in the fall.
A brief NASCO meeting is held in March in Williamsburg, VA, in conjunction with the 5th NAAG Charities Seminar. The purpose of the meeting is to organize state opposition to SOP 78-10, which would permit allocating fundraising costs to public education (sound familiar?).
The first NASCO conference is held in Ft. Mitchell, KY (across the river from Cincinnati) in September, with 27 state people attending (the private sector was not invited). Topics: accounting standards; professional telephone solicitation; legislation; investigation techniques.
David Ormstedt of Connecticut is elected President.
Meetings were held with AICPA to fight, delay, and change SOP 78-10 (rule on joint cost allocation), to no avail; their minds were made up.
Bill Levis, then affiliated with National Information Bureau (NCIB’s old name), begins organizing a project to systematically compile data on the charitable sector. It didn’t take long to realize that the states were the best potential source for data but that the data could not be readily extracted because of a lack of uniformity in reporting formats. This leads to the creation of the Uniform Annual Report project. Bill’s project eventually led to the development of a software system known as CRAS (Charities Registration and Auditing System). CRAS permitted states to create a simple database of registered organizations and to perform some auditing functions on financial information filed by these charities.
Joe Shea from New York is elected President.
The issues continue to be uniform reporting and telephone soliciting.
The Uniform Annual report project is in full swing. It is a cooperative public/private sector effort. The objective is to devise a uniform state financial report. The IRS was not participating.
The U.S. Supreme Court handed down the Schaumburg decision in February. The decision was not, at the time, considered to be of much consequence to state regulation.
The NASCO annual conference is held in Chicago in the fall
The NAAG Charities Seminar was held that April in Minneapolis. Many states attended both the NAAG and NASCO conferences (travel budgets were better then).
Independent Sector is founded.
Early in the year, the states agree on a uniform state report, at which point the IRS expresses an interest in modifying its Form 990 so as to achieve a uniform state/IRS report. Discussions proceed quickly and, in the spring, agreement is reached between the states and the IRS. The new Form 990, a radical departure from the old, is born. It remained unchanged for many years.
SOP 78-10 gets hotter as an issue.
The 7th NAAG Charities Seminar is held in Washington, DC.
The NASCO conference is held in the fall in New Orleans.
Frank Swenson of New Jersey is elected President.
The states’ dire predictions of the consequences of SOP 78-10 begin to materialize. There was much discussion about developing uniform state accounting rules that would supplant SOP 78-10 and other accounting principles (e.g., valuing donated goods and services) for purposes of state reporting. However, state regulatory staffs were small – even in the more active states. Taking care of the basics was challenge enough. Few states felt prepared to go head-to-head with the accounting profession and their blue chip client charities. It must be remembered that the impetus for SOP 78-10 was the need for some establishment charities to get around state fundraising expense limits. Only New York took an initiative in this direction, which led to the development of the summary sheet that requires disclosure of joint cost allocations.
This was the first year of joint NASCO and NAAG conferences. There was consensus that a joint conference made more sense than two separate conferences. An agreement was negotiated on revenue, expense and task sharing. The conference was held in Asheville, NC, in the fall. While NASCO’s conferences had been closed, NAAG had traditionally opened theirs to the private sector. This one would be closed.
Larry Campbell of California is elected NASCO President.
This was a difficult year for NASCO. Last year’s differences of opinion over how to deal with SOP 78-10 deepened. Some states formed a committee with private sector leaders to draft a compromise between the old primary purpose rule and the new SOP 78-10. After considerable work extending well into the next year, a new rule was proposed to the Financial Accounting Standards Board (FASB). It was rejected by FASB after an out-pouring of opposition from advocacy and other “public education” charities.
NASCO and NAAG decided to continue the joint fall conference experiment. It was held in San Francisco with very high attendance. Unlike last year, this conference was open to the private sector.
Cathy Hantzis of Massachusetts is elected President.
SHIFTING FOCUS: 1984 – 1988
As an organization, NASCO’s early years had been dominated by accounting and reporting issues. Other issues, like professional fundraising, were very important to the states and always commanded attention at the conferences. However, it was believed that those issues could be addressed by individual enforcement efforts and fine-tuning of statutes. This was all to change over the next year.
Early in the year, it became apparent that the Schaumburg decision was not going to be confined to its facts. Maryland had been unsuccessful in defending its more lenient statute in the lower courts against constitutional attack. The Munson case was going to the Supreme Court, and few state people were optimistic.
With the help of NCIB and the tireless Bill Levis, the states formed a committee to develop model provisions for state solicitation laws. A private sector advisory committee was established. The states correctly anticipated that the U.S. Supreme Court would bring an end to percentage limitations on fundraising costs in the Munson case. As that was the preferred method of state regulation, something new was needed.
What came to be known as the Model Law Project was officially a NAAG undertaking. While NASCO supported the effort, as an organization it was not involved. However, because generally the same people were active with both organizations, the distinction between NASCO and the NAAG Charitable Trusts and Solicitations Committee faded or, perhaps more accurately, the commonality of interest between the two caused a sort of informal merger. NASCO retained its two most critical reasons for being: 1) to offer a forum for all state charity regulators regardless of agency and 2) to enable the regulators to act and express themselves collectively and quickly. However, the impact of the Munson decision, together with a changing NASCO membership, shifted the organization’s focus to broader constitutional issues.
The NAAG/NASCO conference was held that year in Boston.
Dan Kurtz of New York is elected President.
The Model Law Project dominated. Dan Kurtz left state service during the year and veteran regulator Ed Edgerton (NC) assumed NASCO’s presidency. The conference was held in Atlanta, Georgia.
Ed Edgerton of North Carolina is elected President for another year.
The Model Law Project again dominated. Finally, after two years of drafts, re-drafts, and compromises, the states agreed on a finished product at the annual meeting in San Antonio. The private sector advisory group gave its qualified endorsement in October. In December, the Attorneys General adopted the Model Law.
Christine Rosso of Illinois is elected President.
Several states had already implemented variations on the Model Law, and considerable interest in it was expressed by others. However, momentum dissipated when a challenge to an important provision, that of disclosure of fundraising costs by professional solicitors, surfaced in North Carolina.
Meanwhile, a mild interest in accounting issues resurfaced when the AICPA proposed a new SOP for multi-purpose cost allocation. What eventually became SOP 87-2 was a cosmetic change to SOP 78-10.
The conference was held in Orlando, FL.
Ross Laybourn of Oregon is elected president.
The NASCO/NAAG newsletter made its debut in March.
State-initiated litigation was increasing, with more states becoming active.
Two new charity trade publications started: The NonProfit Times and The Chronicle of Philanthropy. These gave NASCO additional forums in which to disseminate its views.
Three events that summer and fall coincided to change the face of state regulation and energize NASCO as an institution: 1) the U.S. Supreme Court Riley decision in June; 2) in September and October, Watson & Hughey Company mailed its Robert Stone sweepstakes letters; and 3) the annual conference, which was held that year in Tucson, AZ.
Two forces converged on Tucson: the private sector fresh from its Supreme Court victory, and the states reeling from Riley and now seemingly facing a direct challenge to their credibility from Watson & Hughey. It was an interesting three days.
Mike Wright of Virginia, who couldn’t attend the conference, is elected President.
AND THE TIMES, THEY ARE A-CHANGIN’: 1989 – 1992
Some private sector pundits opined that Riley signaled the end of state regulation of charities and professional fundraisers. Clearly it did not. It did, however, force a change in the manner of regulation. Instead of broad prophylactic legislative mandates, we were now seeing more narrowly drawn statutes; sophisticated litigation aimed at specific and appropriate targets, and innovative public education initiatives. The massive, coordinated state response to the sweepstakes mailings was unprecedented in the charity regulation field. Individually and collectively, states are doing a better job of it. That said, there is and probably always will be much serious work to do.
In one sense we have come full circle. The accounting and public education issues of the early years, which bored some litigators to tears, have taken on a renewed significance.
NASCO has played no small part in these changes. By bringing the states together, by forming bonds between regulators and by offering vehicles for the exchange of information, NASCO is fulfilling its primary mission.
The multi-state Watson & Hughey litigation is big news this year and next. More states are taking public education initiatives. The NASCO newsletter grows in size as more states contribute information.
The conference is held in Charleston, SC, a week or so before Hurricane Hugo. The hotel where the NASCO Conference was held is destroyed during the hurricane.
The National Council of Nonprofit Associations (now the National Council of Nonprofits) is founded.
Sheila Fishman of Minnesota is elected President.
Legislative efforts proliferate, as states amend existing laws or enact new laws to meet the challenges of the court decisions and the accounting rules. The states generally act independently of one another, although some states do draw on portions of the Model Law.
The recession is taking its toll, with several state officials having to pay their own way to the conference, which is held in San Diego, CA. Private sector attendance is high, reflecting the impact the states are having.
Terry Knowles of New Hampshire is elected President.
The conference is in Portland, ME. The year before, several states settled their Watson & Hughey cases. In January of this year, the ten states that had joined together to coordinate their litigation also settled. Still other states will settle later in the year.
NASCO takes an active role in the Non-profit Quality Reporting Project being conducted by Baruch College (Bill Levis again).
In the spring, several states attend the first form 990 meeting at the Urban Institute in Washington, DC, with the IRS to discuss matters of mutual interest. This offers some NASCO members an opportunity to meet more than once per year; something that has not happened since the Model Law Project. NASCO members are given an opportunity to meet privately with the IRS. Bill Levis obtains a small amount of funding to assist in travel and lodging expenses.
Dick Allen of Massachusetts is elected President.
This has been a busy year for NASCO. A committee was formed to deal with the accounting issues. Work continued on the broader agenda. There was an attempt, though futile, to open a meaningful dialogue with the trade association Independent Sector. Uniform registration is back on the agenda.
States have increased their litigation and public education efforts, attracting unprecedented media coverage of charity issues.
We are in Chicago for the annual NAAG/NASCO conference.
Rose Ann Reeser of Texas is elected as the 14th NASCO President.
1993 – 1999 Years of Controversy and Growth
As the charitable sector grows in assets and influence, charity regulators find their laws being challenged more aggressively while at the same time staff and budgets are being cut on the state level. Effective regulation becomes increasingly more difficult.
The conference was held in Santa Fe, NM. Due to an administrative glitch the briefing books arrive at the conference a day late. State regulators continue to face constitutional challenges to their statutes. Donna Rogers of Ohio discussed the Dayton Area Visually Impaired Persons v. Attorney General of Ohio decision. The first topic on healthcare appeared on the agenda with AAG John Vinson of Texas discussing hospital litigation and legislation in that state. The IRS updated the group on the status of the United Cancer Council litigation. First Amendment and fundraising issues continue to dominate regulators’ discussion.
Steve Arter of Pennsylvania is chosen as the 15th NASCO President.
The conference was held in Savannah, Georgia. This “infamous” conference stands as a defining moment in NASCO’s history. An unusually large number of private sector guests joined us for the open sessions and, in essence, overwhelmed both the scope and purpose of the conference. During a panel discussion entitled “State Regulatory Priorities – Is There Too Much Regulation?” the usually civil exchange of opposing viewpoints became extremely adversarial. At one point a private sector speaker accused state regulators of investigating fundraisers because they were jealous of the salaries paid to the executive directors of national charities. As a result, at the NASCO Board meeting the decision was made to limit participation by extending a small number of invitations to the private sector in the future. NASCO anticipated some adverse reaction to this new policy and looked for an individual who not only understood the mission of NASCO and was well respected but also had ties in the private sector as well.
Pam Mann of New York is elected President. She left the New York AG’s Office during her term. The Board elected one of the founders and former presidents of the organization, AAG David Ormstedt of Connecticut, who agreed to fulfill the remainder of Pam’s term.
The conference was held in Williamsburg, Virginia. Janice Anderson of Pennsylvania updated the group on the New Era scandal and the effect the case had on the Attorney General’s office. Charitable solicitation issues began to fade as new issues emerged: Sales and conversions of nonprofit hospitals, joint-cost allocation and accounting issues, and the increase in fraudulent activities by groups masquerading as charities were among the topics presented. Karin Goldman of New York provided an update on the Uniform Registration Statement project.
David Ormstedt agrees to continue to serve as NASCO President.
The conference was held in San Antonio, TX. The President held a moment of silence at the beginning of the meeting in memory of the late William B. Cullimore, the Director of Charitable Trusts in New Hampshire and long-time member of NASCO who died in December of 1995. The first discussion of the legal and practical issues in the regulation of Internet solicitation was held. Public/private sector collaboratives in accountability and the standardization of reporting forms were important topics. NASCO was honored to have Sir Richard Fries of the London Charity Commission as a guest speaker. Sir Richard discussed the Elizabethan Statute of Charitable Uses and its modern day application. Richard Larkin, CPA from Price Waterhouse, spoke on the new FASB 116 and 117 rules. Health care acquisitions and conversions and the growth of for-profit healthcare subsidiaries continue to be emerging topics for regulators.
Some members of the private sector in reacting to NASCO’s “by invitation only” policy respond by organizing mirror conferences at the same time and in the same city as the annual NASCO Conference. The relationship between the groups continues to be strained and this causes some concern for state regulators.
Sean Delaney of New York is elected President.
Sean Delaney becomes the Legal Director with the Lawyers’ Alliance for New York and resigns as NASCO president. Susan Elson of Maryland and Craig Mayton of Ohio are elected as Co-Presidents.
The conference was held in Georgetown. Karin Goldman provided an update on the Uniform Registration Project and its continuing success in attracting new state participants. The Federal Trade Commission and David Horn from Washington presented a report on the Operation Badge Fraud joint state/federal investigation targeting groups engaged in fraud in the solicitation of donations for bogus police and fire groups. Virginia was successful in its multi-year investigation and prosecution of Smokey Mountain Secrets. Pennsylvania gave an update on Internet solicitation. The sale of Blue Cross/Blue Shield nonprofit organizations to for-profit entities was an emerging topic of discussion. John Edie the General Counsel for the Council on Foundations gave an update on significant developments in the charitable sector from the foundation manager’s point of view.
Susan Elson of Maryland and Craig Mayton of Ohio agree to continue as Co-Presidents for another year.
The conference was held in Portland, Oregon. The idea of structuring conferences along a theme was raised in 1997 and commenced with the 1998 conference. This year’s theme focused on techniques in the investigation of both civil and criminal charges brought against religious organizations. Richard Allen of Massachusetts hosted a Most Serious Offenders Discussion Forum. Officer Jackie McDonald from the Edmonton Police in Alberta, Canada gave a presentation on international issues in solicitation fraud. Attorney General Margery Bronster of Hawaii provided an update on the Bishop Trust litigation. NASCO invited speakers from the academic community to address the regulation of religious charities. Special Agent Michael Havertz of the FBI provided a workshop on investigating boiler room operations. Public and private participants led a panel on issues in the accountability of religious organizations.
Michael DeLucia of New Hampshire is elected President.
The conference was held in Charleston, South Carolina. The theme of the conference was the Internet and possible regulation of the electronic solicitation of donations. Dan Moore of New Mexico reported on the progress of the 990 electronic filing project. Belinda Johns of California, Marion Gorton of Michigan, and Marcus Owens of the Internal Revenue Service led a workshop on vehicle donation programs. The Information Technology Task Force undertook one of the most ambitious projects in NASCO history – the drafting of a model for the regulation of charitable solicitation on the Internet. The framework for the model – named the Charleston Principles – was drafted and passed on to a committee to be further developed for next year’s meeting.
Karl Emerson of Pennsylvania is elected President.
NASCO and the New Millennium – new faces, new challenges
The first NASCO meeting of the twenty-first century was held in San Diego, California. Internet solicitation and the Charleston Principles dominated the conference. Countless hours were spent by Jeff Evan of Washington, Nikki Trella of Maryland and their committee in the months leading up to the conference fleshing out and rewriting a discussion draft of the Principles. Those present at the meeting discussed the Principles and a further refinement will be undertaken by the committee as a result of the discussion. Terrence Berg of the Michigan Dept. of the Attorney General gave a workshop on electronic investigation: tools and methods. Karin Goldman of New York reported that all but three states have now agreed to accept the Uniform Registration Statement which is an incredible accomplishment. Standard workshops on non-electronic charitable fraud and prosecution continue to be well attended by NASCO members.
In the new millennium the culture and mission of NASCO has begun to change in positive ways. For the first time since the Savannah Conference, NASCO abandoned the “by invitation only” policy for private sector people and opened registration up to all who wished to attend. Private sector attendees understood the significance of this change in policy and were non-confrontational in their interaction with regulators during the conference. NASCO began reaching out to form strategic alliances with private sector organizations including the National Council of Nonprofit Associations. In keeping with this new direction, NASCO members realized it is time for a strategic planning session to take place to chart the organization’s future and to establish its mission and identity. The strategic planning meeting will take place in May of 2001.
Dan Moore of New Mexico is elected President.
Baltimore, Maryland – Nonprofit healthcare and fundraising issues dominate the conference. Significant case developments included the Allegheny Health, Education and Research Foundation in Pennsylvania involving the bankruptcy and sale of AHERF’s affiliate hospitals and medical school. The Pennsylvania Attorney General’s Office litigated against the former officers and directors of the organization for misappropriation of charitable endowments and, criminally, for theft and other charges. A session is provided on conversation foundations created from the sale of nonprofit hospitals and nonprofit insurance companies. There were a number of charitable solicitation cases reported against National Vietnam Veterans Coalition Foundation and Telecom Telemarketing Services, Liberty Publishing Company, and Charles Jaffe. American Target Advertising, Inc. brought litigation against Frances Giani, the Division Director of the Utah Division of Consumer Protection alleging the Utah laws regulating charitable solicitation were unconstitutional. A final report on the multistate litigation against the 1989 Watson & Hughey case was presented – 9 states participated in the litigation. NascoNet, a joint project between NASCO and GuideStar, is introduced to conference members. NASCO, once again, seeks a broadening of IRS/State information sharing under IRC sections 6103 and 6104.
Karin Kunstler Goldman of New York is elected President.
Minneapolis, Minnesota – Sessions during the conference include an overview of the Telemarketing Associates case, recent hospital and health insurance transactions (transitions from nonprofit to for profit), The Baptist Foundation case and the regulation of faith based organizations, electronic filing initiatives with the Urban Institute, an update from the IRS by Steve Miller, Director of Exempt Organizations and from the FTC by Tracy Thorleifson, charity regulation after September 11, 2001 – the New York experience, the use of the form 990 as an investigative tool, and a discussion of how the Enron/Arthur Andersen scandals could affect nonprofits. J. Logan Seitz from the American Red Cross was the keynote speaker at the public day luncheon.
Belinda Johns of California is elected President.
Brooklyn, New York – First Time Conference Attendee session is included in the agenda, Federal Partners update given by the IRS (Steve Miller), Tim Mahoney (US Postal Service), and Tracy Thorliefson (FTC), discussion of the effect of the U.S. Supreme Court Madigan case on professional fundraiser regulation, presentation by Susan Beresford, President of the Ford Foundation on challenges facing foundations in the 21st century (increased compliance, good use of foundation assets, better public outreach), Hot Topic update from Attorney Michael Peregrine, continued emphasis on disaster fundraising issues, telemarketing sales rule training, sale of nonprofit hospitals and cross border transaction issues (Banner Health Care Systems transaction), and review of how Sarbanes Oxley applies to nonprofit organizations. Attorney General Eliot Spitzer is the keynote speaker at the public day luncheon.
Mark Pacella of Pennsylvania is elected President.
Washington, D.C – For two years NASCO partnered with GuideStar in obtaining a federal grant (Technology Opportunity Program) to create NASCONet. The completed website was demonstrated at the conference by Dan Moore, V.P. of Public Affairs at GuideStar. Dan was a former state charity official from the State of New Mexico. Ethics, audits, corporate accountability, investigations into fraud, and cyber investigations as well as the federal partners update were among the panels presented at the conference. Prior to the conference NASCO sent a letter to Senator Charles Grassley in support of federal legislation (Charity Aid Recovery and Empowerment Act) which would earmark a portion of the excise tax revenue for foundation oversight with some money set aside to be distributed to state authorities that oversee foundations and charities on a local level. This issue was discussed at the legislative update session.
Tracy McGinnis of Missouri is elected President
Cleveland, Ohio – the NASCO Conference was originally scheduled to be held in New Orleans, LA, but Hurricane Katrina devastated the city two months before the event. Although it was short notice, the hotel was able to find space for the conference in the Ritz Carlton Hotel in Cleveland. The Federal Partners session included presentations by the Federal Trade Commission, the FBI, and the U.S. Department of the Treasury. At the networking dinner veteran NASCO members served as mentors to new attendees and presented their “A Day in the Life of a NASCO Board Member” experiences during the event. The public day included sessions on Building Strong and Ethical Public Charities, Hot Topics in Corporate Accountability by Michael Peregrine, Terrorist Financing in the Charitable Sector, and Self-Regulation vs. Government Regulation. Diana Aviv, the President of Independent Sector gave the keynote address at the luncheon. Private sessions focused on traditional charitable trust issues, program related investments by private foundations, electronic filing initiatives, charitable gaming, and recent developments in hospital and healthcare cases.
Terry Knowles of New Hampshire is elected President.
Nashville, Tennessee – Theme of the Conference: Nonprofit Regulation at the Crossroads: New Challenges and New Directions for State Regulators. A First Time Attendees session started the conference. Paul Luehr, formerly of the Federal Trade Commission, presented a session on Internet Investigative Tools followed by the Federal Partners session with the IRS, US Postal Service and the Federal Trade Commission. Private day sessions included a review of major cases including the In re: Bair Trust case (Montana) involving oversight of an art museum and the State of Tennessee v. Costa case involving allegations of gross negligence by a charitable trustee, presentations by Stephanie Strom of the New York Times, David Jackson of the Chicago Tribune, and Jeff Kosseff of the Oregonian on the role of the fourth estate in insuring accountability from regulators and the charities they regulate, and a presentation on the Council on Foundations publication: The Value of Relationships Between State Charity Regulators and Philanthropy. At the public day luncheon topic tables hosted by NASCO members were available to public attendees with specific questions in the areas of the Charleston Principles, Commercial Co-Venture Contracts, CEO Compensation, Charitable Solicitation, and “Ask the Regulator”.
Jody Wahl of Minnesota is elected President.
Denver, Colorado – Theme of the Conference: The Ever-Expanding Universe of Charities Regulation. NASCO held a strategic planning retreat in Washington DC at NAAG Headquarters on April 15th. Twenty-two state regulators participated. This retreat updated the strategic plan from 2001 and focused on an evaluation of (1) what NASCO has accomplished; (2) what NASCO has failed to accomplish and why; (3) what worked and what didn’t; (4) what are the strengths, weaknesses, opportunities, and challenges affecting NASCO today and how will these issues affect the organization’s future. NASCO also offered comments to the IRS on the redesign of the form 990. At the conference an orientation and Charity 101 session was offered for new attendees. Jack Siegel was the luncheon keynote speaker and his topic was Bringing it all Back Home: Notable Developments in the Nonprofit Sector. The luncheon was followed by “table topics” which are small group discussions hosted by state charity officials on a variety of subjects. Paul Luehr gave a workshop on E-Discovery and Internet Investigative Techniques and Michael Peregrine of McDermott, Will and Emory provided an update to corporate and governance developments affecting nonprofits. The Pension Protection Act of 2006 authorized greater information sharing between the IRS and state charity officials. Hawaii, California, Illinois, and Colorado volunteered to be the pilot states for the new procedure. A workshop on the Pension Protection Act for Regulators was provided by Attorney Heidi Neff Christianson. Other topics included Nonprofit Corporate Integrity, What’s Relevant Today about Schaumburg, Munson, Riley and Madigan, updates on healthcare, and charitable sales promotions.
Hugh Jones of Hawaii is elected President.
Santa Fe New Mexico – Gary King, the New Mexico Attorney General, welcomed the participants in the 2008 NASCO Conference. Lois Lerner, the Director of the EO/TE branch of the IRS gave an update on the implementation of the new form 990 and 990N. Regulators discussed the problem which arises when a soliciting nonprofit does not file a form 990 which is required by many states but does file the 990N “electronic postcard”. Concerns were expressed that a patchwork of additional financial filing requirements throughout the states might begin to appear. The luncheon keynote speaker was Dean Zerbe, the former Senior Counsel and Tax Counsel to the Senate Finance Committee. Themes throughout the conference included increased emphasis on internal controls for nonprofits, the cost of embezzlement, and accountability to regulators. The former Director of Exempt Organizations for the IRS, Marcus Owens, gave a presentation on Low Profit Limited Liability Companies (L3Cs). Karin Kunstler Goldman from the NY AG’s Office, Hugh Jones from the Hawaii AG’s Office, and Belinda Johns from the California AG’s Office gave an update on the Columbia Law School Charities Project.
Chris Cash of Colorado is elected President.
Austin Texas. Theme of the Conference: Charities in Troubled Times. During the Roundtable several states discussed the dissolution of charities due to the economic downturn in 2008. The luncheon speaker was Tom McLaughlin whose topic was How Can Charities Deal with the Current Crisis? Luncheon was followed by small group discussions. Hawaii reported the development of an Internet based registration system and searchable charity registry. Missouri led a multistate action against Community Support, Inc., a telemarketing firm that had broken numerous state laws. The Group achieved a resolution that had numerous portions of injunctive relief and $200,000 in payments. Danie Huppe-Cranford of the Canada Revenue Agency Charities Directorate gave a presentation on Canada’s regulation and registration program for charitable entities. Consistent with the theme of the conference, topics on the public day included bankruptcy issues and end of life issues for charities. A presentation on CEO compensation at non-profit hospitals and mission drift in the hospital sector was given by David Spackman. An update on the Unified Annual Financial Statement was presented by Chris Cash and Robert Tigner. The Columbia Law School Charities Project update was presented and included a Columbia Regional Meeting session at the conference. Other topics included a discussion of the Charleston Principles and internet solicitation, multi-state cases, the new form 990, and L3C’s.
Eric Carriker of Massachusetts is elected President.
Silver Spring, Maryland. Theme of the Conference: Charities and Regulators, Doing More with Less. NASCO held a strategic planning retreat May 2-4 at the Urban Institute in Washington, DC. NASCO members agreed the organization should strive to expand membership. In order to accomplish this goal, NASCO should improve its internal and external outreach. The outreach committee agreed on a “rapid response” approach to outreach. Whenever there is news from nonmember jurisdictions, the committee would conduct outreach to those respective jurisdictions. NASCO members agreed that the organization should strive to improve communications with its members – issue a newsletter that highlights enforcement actions, legislative initiatives, board activities, and other initiatives, creation of a NASCO (States Only) listserv. NASCO members suggested that it strive to improve its relationship with the IRS. In order to accomplish this goal, NASCO should continue its liaison role with federal agencies, and continue to establish contacts at the IRS. NAAG could serve as a point person with respect to sign-on letters, comments, and policy positions. Members inquired whether there should be the creation of a Charities Committee within NAAG. Chris Cash suggested we work toward a single point filing system. During the year several NASCO members served as official observers at the Uniform Commissioners’ meetings on the drafting of the Oversight of Charitable Assets Act. Given the economic downturn, many states eliminated out of state travel funds and prospects for attendance at the conference appeared bleak. NASCO applied to NAAG’s Mission Foundation for a grant to bring regulators to the NASCO Conference. The request was granted by the Mission Foundation and a number of states received travel grants to attend the conference. The luncheon speaker at the conference was Scott Harshbarger, former Massachusetts Attorney General. Mr. Harshbarger’s topic “Was ACORN the Real Victim? Lessons for Effective Governance during Troubled Times.” Topics at the conference included case selection criteria, standards of care for nonprofit directors in the wake of the Madoff scandal, recent nonprofit developments in Congress and Federal Agencies, the evolving role of philanthropy in America, how to measure a charity’s effectiveness, regulation of new fundraising strategies in a down economy, and the Top 10 compliance issues for state and federal regulators.
Tracy Boak of Pennsylvania is elected President. Attorney Boak later accepted a job at a private law firm and tendered her resignation as NASCO President.
Bob Carlson of Missouri is elected President.
Silver Spring, Maryland. Theme of the Conference: Nonprofit Regulation in a Time of Change. Given the financial challenges faced by individual states the NASCO Conference was shortened from its customary 3 ½ days to 2 ½ days to cut costs. In order to cover as many topics as possible, each day of the conference began early and went late – the Sunday session did not adjourn until 9:00 p.m.; Sunday and Monday included working lunches. Topics included a bankruptcy primer for regulators, legal implications of social media, Michael Peregrine’s annual corporate governance and nonprofits update, international solicitation issues, the anatomy of an investigation, a focus on the investigation and prosecution of illegal activity by Roger Chapin (Help Hospitalized Veterans; Salute America’s Heroes), Bobby Thompson (U.S. Navy Veteran’s Association), and Greg Mortenson (Central Asia Institute, Three Cups of Tea), the annual federal partners update, alternative corporate structures, and how to investigate and litigate breaches of trust and will disputes. David Spackman of McDermott, Will, and Emery was the luncheon speaker on Monday. NASCO members also discussed the 2011 draft of the Model Protection of Charitable Assets Act issued by the National Conference of Commissioners on Uniform State Law. A subcommittee of NASCO members worked closely with the NCCUSL drafting committee in developing MPOCAA and attended several of the drafting committee’s work sessions. The Single Portal filing project is born under its original working title the National Association of State Charity Official Unified Electronic Registration System.
Elizabeth Grant of Oregon is elected President.
Silver Spring, Maryland. Theme of the Conference: The Evolution of the Nonprofit Sector. The NASCO Conference is again 2 ½ days long. During the debriefing session on Tuesday, NASCO members discussed the challenge of a shortened conference and its impact on attendees. Several suggestions were made for the 2013 conference. The downturn in the economy continues to impact nonprofit organizations and the roundtable discussion provided examples of failing nonprofits, misuse of restricted assets, and the difficulty in regulating organizations in financial distress. Topics at the conference included an overview of direct mail solicitation, information sharing under the Pension Protection Act and the lengthy, expensive, and complicated requirements required of state charity officials who wish to receive information from the IRS, issues involving excessive compensation, new internet investigative tools, accounting issues including proposed changes to the FASB rules governing the reporting of nonprofit assets, small group discussions with the regulated community, and the development of charity impact information. The Unified Electronic Registration System is renamed the Single Portal Filing Project.
Therese Harris of Illinois is elected President
Silver Spring, Maryland. Theme of the Conference: Nonprofit Regulation in a Time of Change. NASCO members acknowledged the passing of Charles Eddie “Sweet Thang” Brown, the retired Director of Investigations in the South Carolina Secretary of State’s Office. The Aspen Institute releases a report entitled Information for Impact: Liberating Nonprofit Sector Data which underscores the importance of having current, accurate information on the sector widely available to regulators, elected officials, academics, and donors. Topics include the regulation of disaster relief fundraising, receivership issues with nonprofits, reports on multi-state investigations of Cancer Fund of America, Boobies Rock, and Walker Cancer Research, Professor Nancy McLaughlin of Utah presents a panel on conservation easements and state charity officials’ role in enforcement cases, the luncheon topic was nonprofit hospitals and the Patient Protection and Affordable Care Act, Julie Floch, CPA, presented on Gifts in Kind and Joint Cost Allocation, there was a panel discussion on the role of donor advised funds, and a presentation on fundraising through social media. Presentations and updates on the Single Portal Filing Project and open data in the nonprofit sector are provided. IRS Exempt Organizations Director, Lois Lerner, resigns amid controversy regarding the Service’s review of certain organizations; Ken Corbin, the Acting Director of Exempt Organizations provides the IRS Federal Partners Update.
Alissa Gardenschwartz of the Colorado Attorney General’s office is elected President.
Washington DC Hyatt Regency. The conference theme was the Evolving Role of Charitable Registration in the 21st Century. The IRS proposed a streamlined application for exemption form, the 1023EZ, to reduce their backlog and make the process simpler for small nonprofits. During the comment period NASCO filed its written objection to the proposed 1023EZ in April stating in part “such a form would make it easier for ‘scam’ charities to obtain Section 501(c)(3) status. . .a shorter form 1023 may be less capable of providing warning signals.” The IRS adopted the form 1023EZ on July 1, 2014. The NASCO Conference welcomed a special guest, Sue Woodward from the Australian Charities and Nonprofit Commission, who gave presentations to both the Single Portal working group and to the conference attendees about Australia’s electronic filing system for nonprofit organizations. Professors Thomas Kelly and John Colombo participated in the luncheon keynote session entitled “Are Charitable Organizations Really Charitable.” Topics at the conference included Nonprofits and Intellectual Property: What Every State Regulator Needs to Know”, Disposition of Assets upon Dissolution of a Not-for-Profit, Data Mining Using Registration and Other Public Information, Legislative Developments and Trends, Hospital CEO Compensation, the Columbia Charities Project update, Rating and Evaluating Charities, UPMIFA, UBIT Reform Proposals from the Advisory Committee on Tax Exempt Entities, and Goal Setting and Performance Measurement for Charities.
Janet Kleinfelter of the Tennessee AG’s office is elected President for a two-year term.
The conference was held October 5-7 at the Georgetown Marriot. The theme of the conference was “A Renewed Focus on the State Charity Regulator.” The conference began with the Public Day on Monday. The keynote session involved a panel of General Counsels with Missouri Deputy Attorney General Bob Carlson moderating the discussion. Topics included How a State Regulator’s Office Works, Proposed New Standards for Not for Profit Financial Statements, Emerging Trends in Disaster Fundraising and the Use of Mobile Devices, Achieving Effective Collaboration between Regulators, Nonprofits, and Foundations, the Charleston Principles, Update on the Single Portal Project, U.S. Treasury Update from Ruth Madrigal of the Office of Tax Policy, Investigating and Prosecuting Charities that Abuse the Gifts in Kind rules, Trends in Corporate Governance, First Amendment Issues, Civil and Criminal Enforcement Options, Update on Cancer Fund of America Multi-State, and State Regulatory Issues – the Common and the Uncommon.
Janet Kleinfelter of the Tennessee AG’s office is President.
The National Association of Attorneys General convened the inaugural meeting of the NAAG Charities Special Committee in March, 2016 in Denver Colorado. Attorney General Joseph Foster (NH) and Attorney General Doug Peterson (NE), are Co-Chairs of the Committee.
The Conference will be held on October 17 – 19 at the Westin Hotel Washington DC City Center. The theme of the conference is The Evolving World of State Charities Regulation. Attendance by the states is high and many new regulators were in attendance. Abby Stempson coordinated mentors from the experienced NASCO members for the new attendees. Karin Kunstler Goldman gave a moving tribute to the late Julie Floch, CPA from EisnerAmper who was a regular presenter at the NASCO Conference and a great friend and colleague to NASCO members. Members of the NAAG Charities Special Committee, Attorney General George Jepsen of Connecticut, Attorney General Derek Schmidt of Kansas, Attorney General Doug Peterson of Nebraska, Attorney General Joseph Foster of New Hampshire, and Attorney General William Sorrell of Vermont gave a presentation on both the public and private day regarding the upcoming work of the Committee. Topics at the conference included Non-Traditional Models of Philanthropy, Donor Advised Funds, New Tools for the Nonprofit Sector, Multistate Litigation including an overview of the Cancer Fund of America case, Hospital Transactions, and Informal Resolution of Cases. The Federal Partners Update was presented by Lois Greisman of the Federal Trade Commission, Richard Crom and Adriane Piercy of the Internal Revenue Service. Karen Gano gave an update on the SinglePortal Filing Project which will be launched in early 2017. At the NASCO Annual Meeting an amendment to the Constitution was adopted which includes changing the terms for officers from one to two years. This amendment will aid in succession planning and insure greater consistency in NASCO’s leadership.
Karen Gano of the Connecticut Attorney General’s Office is elected President.
To be continued!
(Last Updated 10/20/2016)