By William P. Barrett
In 2013 the Nevada Legislature passed, and Gov. Brian Sandoval signed, significant revisions to the state’s laws regarding solicitation of donations by charitable organizations. The lax old law had been a source of complaints about misrepresentations by agents of some charities.
Among other things, the revised law clearly specified that before soliciting from the public, especially over the telephone, most charities had to file, among other things, an annual financial report or IRS Form 990 tax return with the Secretary of State’s Office, which the agency “shall … post” on its website. A would-be donor contacted by a cold-calling telemarketer on behalf of a charity could then determine, for example, if this was one of the surprising number of national charities that spends only 10 percent or even less of donations on its charitable cause, with the rest going mainly for fundraising costs.
Yet four years later, the secretary of state’s office still doesn’t post charity financial reports or IRS Form 990s on its website. Not one from any of thousands of charities operating or soliciting in the state can be found.
“You raise some valid questions,” says Kimberley Perondi, deputy secretary of state for commercial recordings. And Cadence Matijevich, deputy secretary of state for operations, says in light of questions from me, a “legal review” of her agency’s responsibilities is underway. But she suggests the no-posting policy was adopted by “the prior administration.” She assumed her position in late 2015 under the current administration of Secretary of State Barbara K. Cegavske, who took office earlier that year, succeeding Ross Miller.
I’ve lived in Nevada for barely a year. But I am a journalist for national publications who has written about charities for a long time. My perception is that as it is being implemented on the ground, the Nevada scheme for regulating charities and protecting the public is exceedingly weak and an open invitation for sharpies. I made that point using these very words in an email to the secretary of state’s public information officer, Kent Alexander, inviting a response. He did not address my observation.
Nevada charity law actually was revised again in 2015 to make clearer that out-of-state charities–often worse abusers than local operations when it comes to financial inefficiency–were subject to the registration and disclosure law. The revisions also bolstered state authority while adding some due process protections. The law clarified that the secretary of state’s office had authority to impose civil penalties, issue cease and desist orders, make referrals to the attorney general’s office and start revocation of registrations for non-complying charities.
Yet it is not clear that the secretary of state’s office has taken any of these actions against any charity since 2013. Seeking clarity after my initial inquiry, I asked the secretary of state’s office in writing for numbers over this period for civil penalties, cease and desist orders, and referrals to the attorney general’s office or any other law-enforcement organization. I got no response. Both Perondi, the deputy secretary of state, and Alexander, the PIO, say the agency has extremely limited authority to regulate charitable activities. But the legislative counsel’s note attached to the 2015 law states that provisions “transfer primary jurisdiction for enforcing the disclosure requirement from the Attorney General to the Secretary of State,” while testimony to a legislative committee for the 2013 law made clear one purpose was to give the secretary of state’s office more authority. Based on all that and the explicit wording of current Nevada law, I beg to differ.
Like many states, Nevada divides jurisdiction over charities between two agencies, here the secretary of state’s office and the attorney general’s office. In my experience elsewhere, divided jurisdiction tends to lead to little or no jurisdiction and action. That’s certainly true in Nevada, where the secretary of state’s office acknowledged to me it doesn’t have even a single employee whose primary duty is charitable oversight of any kind.
Over at the office of Attorney General Adam Laxalt, I twice emailed his director of communications, Monica Moazez, asking among other things how many employees the agency has dedicated to charitable regulation. She didn’t respond, so I’m going to assume the number there is pretty close to zero, too. According to a 2016 report by the Center on Nonprofits and Philanthropy, the average state government has seven lawyers and staff overseeing charities.
Laxalt’s office, at least, was involved in an unprecedented legal settlement last year involving charity regulators from all 50 states and the District of Columbia and led by the Federal Trade Commission in Washington, D.C., that shut down Cancer Fund of America. That was the Knoxville, TN flagship run by the Reynolds family of a network of sham charities that over time raised nearly $200 million from donors nationally. The settlement came years after various journalists–myself included–wrote about the dodgy operation.
Ironically, the Laxalt press release bragging about the Cancer Fund of America resolution and offering advice going forward to Nevada donors said that “information on the [IRS] Form 990” can be found on “the Nevada Secretary of State website.” Really? In my opinion that was just ignorant.
To me, it’s clear that Nevada law puts the secretary of state’s office on the front line of charitable oversight. In my judgment the attitude of the secretary of state’s office toward charitable oversight is a tad lackadaisical. Let me offer some more examples.
—In August, I received a cold call at my Las Vegas house from a telemarketer soliciting funds for Veterans Trauma Support Network, which is an evocative name used by a charity called Crisis Relief Network, of Orlando, FL. Looking at databases maintained in other states. I saw that it’s one of those charities that spent 88 percent of the money raised in fundraising costs. (The Better Business Bureau Wise Giving Alliance, a leading charity watchdog, says fundraising costs should be no higher than 35 percent.) Only 12 percent–one penny out of every eight donated–went to good works.
I could not find a registration statement (let alone a financial report) on the Nevada Secretary of State website for either Veterans Trauma Support Network or Crisis Relief Network. But I called the main office in Carson City just to make sure. The person I spoke with confirmed the lack of registration, said I could file a complaint through the agency website but added it would take “a couple of months” for anyone to look at it. I didn’t file a complaint, preferring instead to blog about it. But had I done so, how many other Nevadans would be snookered in the time it took for the grievance just to be reviewed, let alone acted on?
—Until I pointed it out recently, the secretary of state’s website listed statutory citations governing charitable disclosure that the Legislature repealed in 2015.
—In his written response to me, Alexander, the spokesman, listed several websites not maintained by his agency where IRS Form 990s could be found. Of course, as one who covers this topic, I know them all, and others. But the average Nevadan doesn’t. I also know that many of the filings on the sites Alexander cited are years out of date. Still, why doesn’t the secretary of state’s office at least post these links on its own website for the public to see? I suppose one possible reason is that it might highlight the secretary of state’s office failure to follow the requirements of Nevada law.
—The secretary of state’s office continues to require that an individual charity list on its registration statement only six pieces of financial data that are then posted on the agency website: total revenue, total expenses, the difference, total assets, total liabilities and that difference. Such a bare-bones summary is hardly the stuff of a standard financial report as the phrase is normally understood in the business or regulatory worlds, other sections of Nevada Revised Statutes or met by submission of an IRS Form 990, which contains similar information. In the absence of a financial report or IRS Form 990, these particular half-dozen lines tell you nothing. Moreover, the legislative history of the 2013 law shows that the text in the original bill was amended from requiring “a financial report on a form prescribed by the Secretary of State” to just “a financial report,” suggesting the secretary of state’s office could not define its contents.
—One charity that was fully registered by the secretary of state’s office to solicit in Nevada on July 7 is Firefighters Charitable Foundation, of Farmingdale, NY. Here are some of the things you can’t determine from the secretary of state’s website, but which you might figure out from the most recent IRS Form 990 return, which I found elsewhere: Nearly 90 percent of donations went to fundraisers. Less than 4 percent of the money spent went to good works. (The BBB says good works as a percentage of total expenses, a calculation called charitable commitment, should be a minimum of 65 percent.) There is no iron-clad requirement that the few dollars for good works all went to firefighters or even victims of fires. The CEO and his wife, who is the secretary/treasurer, were paid nearly half the amount given out in grants and assistance.
Because of the huge money raked off by fundraisers, the firefighters foundation was No. 4 on the Tampa Bay Times’ list a few years ago of America’s Worst Charities. The organization really should be called Fundraisers Charitable Foundation.
But it’s proudly approved to solicit in Nevada by the secretary of state’s office.
Not every charity that solicits on the phone in Nevada has to register and file financial reports. There are exclusions for religious organizations, alumni associations, and solicitations directed to 15 or fewer individuals.
Nor are all nonprofit organizations charities. Most charities, as the term is commonly understood, have IRS approval as a 501(c)(3)–a section of the federal tax code–such that contributions can be tax-deductible (even if, as is so often the case, most of the money goes to fundraisers). But Nevada law and practice is a little squishy on operations that sound like charities–but aren’t.
For instance, twice in my one year here, I’ve been called at home by fundraisers soliciting for something called the National Police and Troopers Association. Both times, I was told that contributions went to fund “death benefits” for families of fallen officers. Now that sure sounds like a respectable charitable cause, especially since the calls came from an outfit called Charity Appeal, a paid fundraiser that, as it happens, is also in Nevada, in Carson City.
Sounds good, but not really true. The National Police and Troopers Association is a trade name used by the International Union of Police Associations, AFL-CIO, of Sarasota, FL. Yup, a labor organization representing police officers negotiating collective bargaining agreements, and definitely not a charity. Its latest financial statements make several things clear: (1) Only 1/10 of 1 percent of the funds donated over the past few years, and nothing in some years, went for death benefits; (2) More than 90 percent of the donations was spent on fundraising, (3) the little money left over after fundraising was used to reduce union dues paid by members hoping for better contracts paid by taxpayers , and (4) contributions are not tax-deductible. Some $13 million was raised in this sketchy way by the outfit in the year ending in March 2016.
Were I a fact-checker at The Washington Post, I would rate the mission pitch I heard as Four Pinocchios. This police organization also made the Tampa Bay Times’ worst charities list at No. 5. A press aide told the paper, “It’s money we otherwise wouldn’t have to support our officers.”
Despite the seeming charitable spin, there is no solicitation registration in Carson City for International Union of Police Associations, AFL-CIO, or its dba, National Police and Troopers Association. But unlike some 40 other states and the District of Columbia listed in the organization’s IRS Form 990, Nevada law actually seems to say that nonprofits — and a labor union is a nonprofit — that aren’t charities but solicit over the phone for money don’t have to register or file an annual report or IRS Form 990.
(For what it’s worth, I keep getting calls asking for money from the police and troopers association even though I have been pounding the organization in writing for some years. It’s even a repeat nominee for a list I started on a blog in 2014 of America’s Stupidest Charities, defined as nonprofits that call me for a donation despite a critical write-up by me; what can be more stupid than that?)
Given the current way the secretary of state’s office operates and views its obligations, I’m not sure a beefed-up registration requirement for such noncharity charities would help the public much. In my opinion, it’s time for Nevada lawmakers to take another look at the bigger picture and see if they approve of how the secretary of state’s office treats their condition precedent mandate that financial reports or IRS Form 990s be received and posted. But hey, I’m still new here.
A lawyer by training and a Chartered Financial Analyst, William P. Barrett is a veteran journalist who has written for Forbes and other media outlets. He lives in Las Vegas, where he blogs at www.newtolasvegas.com. He can be reached at: firstname.lastname@example.org
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