Start-Up Charity Review Board

Earlier in this blog, I tried to suggest organizations that could be counted on to accomplish the task of reviewing any plans and projections for new charity start-ups as a way to help them get off to a more solid start. But I want to once more center down on this topic to see just exactly what kind of issues are in here.

Could a government agency really do this work, and could they do it well, consistently, over a long period of time? I suspect that this probably can not happen. There is a vast difference, as I see it, between "regulating" charities vs. truly helping charities, in the strategic sense, avoid trouble down the road. I don't think we need to take a stance here of regulation. But I think it is a service to the charities, the donors, the society, to impose on new charity start-ups a review process that ensures each new nonprofit gets off to a good start.

Initially, we need to consider the question of "which agency?" We have our choice. Internal Revenue Service? Their main issue is taxation. But the only interface charities have here has to do with the tax deduction and the reporting function. Yet we know that most donors, while not necessarily ignoring their tax deductions, are not primarily motivated to give to charity because of the deduction. And the reporting function with the Form 990 is designed only to prevent theft, fraud and abuse of the tax-exempt privilege for personal gain. Yet the more sensitive issues of governance and fundraising infrastructure involve much more than a "tax view" as a basis for reviewing any plans and projections of new charities. That may be why the IRS decided to get out of the business of seeing to it that charities were properly set up before issuing their 501-c-3 designations.

Department of Interior? But that has to do with land and its use and regulation. Department of Justice? But getting new charities off to a good start doesn't mean we're involved in helping them avoid breaking the law. We just want to make sure that a charity, as a public trust, has someone, some agency, looking over its shoulder enough to get the group off to a good start.

So who is going to do this work? Should it be a government function? Should it be government funded?

I suggest the work of a new charity review panel should be funded by public tax dollars for two reasons. First, because a charity is a public trust, and it will serve the public better if it gets off to a good start and doesn't flounder around. We serve the public interest much more with effective program supported by effective fundraising and governance. When we lack that, we tend to waste the public's money.

Second, the new charity review panel should be funded by public tax dollars for the reason that the work charities do for our society is essential to the strength and survival of our nation, our form of government and our way of life. Charities do what government agencies cannot or will not do. And we do it better. Our standard for their performance should, therefore, be Lawrence Lindsey's "$1 in, get $6 of service out" formula. We want our charitable institutions to do the work competently, effectively and efficiently. That's why we have, as a people and as a nation, such a great stake in reviewing new charity start-up plans in the first place.

Therefore, it seems to me that a new charity start-up review process would have to be carried out by a nonprofit, and done by people in the nonprofit selected for their expertise and experience in nonprofit programs, fundraising and governance. Only this type of person would have at heart ensuring the strength and success of a nonprofit organization. But it should be funded by government – which represents "all of us."

That brings up the issue of the kind of relationship that must be forged between the government funding and the nonprofit review process. Let's say that we're either going to set up a nonprofit organization just for the purpose of doing new charity start-up review, or we're going to retro-fit an existing organization, such as Independent Sector or Association of Fundraising Professionals, to carry out this function. Should that charity be required to annually submit grant applications to the federal government for grants? Or should that money be part of a continuing and unbroken disbursement from the Treasury Department just as any other government department?

Have a great weekend! See you on Monday with more on this thread.

New Charity Review Panel vs. Federal Government

When we left you yesterday, we had this issue about the funding relationship between a new charity start-up review group and the federal government's fund dispersal procedure. What is to be the appropriate relationship: grant making, or the regular bureaucratic budget process?

You're probably going to think this is a bit off the wall, but I would opt for the grant making process, and I would do it on a four-year cycle pegged to the off-year elections. The review agency would have to apply to a specific government department to which Congress would give the oversight responsibility. There would be a consistent application process, and the agency would need to make a periodic report to that department. The grant would be almost automatic, but not quite. There would need to be a formal review of the review agency's work to show that all those organizations who were reviewed and granted 501-c-3 status are alive and well and functioning as they should. The funding to do this review and assessment job should be voted by Congress every 10 years, and that vote should be taken in a year when there is no other election.

I think there are three reasons why this would be the best relationship. First, it would keep the review group honest, in that it would require performance evaluation to be done regularly, and a report made to the public about what's happening in the process. Second, it would provide the funding necessary to get this vital job done. Third, it would periodically raise to public view the fact that nonprofits are there, are working on our behalf, are scrutinized by some government-related agency, and are doing what they're supposed to do.

And, with that comment, I am going to close out this thread of how we might prevent the phenomenon known here in this blog, at least, as "Founder-itis." I believe that if we could prevent this phenomenon from occurring that it would serve our nation well. I think also that the way to prevent it is to put the founder on the spot even as the new charity is being founded, and make sure that proper governance is in place by people who are qualified to manage the founder, and by having a fundraising infrastructure in place that will prevent the founder and his/her organization from getting into fundraising problems down the road.

More on the Start-Up Charity Review Board

Earlier in this blog, I tried to suggest organizations that could be counted on to accomplish the task of reviewing and plans and projections for new charity start-ups as a way to help them get off to a more solid start. But I want to once more center down on this topic to see just exactly what kind of issues are in here.

Could a government agency really do this work, and could they do it well, consistently, over a long period of time? I suspect that this probably can not happen. There is a vast difference, as I see it, between "regulating" charities vs. truly helping charities, in the strategic sense, avoid trouble down the road. I don't think we need to take a stance here of regulation. But I think it is a service to the charities, the donors, the society, to impose on new charity start-ups a review process that ensures each new nonprofit gets off to a good start.

Initially, we need to consider the question of "which agency?" We have our choice. Internal Revenue Service? Their main issue is taxation. But the only interface charities have here has to do with the tax deduction and the reporting function. Yet we know that most donors, while not necessarily ignoring their tax deductions, are not primarily motivated to give to charity because of the deduction. And the reporting function with the Form 990 is designed only to prevent theft, fraud and abuse of the tax-exempt privilege for personal gain. Yet the more sensitive issues of governance and fundraising infrastructure involve much more than a "tax view" as a basis for reviewing any plans and projections of new charities. That may be why the IRS decided to get out of the business of seeing to it that charities were properly set up before issuing their 501-c-3 designations.

Department of Interior? But that has to do with land and its use and regulation. Department of Justice? But getting new charities off to a good start doesn't mean we're involved in helping them avoid breaking the law. We just want to make sure that a charity, as a public trust, has someone, some agency, looking over its shoulder enough to get the group off to a good start.

So who is going to do this work? Should it be a government function? Should it be government funded?

I suggest the work of a new charity review panel should be funded by public tax dollars for two reasons. First, because a charity is a public trust, and it will serve the public better if it gets off to a good start and doesn't flounder around. We serve the public interest much more with effective program supported by effective fundraising and governance. When we lack that, we tend to waste the public's money.

Second, the new charity review panel should be funded by public tax dollars for the reason that the work charities do for our society is essential to the strength and survival of our nation, our form of government and our way of life. Charities do what government agencies cannot or will not do. Our standard for their performance should, therefore, be Lawrence Lindsey's "$1 in, get $6 of service out" formula. We want our charitable institutions to do the work competently, effectively and efficiently. That's why we have, as a people and as a nation, such a great stake in reviewing new charity start-up plans in the first place.

Therefore, it seems to me that a new charity start-up review process would most effectively and appropriately be carried out by a nonprofit, and done by people who are selected for their expertise and experience in managing nonprofit programs, fundraising and governance. Only this type of person would have at heart ensuring the strength and success of a nonprofit organization. But it should be funded by government – which represents "all of us."

That brings up the issue of the kind of relationship that must be forged between the government funding and the nonprofit review process. Let's say that we're either going to set up a nonprofit organization just for the purpose of doing new charity start-up review, or we're going to retro-fit an existing organization, such as Independent Sector or Association of Fundraising Professionals, or The Giving Institute (formerly the American Association of Fund Raising Counsel) to carry out this function. Should that charity be required to annually submit grant applications to the federal government for grants? Or should that money be part of a continuing and unbroken disbursement from the Treasury Department just as any other government department? See you tomorrow.