Question

During the final week of the course, you will submit a paper that will be written as if you were making recommendations to a member of Congress. Imagine that the United States Congress was considering sweeping legislation that would provide intensive regulation of nonprofit fundraising, including the imposition of more filing requirements to the Internal Revenue Service for nonprofits, as well as more active obligations on the part of nonprofit leaders to explain in detail their fundraising strategies, marketing, and fundraising efforts. Imagine also that such legislation would provide greater public oversight of the nonprofit fundraising process, but would also burden nonprofits with significant paperwork and accountability requirements. In your paper, discuss your views on whether or not the federal government should play a much larger role in regulating nonprofits and especially how nonprofits identify donors, collect funds, and spend fundraising dollars. Remember that there are only forty states that have state regulations while ten states have no state regulations at all. For example, there was a significant controversy after 9/11 regarding the American Red Cross because they collected fundraising monies and did not use those funds for the victims of 9/11 -- they instead diverted those funds to other projects of the Red Cross. Here are four questions to help frame your discussion. • Do you believe that government has a strong role to play in the regulation of nonprofit fundraising? • Do you think that states should play a role in regulating nonprofit fundraising? • Should there be a Sarbanes-Oxley-type legislation regarding nonprofit fundraising? • If so, what values should guide politicians as they attempt to set up regulatory systems to ensure that nonprofit fundraising is done in an ethical fashion? Would stronger regulation of nonprofits have a chilling effect by decreasing contributions to nonprofits and diminishing the willingness of individuals to create nonprofits to address serious public crises and controversies?

Answer 1

Yes, government has a strong role to play in regulating nonprofit fundraising. This is to ensure that the benefits enjoyed by a non-profit organization under state and/or federal laws are not misused for personal benefits of individuals associated with the organization and/or groups not related to the cause of fundraising.

It is necessary to have a Sarbanes-Oxley type legislation regarding nonprofit fundraising. This prevents accounting frauds and allows the government to keep the confidence levels high and ensure more funds towards nonprofit. When a nonprofit adheres to federal and state laws -> increased funds from both federal and state governments due to compliance. This ensures organizations operating under different guises are brought under level playing field.

Politicians must ensure that they keep the donor confidence levels high by implementing policy actions that encourage more funds towards the cause of the non profits. This means implementing regulatory actions with respect to fundraising and account disclosures. Politicians could ensure more funding from the government's side to organizations that meet the federal and/or state requirements. This raises confidence levels among donors who would donate to organizations that disclose where the funding is being utilized.

If a nonprofit is created for the true purpose of nonprofit fundraising, then regulations should not be much of a concern unless it interferes with its operations. If regulations are going to be a problem then to some extent it raises a question as to whether it truly serves the purpose of its existence that it claims. So there is a question as to whether the funds are reaching their desired targets. Added benefits by means of more federal/ state grants and funds could encourage nonprofits to comply to regulations and thereby the willingness of individuals to create nonprofits is not affected.