For over a month, the Omaha World Herald has been publishing investigative articles about the goings on at Goodwill Omaha. The practices outlined by the newspaper have been highly unfavorable to the charitable organization.
However, it was not until this week that Abigail Stempson, chief of the Public Protection Bureau and the Consumer Protection Division under Attorney General Doug Peterson finally announced that the AG’s office is reviewing the matter. This is a situation that repeats itself all too often. Not until the media raises a fuss does the state attorney general finally get into the act of protecting charitable assets—a responsibility that is clearly in their job description. State AGs have both common law and statutory authority to protect charitable assets, yet few are proactive in this area.
When pressed on this issue, the typical response from a state AG office is that they do not have the resources to adequately police the charitable community. It should be noted here that the Omaha World Herald staff had access only to the same information and documents that you or I (or the AG’s office) can also access right on the Internet.
State AG officials aren't wrong about their resources challenges. When it comes to policing nonprofits, they are famously understaffed, a fact confirmed by a report released this fall that reported nearly one-third of U.S. states and territories have less than a single full-time-equivalent lawyer or staff member dedicated to charity oversight. Since charitable organization oversight does not usually include a provision for assessing fines or other financial penalties, this is the first responsibility ignored when budgets are limited. My point, here, is not to lobby for increased funding of state AG offices. Rather, it is to remind donors that they must be vigilant in assessing the worthiness of the recipients of their charitable giving.
One of the primary issues at Goodwill Omaha was executive compensation. This information is clearly visible on the IRS Form 990. That form is available to everyone via the website Guidestar.org. In this instance, Goodwill Omaha spent so much on executive pay that it had much less available for spending on the programs that constitute its charitable mission. This fact is also readily available on the Form 990.
State laws do not provide limits on compensation at charitable organizations. Even the IRS refrains from imposing specific compensation limits. This may be one reason why both the IRS and state AGs are reluctant to provide oversight—the issue of excess compensation is a matter of judgment and regulators prefer black-and-white, right-or-wrong situations. Most people would agree, however, that they can recognize excess compensation when they see it—but, of course, they must look to see it.
Donors may believe that the volunteer board is primarily responsible for monitoring the policies and practices of the charity. That is correct. But it does not mean that the board will faithfully perform its job. The larger the board, the more likely that improper practices will be allowed to continue. And those practices tend to get a little worse each year. Mandatory term limits that force board member turnover would be a step in the right direction. Although the existence of a term limit policy is not a required on Form 990 disclosure, one can gauge board turnover by quickly reviewing several years of the form.
I could cite many examples, but the message is clear and simple. You must take more responsibility for determining if your donation dollars (or even your donated clothing, in the case of Goodwill) is benefiting the social program you intend, or if it is being spent in other ways. Don’t assume that “the system” is monitoring this area, as it may be working in other areas.