Responding to the
New Climate of Scrutiny
Notes by Trisha Mattieu
Panelists:
Teresa Moore, Moore Ink; Laverne Woods, Davis Wright Tremaine LLP
Laverne Woods about
- Causes
of scrutiny
- Types
of scrutiny
- Proactive
things from a legal perspective to do in order to fare well when scrutiny
occurs
The Changing Climate for Nonprofits
Post-Enron Governance Standards
Scrutiny by the Media
- Nationally:
Boston Globe, Forbes, Wall Street Journal, Chronicle of Philanthropy
- Locally:
Puget Sound Business Journal, The Post Intelligencer, The Oregonian
- Over
the last year and ½ calls from media have gone up exponentially.
Legislative Scrutiny
- H.R.
7 in 2003, CARE Act
- Rep.
Thomas: Ways & Means hearings
- Senate
hearings on credit counseling
Scrutiny by Regulators
- Internal
Revenue Services. Soft audit telephone calls have stepped up.
- Federal
Trade Commission. The FTC gets involved especially in charitable
solicitations.
- State
Attorneys General/Department of Justice. The AG office in WA State is
currently staffed with very good, thoughtful people.
Anti-Terrorist Initiatives post 9/11:
What You Can Do
- Self-Assessment
- Written
Policies
- Pro-Active
PR
Self-Assessment
- Does
the board have adequate training/knowledge regarding their fiduciary
obligations? If a board member is uncomfortable with board duties, they
should not accept the job. They have responsibilities and need training
since the “buck stops with the board”.
- Is
the board or a committee with board-delegated powers exercising oversight
over all major activities?
- Are
board decisions documented in minutes? This is very important. It is easy
for the board to get sloppy here. Ensure minutes have enough—but also not
too much. Think of the minutes as notes that may be made public.
- How
does each program/activity relate to your mission? One place here where
boards can get in trouble is having to pay federal tax on income unrelated
to the original mission.
- Are
any board members related to each other, or to any staff? There are many
ways to do this appropriately, but a conflict of interest policy must be
in place. Relations should not be involved in each other’s compensation,
for example.
- Are
there any loans outstanding to officers or directors? This is ILLEGAL in
WA State.
- How
is executive compensation established and approval documented? Need to
have a policy for how executive compensation is determined.
- Is
there a system in place for tracking donor restrictions on gifts and
compliance with restrictions? Must have good record keeping here.
Written Policies
- Conflict
of Interest Policy. Should be tailored for needs of particular board.
- Board
and senior management
- Annual
questionnaire
- Follow
it!
- Executive
Compensation Policy
- Tax
law “Intermediate Sanctions”
- Independent
comparability data
- Approval
by independent board or committee
- Documentation
in written minutes
- Employment—The
most common lawsuits are HERE. Make sure you get legal counsel on what
types of policies to have in writing.
- Hiring
practices: discrimination, testing, background checks
- Pitfalls
and liabilities of employee handbooks
- Updating
policies is essential
- Termination
- Endowment
Policies
- Compliance
with Uniform Management of Institutional Funds Act. This tells how much
you can and cannot spend of endowment. This has been a big issue with the
economic downturn. Many cannot spend endowment until it is worth more
than when it came in.
- Investment
policy’
- Spending
policy
- Tracking
system for donor restrictions
- Gift
Acceptance Policies
- Consistent
gift documents
- Avoiding
“expensive gifts” (such as land that you later find to be on an
environmental hazard)
Fundraising Pit Falls
- Credibility
with Donors
- Is
your organization registered in all states where you solicit funds?
- Unified
Registration Statement: www.multistatefiling .org
- Do
you solicit funds through your website?
- Madison
v. Telemarketing Associates, 2003 Supreme Court case
- States
can prevent solicitation sfrom implying tha a substantial portion of
contributions go to charity when it does not.
- Federal
Trade Commission “Operation Phony Philanthropy”—law enforcement and
education
- Red
flags for IRS: games of chance, car donations, thriftshop goods for sale
by for-profits.
Proactive PR: Tax Reporting
- Annual
tax returns Form 990 and 900PF (private foundations) are public documents.
- Ease
of access with Guidestar.org
- Importance
of Guidestar summaries: information comes from Form 990
- Open
invitation to tell your story: program successes, numbers served, and
future goals
- Compensation
to board, executives and highly paid employees/independent contractors
-
Consider
legal review
Teresa Moore: Media Relations
What happens if your organization makes a mistake and the
media comes calling…
Case Study: YWCA was recently in the news after an employee
of theirs shot and killed his girlfriend on March 17, 2004 at the Miller
Community Center in Seattle. The man was then killed by police officers. The
reason YWCS was in the news had nothing to do with the murder. The media discovered that the man had been a
registered sex offender, so the question became why had YWCA hired a sex
offender?
YWCA found out about this man’s history and responded before
it even hit the news. The man had been hired through another organization,
Labor Ready, who they assumed had the same screening standards that they did.
They were horrified to find this out and fired Labor Ready right away. They had
immediately taken the following steps:
- Got
the facts
- Notified
their staff and board
- Consulted
with PR Counsel (Teresa Moore)
- Designated
a media spokesperson
- Developed
a public statement.
This was the best way they could have handled the situation.
They did not need to respond to a negative op-ed written because their side of
the story got out. The number 1 thing is to ensure your side gets heard!
YWCA has thousands of donors but did not have a single
communication from anyone about this incident. Why? Because they have good
communication with their donors all the time.
Rules for Effective Crisis Communications
There are five states of a crisis: Detection,
prevention/preparation, containment, recovery and learning. Communication is a
key part of each and every stage. Most importantly, good crisis communications
can be the difference between an organization’s survival or demise after a
crisis occurs.
Rule #1: Communicate effectively all the time.
Rule #2: Have a plan. A crisis communication plan.
You can get examples of good plans off the Internet, purchase university
textbooks on how to develop them, or hire a professional PR firm to assist you.
Rule #3: Express concern. The first response is often
to clam up. But you can and should say something in a crisis and not saying
something is the kiss of death in a crisis. Accept responsibility. Tell them
what you’re going to do in the future. There is always some measure of concern
that can be expressed without putting yourself or your organization in a
precarious legal position.
Rule #4: Never ignore the media. There are three types of responses to a
media during a crisis:
- We
know and here’s all the information
- We
don’t know everything now. Here’s what we know. We’ll find out more and
let you know.
- We
have no idea, but we’ll find out and tell you.
Rule #5: Handle the media wisely. Identify key
spokespeople in your organization and then provide them with media training.
If someone from the media asks technical questions, it’s
okay to say “I want to make sure I get everything to you correctly. Let me get
that to you in writing”.
