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From the President's Office, March 2006

Dear Friend:

My February column on Jack Abramoff and the definition of a nonprofit seemed to hit a nerve, generating more response than any article I've ever written for GuideStar. In fact, as I write this piece at the end of February, I am still receiving comments from you.

Many of you wrote to say, "Great article" or "I couldn't agree more." Others went further: "I agree with you that it is time to raise our voices in concern." "You are so correct to speak up about this alarming misuse of [the] nonprofit designation."

One correspondent spoke for many when she reflected on the impact the actions of a few can have on other organizations: "The non-profits being formed as tax loopholes and as a means of raising funds have been getting more and more questionable. As always, it's the little guys who get hurt." Another writer suggested, "We legitimate non-profit organizations need to do some massive PR to reassure the public that most of us are indeed operating to help as many people as we can with the donations we receive."

Several people pointed to the number of nonprofit organizations and the apparent ease with which they receive tax exemption as problems. "There are too many non-profits and the real function of them is being diluted." "Wish there was a strategy with the IRS on redefining non-profit charitable organizations." "My thoughts are that the IRS too easily [gives] the nonprofit designation." "The IRS could spend more time examining start-ups with flimsy pre-text and less time worrying about sturdy little agencies trying to get the job done."

There were some interesting ideas about what the future holds for the sector. A CPA predicted, "The nonprofit world is going to wind up with more restraints via State's AG offices and/or the IRS or it needs to set up its own independent IG office with a clean audit being a 'Seal of Good Housekeeping.' Either of these alternatives will be costly but public confidence needs to be regained." Along the same lines, another writer suggested, "Refrigerators come with an EPA endorsement; why can't non-profits have a catchy IRS endorsement? Spend 80% of your revenue on program costs and you earn an 'energy star.'"

A grantraising consultant cautioned against going overboard, however. "A high level of accountability from our end is of course critical. While this might mean that we should expect to invest somewhat more in the way of disclosure and reporting, I wouldn't want to see undue burdens thereof sapping the strength of service organizations, especially smaller ones." Another writer asked, "Would you require legitimate (however defined) charities to tell PACs and politicians, 'We're sorry, we can't accept the funds you want to give us, so we can't help more poor people'?"

Of course, some people thought I'd missed the boat entirely. "While your letter makes interesting reading," wrote one, "I would prefer to read about action, rather than questions about what non-profits think should be done."

I always enjoy receiving feedback—good, bad, or indifferent—on my articles, but I particularly appreciated the response to February's column. Your messages demonstrated how deeply people care about the sector, and how important the issues of trust, accountability, and ethics are to so many.

So where do we go from here? The first tendency in Washington is always to add more regulations and laws, and there probably are a few places where this could have some benefit. But here at GuideStar we believe the best answer is more sunshine. Full voluntary disclosure, more transparency, better accountability—ultimately these are the things that will give donors confidence and expose those who would take advantage of the nonprofit sector.

Sincerely,

Bob Ottenhoff
President and CEO