Programs

2005 NCPC Program Highlights

January 28, 2005
Nonprofit Integrity Act of 2004
Is your agency complying?

By Sharon A. Barnes, MNA, CFRE

The North County Philanthropy Council thanks Lynda S. Moerschbaecher, Attorney at Law, and Stephen C. Hermes, CPA, CVA for their important discussion on The Nonprofit Integrity Act of 2004, which profoundly affects nonprofits, and financial accountability.*

Following are highlights from NCPC’s January 2005 luncheon.

In recent years, nonprofit fiscal abuses grab media headlines, appalling those of us who work to serve our clients and causes with high integrity. All are hurt by the actions of a dishonest few. New York and California are two states leading the way toward insuring public trust in charities. The Nonprofit Integrity Act of 2004 became California law at the beginning of 2005. Is your organization in compliance?

Almost all nonprofit leaders know the basics of filing a Form 990, and the importance of keeping accurate, timely accounting records. However, recent legislation mandates NPOs file and make more information available to the California State government and the public than ever before.

Speakers Lynda S. Moerschbaecher, Attorney at Law, and Stephen C. Hermes, CPA, CVA, of Mayer, Hoffman McCann, pointed out the broad scope of this legislation, noting that the Integrity Act can apply to any charity soliciting within California, as well as those incorporated in our state.

In broad terms, the requirements of the Integrity Act are in place to help Californians make important personal decisions on charitable giving, according to the Office of the Attorney General’s Web site. Sponsored by Attorney General Lockyer, the Nonprofit Integrity Act of 2004 imposes new protections against fraudulent fund-raising practices and requires greater financial accountability by charities and commercial fund-raisers.
Yes, the additional paperwork may increase the workload for many charities. However, the resulting financial transparency stands to benefit all nonprofits, our speakers noted. Hermes and Moerschbaecher described the layout of the act which includes financial accountability, governance and fund-raising rules.

While some charities or trusts are exempt from the Act, it covers charitable corporations, unincorporated associations, trustees, and legal entities holding property for charitable purposes. The Office of the Attorney General, State of California, will maintain a new registry, requiring that variety of documents and audited statements be filed depending on a charity’s gross revenues. Other regulations apply.

For example those organizations with revenues over $2 million must undergo stringent oversight by an Audit Committee set up by the charity, including reviews of CFO and CEO compensation, and audited financial statements — to name just two. For NPOs grossing under $2 million other rules apply, and differ.

Commercial fund-raisers and counselors are included in the Act. Most must register with the AG’s office, work from written contracts also filed, allow charity termination rights, maintain financial records for at least ten years, and meet other requirements.

Lynda Moerschbaecher and Steve Hermes emphasized the need for all nonprofits to check their organization’s compliance with this new Act, which went into effect in the beginning of 2005. You can start by visiting the California Office of the Attorney General’s website: www.ag.ca.gov/charities for general information and downloading forms

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* The information in this article is not intended as a substitute for legal or accounting advice. Please consult appropriate legal and accounting professionals.

RESOURCES: The Office of the Attorney General, State of California. Retrieved 4/24/05 from http://ag.ca.gov/charities/