Law says nonprofits don’t have to give set amount to veterans
Charities collecting money for veterans in Florida raise a lot of cash. In some cases, they spend a lot raising the money and keep a large portion of it for themselves.
Yet nothing these groups do is illegal unless they commit fraud in their solicitation or in the paperwork they file.
Nonprofit corporations must file their charter, bylaws and other legal documents with the Florida Secretary of State and obtain a certificate of tax exemption from the Internal Revenue Service. They also must file detailed financial reports as to how they raise money and use it.
But there’s no requirement that they spend a certain amount of money collected to actually help veterans. And officials say no government body is looking closely at the documents filed by these groups.
“We have more than 11,000 charity organizations registered, so we cannot audit every one, we don’t have enough people,” said Liz Compton, spokeswoman for the Florida Department of Agriculture and Consumer Services, which oversees nonprofit organizations in the state. “We take their applications and make them submit financial data to us and we put it where people can find it.
“But … we can’t tell them how to handle their money nor require them to tell contributors up front how much of their donation will directly affect veterans. If they give 5 cents to charity, they are technically legal.”
Compton said her office only investigates nonprofits if there are complaints.
That’s what happened with the Tampa-based, U.S. Navy Veterans Association, which claimed chapters in almost every state and raised millions of dollars.
The group received good marks from some watchdog groups because it appeared to fully disclose its finances. It even got a clean bill of health from the Internal Revenue Service, which probed its affairs.
According to the latest paperwork the group filed, it gave 85 percent of its payouts to veterans in 2008.
But an investigation by the St. Petersburg Times showed the entire operation was one man using a stolen identity, who made off with millions of dollars in donations. Law enforcement officials contend the paperwork was fraudulently filled out.
Tracy Bocik, president of the National Association of State Charity Officials and director of the Pennsylvania Bureau of Charitable Organizations, said states can’t tell charitable groups how much money they must contribute to help veterans or other causes. Nor can they limit how much organizations can spend on fundraising and administrative costs.
“It is frustrating to us, as state officials, to look at the whole operations of some charities. There is very little we can do about it,” Bocik said.
The case that set the precedent is Riley v. National Federation of the Blind in 1988. The North Carolina legislature adopted a law establishing a “reasonable fee” that a professional fundraiser could charge according to a three-tired system. A fee of up to 20 percent was deemed to be reasonable, anything higher was unreasonable and unlawful. The law also required fundraisers to tell prospective donors up front the percentage of funds collected during the previous year that went to program benefits.
The U.S. Supreme Court determined the North Carolina law unconstitutionally infringed on the free speech rights of the solicitors. The Supreme Court said the fee regulations were not tailored to prevent fraud.
The loose rules created by the court decision allow for some people to make significant amounts of money while ostensibly running an organization for the benefit of veterans and their families.
Take the case of Roger Chapin of San Diego, who has founded several organizations to benefit veterans, including two — Coalition to Salute America’s Heroes and Help Wounded Heroes — that operate in Florida.
Chapin retired this year as head of Help Hospitalized Veterans with a pension of more than $1.9 million. During his tenure as head of that charity, Chapin and his wife drew salaries of more than $400,000 a year each, plus received the use of a home in Virginia and country club memberships, according to testimony before the House Committee on Oversight and Government Reform in 2007 and 2008.
Although Chapin was one of the targets of the committee’s investigations, no legal actions were taken against him or his charities. Congress also passed no measure to control excessive fundraising costs by charities.
Chapin’s organizations operating in Florida, the Coalition of Salute American Heroes, gave 48 percent to veterans, while his Help Wounded Heroes gave 5 percent of the total money it collected to veterans benefits nationwide.
The American Institute of Philanthropy reports that Chapin ranks third in compensation among all chief executives of nonprofit corporations in the United States.
Lacking new legislation at the state and national level, Bocik and Compton, along with many other officials dealing with charities, say residents have to be wary of to whom they give money.
Daniel Borochoff, president of the American Institute of Philanthropy, said the use of the First Amendment to screen unscrupulous fundraisers and charities should have no standing in court.
“How is giving money to veterans and their families a controversial subject?” he said.
He also thinks it ought to be harder to qualify as a nonprofit corporation.
“There ought to be regulations that say nonprofits must disclose what they spend their money on and in detail,” he said. “That way, donors would be able to tell who is doing good work and who is not.”
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