April 2017 Meeting: Lobbying vs. Advocacy: Massachusetts and Federal requirements

Dan O’Brien, Esq. and Karen Kent, CPA, gave a presentation about issues involved
with lobbying and advocacy by non-profit agencies in Massachusetts. Dan O’Brien,
Esq., is Vice President with The Brennan Group and has over twenty-five years of
public affairs experience in Massachusetts, including significant lobbying and lobbying
consulting experience. Dan has worked on a wide variety of issues in the areas of
higher education, financial services, and real estate and on behalf of Fortune 500
companies. He also served as a government relations professional in the Executive
Office of the Massachusetts Water Resource Authority for three years. Karen
Kent, CPA, is a Principal and a member of the Firm’s Executive Committee. Her
accounting and management consulting practice encompasses numerous clients in the
non-profit and real estate industries.  She also specializes in compliance-driven audits
and process implementation.

Some of the topics that they discussed are as follows: In this day and age — what do you
need to know about advocacy vs. lobbying to protect your organization’s 501(c)3
status?  Massachusetts vs. Federal rules reporting?    501(h) election vs. insubstantial
reporting on the 990? Tracking and reporting your staff, volunteers and organization’s
time costs? Do you, your staff, volunteers and consultants know how to manage your
advocacy to keep it separate from your lobbying efforts and stay within required limits?
The rules can be murky and the implementation of processes to manage, track, and
report your data can be messy.

First, it is important to define what acts constitutes lobbying and who is a lobbyist. On
the Federal level, a lobbyist is any individual who is either employed or retained by a
client for financial or other compensation, whose services include more than one
lobbying contract, and whose lobbying activates constitute 20 percent or more of his/her
time in services for that client over any 3-month period. Covered Federal officials
include members of Congress and their employees, committees, etc. and members of
the Executive branch. In Massachusetts, legislative lobbying is an act to influence
legislation including strategizing, planning, and research performed in connection to this
effort, and Executive lobbying is any act to influence the decision of any officer or
employee of the executive branch of the State. To be a lobbyist in legal terms, you
have to be compensated and you need to have direct contact with the official you are
trying to influence. Advocacy means speaking generally about an issues, but lobbying
involves try to advance specific legislation. If you have two or more communications
about an issue and meet the other thresholds (being compensated, etc.), then you need
to register as a lobbyist. If you write up a position paper for general education, then that
is not lobbying. If that activity is directed at advancing specific legislation, then it is
lobbying. If you or your organization belongs to an association or trade group that
lobbies, that does not make you a lobbyist.

If your agency directly hires a lobbyist, then both your agency and the lobbyist have to
register with the State or Federal government. There are hours worked and compensation
received thresholds which trigger the requirement to register as a lobbyist. The standards
are different for the State of Massachusetts and for the IRS. According to the IRS, there
are 2 types of lobbying: direct lobbying and grassroots lobbying. Direct lobbying is direct
communication concerning official action or legislation. Grassroots lobbying involves
asking the broader public to support certain causes or legislation. Reporting lobbying
activities to the IRS is not an easy task. You need to list exactly all of the costs
associated with the lobbying activities. There are different regulations for direct
lobbying and for grassroots lobbying. Check with the Secretary of State for the
Commonwealth, the Secretary of the State Senate, or the Office of the Clerk for the
U.S.House of Representatives for further information and clarification.

February 2017 Meeting: Meet the Massachusetts Attorney General’s Public Charities Division

Meet the Massachusetts Attorney General’s Public Charities Division

Is the sum total of your relationship with the Attorney General’s office the annual filing of the Form PC? Members of the AG’s Nonprofit Organizations/ Public Charities Division came to speak about the regulation of the nonprofit sector, their priorities to support a vibrant nonprofit sector, and how they hope to work with you, as nonprofit leaders, to prevent misuse of charitable funds and protect nonprofits and their donors from fraud and loss.

Assistant Attorneys General Courtney Aladro and Emily Gabrault, members of the AG’s Nonprofit Organizations/ Public Charities Division, gave a presentation about the regulation of the nonprofit sector, their priorities to support a vibrant nonprofit sector, and how they hope to work with nonprofit leaders to prevent misuse of charitable funds and protect nonprofits and their donors from fraud and loss. They spoke candidly about their work, including some real-life examples of cases their office has seen, current office priorities, and best practices for what to do when problems arise in your organization.  They discussed how to avoid common pitfalls and identify red flags to support a constructive relationship with the Division.

The AG’s Nonprofit Organizations/ Public Charities Division, which has a staff of 18 people, has as its major purpose to regulate the nonprofit sector, enforce regulations, and to provide a resource for the sector. In total, the Division oversees approximately 27,000 public charities in the Commonwealth of Massachusetts. The government regulations governing companies (nonprofit and for profits) are constantly changing: DOL regulations, the definition of exempt and nonexempt, IRS requirements, reporting requirements, etc. In addition, the political climate has changed drastically since the last election, so the AG’s office has started a hate crime hotline, which has received a lot of calls recently.

One area that the AG’s office examines is the whether the Board of Directors for a public charity performs its fiduciary duties in a responsible manner. Fiduciary duties include the following: sound fiscal policy; legal and regulatory compliance; sound policies and procedures; oversight of management; Board self-assessment; and safeguarding assets. Board members and management have a duty of loyalty including policies against conflicts of interest and personal financial gain from corporate decisions. Some of the common problems that the AG’s office has dealt with public charities are: “founders syndrome” where the charismatic, visionary, committed founders has become autocratic, distracted, weak, and too comfortable with a controllable Board; conflicts of interest in the Board and management; and a lack of structure and sound corporate processes, especially when it relates to checks and balances and separation of duties. Courtney and Emily reviewed the Fraud Triangle with the 3 points of the triangle being: motivation, rationalization, and opportunity.

How do issues involving public charities come to the attention of the AG’s office? Sometimes a Board member contacts the AG, sometimes issues are raised by other government agencies, sometimes from a consumer. The main goal of the Public Charities Division of the AG’s Office is not to penalize or punish an agency, but to assist the agency in correcting the problem and adopting preventive measures and sound policies. The AG can seek restitution and can assess penalties for various violations and can issue injunctive relief to prevent a “bad actor” from continuing in his/her nonprofit role. Courtney and Emily gave several examples of the types of issues the Division deals with. Example one involved a husband and wife team operating a nonprofit where the lines between personal and business activities became blurred. Example two involved a charity which purchased health insurance from a Board member who worked for the insurance company. Example number three involves a lack of segregation of duties, which led to fraud. A civil case is often easier to prosecute than a criminal case. Example four involved an agency who received a funding cut and as a result, cut back on its operational functions such as paying its employees and paying its debts in order to keep operating. In that case the agency has to maintain its operational functions as well as to continue to fulfill its mission. The agency should monitor its expenses and keep ahead of any potential funding issues. The AG’s office lists the best practices for a public charity as the following: have an independent Board; adopt sound documented policies and procedures; adopt good governance procedures; adopt solid disclosure, evaluation, discussion, and documentation procedures; and major decisions should be made by the independent Board.

A question was asked about changing the purpose of a restricted fund when the funder is no longer available. You can go to the AG’s office to try to get that resolved. You cannot borrow from restricted funds or an endowment fund to temporarily fund cash flow shortfalls. Courtney and Emily said that the enforcement priorities for the next year will be to curtail foundation self- dealing and to better monitor how organizations solicit donations.


October 2016 Meeting: Background Checks: the Who, What, When, Where, How & Why

What we covered:

  1. Why should you background check?
  2. Who should you background check?
  3. When should you do it in the hiring process?
  4. What should you check for?
  5. How should you go about it?
  6. What if you find negative information and don’t want to hire?

Dave Wilson, a partner at Hirsch Roberts Weinstein LLP, who advises businesses and non-profits on employment matters, gave a presentation on how to navigate the Commonwealth’s CORI and non-discrimination laws in the hiring process.  Kimberly Napoli from the same firm assisted with the presentation. He covered the following areas: 1) why should you background check?  2) Who should you background check?  3) When should you do it in the hiring process? 4) What should you check for? 5) How should you go about it? And 6) What if you find negative information and don’t want to hire?
According David and Kimberly, the new Massachusetts CORI Law went into effect in 2009, which triggered taking any kind of criminal record questions off the job application.  The new sequence of hiring is:  applicant fills out the initial written application form with no questions about criminal background, applicant takes skills assessment test (if applicable), and then applicant interviews for the job.  Doing a telephone screening first can save time. After an interview, you can have the applicant fill out a Supplemental Application Form, which can include questions about criminal background.   The next step is to make the job offer, conditional on a satisfactory CORI (Criminal Offender Record Information) check.  The employer then gets the applicant’s written permission for the CORI check and other background screening checks (such as a credit check).

ICORI is the on-line method for doing CORI checks.  If you use this site, you need to put in the exact name of the person you are checking.  In general, you can check the background of a prospective employee, but you cannot ask about salary history. You can ask what his/her preferred salary range is.  If you get a CORI back with an issue on it, the best practice is to give the applicant “Due Process” – ask them to explain the issue.  It could be something that happened a long time ago when they were a teenager, etc. You must provide a copy of the CORI to the applicant. If you are considering not proceeding with the employment based on negative information in the CORI, then your company should send out a “pre-adverse action disclosure letter” to the applicant.  A company is not allowed to make a negative hiring decision based on a CORI without discussing it with the applicant first.  So the next step is to have further discussion with the candidate, then make a decision, inform the candidate, send out a “post-adverse action disclosure” letter if you use an outside background check service, and then hire or no hire.  One helpful hint would be to have someone else besides the person doing the hiring, do a Google and Facebook search on the candidate for all those who will be called in for final interviews.

David and Kimberly pointed out some practices that are important.  It is very important to have applicant fill out a written formal application form.  The applicant by signing the document is stating that everything in the application is true, and if it turns out not to be true, then that is grounds for firing the person later on if necessary.  Also, even though it is more costly, it is a better practice to use a 3rd party vendors to do the background checks.  It is very important to do background checks, especially for some positions. It is better to screen unsuitable applicant out early in the process. It is also very important that an employer be fair and reasonable when dealing with applicants.   Always give applicants and employees due process. For references, you should ask the applicant for the names of their past supervisors and ask his/her permission to talk to them.  Better yet, you should ask the applicant to actually set-up the call with their former supervisors for you.  Also, when making the call, you should state your questions upfront.  Good reference questions are:  What did the person do at your company? What did the person do well?  What were some areas that needed improvements, and rate the persons as an effective employee form one to ten? If you have questions about using CORI, you can go to the DCJIS website (http://www.mass.gov/eopss/agencies/dcjis/ to access publications with step by step instructions.

October 2014: What Everyone Needs to Know About the New OMB Grant Rules

October 2014 Meeting: What Everyone Needs to Know About the New OMB Grant Rules

Anita Lichtblau, of Casner and Edwards, gave an overview of the changes in federal regulations known at the Super Circular most likely to affect our members. The Super Circular consolidates and supersedes seven federal circulars. Our members may be most familiar with the A-133 audit circular, the A-122 cost principle circular, and the A-110 grant administrative circular.

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