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Statement of Zimmerman-Lehman, San Francisco,
California
I have worked all my life in the public interest arena
primarily with small and effective nonprofit organizations. Currently, I
consult with a wide range of small to midsize nonprofits, many of them social
change organizations that have small administrative staff.
I am concerned any time I see major regulatory changes since
I know each and every time there is a change, regardless of the reason, there
is a cost to learning and implementing the change which means more overhead
expenses and less resources for programs. This is particularly true for the
types of organizations for which I work. Both the Pension Protection Act of
2006 and now the revised draft Form 990 will and do have the unintended
consequence of requiring organizations with limited capacity to divert
resources to accountants, auditors and others to collect, track and process the
data required to meet the suggested reporting standards. The proposed changes
will reduce service delivery and increase administrative overhead. Also very
few changes add value other than more transparency (the largest value added
new regulatory change in the Pension Act, the IRA rollover, is limited to only
two years).
Generally, when I study the background on these changes the
intentions are good and fit with the types of governance procedures I promote.
However, I also feel they are often addressing problems that are faced more
often by large, financially comfortable organizations such as colleges,
hospitals and foundations. It is the rare small nonprofit that need worry
about over “compensation.” More often I worry about under-compensation and
assisting organizations to not only run their programs effectively and
efficiently but raise all the money they can to increase their capacity for
service. I work with many many honest hard working fundraisers who struggle
every day to increase resources for services that used to be provided by the
government. In recent years, many public schools and even cities have needed
assistance in raising private funds.
I ask you to do a “cost-benefit analysis” of every
proposed change before it is made --especially the cost to smaller agencies.
- Is this new the regulation really needed?
- How will it benefit the public?
- Will compliance reduce services to the public?
- Will this new regulation really promote more effective as
well as transparent services?
- Should the same information be required from all
nonprofits regardless of size, type or focus?
Thank you for your consideration,
Ann Lehman
Partner
p.s. At the hearing on July 24, 2007 I read that nonprofit abuses “…
included inflated valuation of non-cash donations, charities that are
established primarily to benefit a single donor, abusive donor-advised-fund
arrangements, the blurring of the line between tax-exempt and commercial
activities, excessive compensation, and improper political activities…”. These
abuse should not to be dismissed, but rarely affect small to midsize nonprofits
and do not warrant the increase in regulations and scrutiny that has been
recently heaped on all nonprofits. Rather than increasing overhead expenses for
all – which donors hate to fund – the IRS should do a better job out ferreting
the bad players.
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