MARCH 2016


The defendant in a federal fraud case used a loan guarantee from a charitable trust to allegedly misappropriate more than $52 million.


In a never-ending quest to find revenue, the legislature is considering a bill to levy tax on the earnings of the Yale endowment.

Commentary: The fund is tax exempt, but the legislature is looking at the income generated by its investments and trying to make a distinction between that income (and taxing same) and the general revenue the organization receives through gifts, grants, and contributions.


A federal grand jury has arraigned two individuals on a 41 count indictment charging fraud, conspiracy, money laundering, and operating an illegal gaming business. The accused operated Racetrack Bingo, Inc. in Fort Walton Beach on behalf of a number of charitable organizations and, according to the allegations, did so in an illegal manner and charged participating charities “grossly inflated lease fees.”


The Secretary of State, Brian Kemp, has announced the commencement of an investigation after his office received several notices of a fake check scam targeting charities in Georgia. According to a published report, the name most often associated with the scam is “Ken McFarlane,” supposedly an architect in London. Apparently the same name was used in similar attempts in Virginia.


A bill has been proposed in Hawaii (SB 2812) which would amend the state’s charitable registration and solicitation law to require a number of point-of-solicitation disclosures and increase penalties for late filings.


Lately the Missouri Department of Revenue has been particularly generous about finding ways to exempt state-based nonprofit organizations from sales tax. In one case they ruled that a nonprofit civic organization would not be taxed for its sale of alcoholic beverages or light snacks at its events, while in another case it ruled that online website sales were also exempt because the items were substantially related to the charitable purpose of the organization claiming the exemption.


The Missouri Supreme Court has ruled that a man cannot sue Boy Scouts of America for his alleged childhood sexual abuse at the hands of a scout leader. The ruling held that a statute of limitation barred a claim for battery and negligence; but more importantly, the Court ruled that the issue of sexual abuse pertained only to the individual and not to the organization.

New York

The Wall Street Journal reports that the mayor and his top aides are in the process of closing down their nonprofit, Campaign for One New York, a political organization tied to the mayor that has come under scrutiny for its donors and spending.


An El Reno family used the concept of a “charitable trust” to defraud new car buyers. Thirty victims lost over $335,000 when they were told to donate their rebates to a charitable trust from which all their future car payments would be made. The perpetrator pleaded guilty to fraud in Oklahoma Federal Court.

Commentary: At its base level, this is simply another form of a pyramid scheme, but unusual in its concept.

South Carolina

It is with sadness that we note the passing of Ned Badgett, of the Secretary of State’s office.

South Dakota

According to a published report, an older couple that died in a murder/suicide last year actually stole hundreds of thousands of dollars intended to help improve Native American college readiness, among other things. The Attorney General believes that the amount of money misused may reach as high as $1 million. Other members of the Board and employees have also been charged with felonies.


The Virginian-Pilot newspaper reported that the head of a purported charity with close ties to Florida U.S. Representative Corrine Brown has pled guilty on federal fraud charges. Although the organization had income of $800,000, it awarded only one scholarship. A large amount of money went to pay for cars, entertainment, and other personal items.

Other Matters


The agency has announced that there will be no material changes to form 990 for 2015 but cautions that changes are in the works for 2016.

Independent Sector

This important umbrella organization has recently announced that Dan Cardinali has been named new president and CEO. Dan will begin his service in July and brings with him long experience in the charitable community and currently serves as the president of Communities In Schools, Inc.

The Trump Foundation Saga Continues

As mentioned in last month’s newsletter, Donald Trump skipped the Iowa Debate and instead made a private speech and raised over $6 million for American Veterans. The Washington Post has now asked the question: what happened to the money raised?  Apparently, approximately half the money has been distributed while the rest remains undistributed.

The Wall Street Journal

In late February the Wall Street Journal published an article about internet Crowdfunding sites, primarily raising concerns that there are not enough controls to protect users of these sites and the integrity of the contributions made by such users.

United States Postal Service

The Alliance of Nonprofit Mailers reminds everyone in the industry that postage rates will return to the CPI rate as the 4.3% exigent surcharge is removed on April 10th. Kudos to this important organization.