Nonprofit Sector Update: 2020 NAAG/NASCO Conference

November 17th and 18th, 2020, marked the public sessions of the annual NAAG/NASCO Conference. Harbor Compliance is a proud yearly attendee of the NAAG/NASCO conference. We are committed to discussing the biggest challenges facing the sector with state regulators so that we can provide you with up-to-the-minute expertise.

This article will provide key takeaways from the 2020 NAAG/NASCO Conference for our clients and nonprofit readers.

What are NASCO and NAAG?

The National Association of State Charity Officials (NASCO) is an association of the state agencies responsible for overseeing charitable organizations and charitable solicitation in the United States. NASCO is the leading body for the exchange of information among state agencies and the nonprofits they serve.

The National Association of Attorneys General (NAAG) is a nonpartisan national forum consisting of America’s attorneys general. In many states, the attorney general’s office directly handles state charitable solicitation registrations, oversees charity enforcement, or does both.

Each year, NAAG and NASCO co-host a conference to share state regulators’ updates, hold interactive panels on enforcement actions, and discuss regulator priorities for fundraising in the virtual world. It is an opportunity for the public to listen in on discussions of the nonprofit sector’s biggest regulatory challenges and key proposed solutions.

This Year’s Themes and Trends

In a year devastated by COVID-19, nonprofits faced new operating and fundraising challenges in a fully remote paradigm. Regulators, too, face the increased responsibility of ensuring nonprofits’ compliance with the various laws relating to online fundraising, charitable registration, and transparency.

This year’s conference, held virtually, was titled “Weathering the Storm.” Along these lines, several trends and themes emerged.

The Benefits of Mandatory 990 Online Filing

Made effective July 1, 2019, the Taxpayer First Act requires tax-exempt organizations to electronically file (e-file) Form 990 with the Internal Revenue Service. The legislation aimed to reform the IRS into a more taxpayer-friendly agency and modernize its technology and. Mandatory Form 990 e-filing offers tax preparers more accurate data entry and faster processing.

Tax preparers and the IRS aren’t the only ones to benefit from mandatory e-filing. State agencies accustomed to receiving 990 tax returns from individual organizations (often in paper format) now receive aggregated data electronically. State charity regulators are now quickly able to identify governance violations, executive compensation issues, and conflicts of interest. Increased federal financial data availability may result in a reduced annual reporting burden for nonprofits, especially as more states move to online filing portals of their own.

Governance and Fundraising During COVID-19

In light of COVID-19, nonprofits across the country have pivoted into primarily online fundraising and operational models. Over the two days, regulators expressed both sympathy and admiration for organizations who successfully made the transition. They also reviewed a variety of best practices for organizations when fundraising online.

The Importance of Communication

With resources and operations stretched to the maximum, internal communication is vital. Organizations were advised to adopt an “early-and-often” style of meeting and communication. Here are some tips:

Meetings should happen much more frequently and not consist only of the Board of Directors. Executive Directors, management, staff, and even volunteers should be informed and involved to the extent required to fulfill their roles.

Meetings should be well run. Nonprofits are not necessarily required to follow Robert’s Rules of Order. However, meetings should follow a clear agenda and allow time for discussion on pivotal issues.

Meetings should take a proactive approach to resolving issues. COVID-19 has presented all sorts of unpredictable challenges. While each organization faces uncertainty, it’s always better to plan and prepare rather than react.

Meetings should be well-documented. Keeping meeting minutes is a fundamental governance requirement for nonprofits. With the increased frequency of communication, a greater number of involved stakeholders, and key decisions that impact public health and the general welfare, good documentation and recordkeeping are mission-critical during the pandemic.

Board Member Involvement

Any nonprofit organization’s success depends heavily on its board of directors (or board of trustees). Together, the board of directors sets the organization’s strategic direction, approves budgets and significant expenditures, reviews executive performance, sets compensation, and ensures programs adhere to the overall mission.

In light of COVID-19, organizations face more significant challenges in operating and fundraising. Communication, especially at the board level, must be more frequent and effective. And, there is an increased need for board member professionalism and participation. Here are some best practices:

In general, the Board Chair and President/Executive Director are responsible for ensuring board participation and open communication.

Board members must know their roles and responsibilities fully. Every individual must not only meet expectations, but also go above and beyond. At a minimum, this means full attendance and participation and a willingness to take on additional responsibilities and tasks.

If the nonprofit never properly established board member expectations, now is the time to do so. The organization may consider creating a sample expectations document for use with existing and new board members.

At times, board members fall short in performing their duties. Now more than ever, Board Chairs and Executive Directors must work quickly to reestablish appropriate expectations with any underperforming board members. Most of the time, that conversation is enough to resolve the situation. If it doesn’t, the organization should not delay replacing the board member.

Successful Online Fundraising Tactics

In general, online fundraising is more accessible, less expensive, and wider-reaching than traditional fundraising methods and in-person events. The COVID-19 pandemic has only accelerated the use of online fundraising methods. However, with near-universal adoption of online and digital methods come challenges for new and experienced organizations alike. While every nonprofit is different, here are a few ways to ensure successful online fundraising campaigns that were reviewed at the conference:

Donor engagement is paramount. With nearly every organization using some form of online fundraising method (email, social media, virtual events, etc.), nonprofits must cut through the noise! With the stresses of COVID-19 impacting everyone, only content and appeals that tell a story and demonstrate a meaningful impact will get your donors’ attention – and that takes some extra elbow grease.

Keep your donor’s attention. In a virtual setting, this can be hard to do. Anyone who has used any social media platform for more than 10 seconds knows how easy it is to be distracted! Whether it’s gamifying your event, featuring a celebrity, or telling a riveting story, the more your organization’s online content requires user interaction, the better.

Give people every opportunity to donate. Online fundraising methods create broad exposure for your organization. You never know who may be compelled to support your nonprofit. With short attention spans abounding, make sure to include a way that donors can give easily, painlessly, and joyfully as a result of your online events, solicitations, and communications.

Ensure your compliance with state fundraising requirements. Forty-one states require nonprofits to register before soliciting their residents. Online fundraising methods can easily reach donors in every state. Take care to file any necessary registrations, ideally before you start soliciting, and invest in a reliable service provider to stay compliant with annual renewals.

Meet your state donor disclosure requirements. In addition to IRS-mandated disclosure requirements, 25 states require nonprofits to include state-specific language on their website, emails, and other donor-facing solicitation materials. Disclosure statements give your donors the ability to learn more about your organization and provide them with confidence in your organization before they donate.

Looking Ahead: DAF and Platform Regulations

Regulators care deeply about protecting both the consumers and nonprofits operating in their states. As organizations and donors continue to connect in new and innovative ways, state officials’ primary goal is developing sensible regulations that protect and facilitate, not complicate, giving throughout the sector.

While COVID-19 has largely disrupted the advance of legislation in many states, additional registration requirements and rules for both platforms, such as GoFundMe, and Donor Advised Funds (DAFs), like Vanguard Charitable, are in the works. State regulators seek to ensure transparency throughout the sector.

Ultimately, NASCO and NAAG continue to collect sector feedback and provide suggestions on proposed regulations. Specifics will only become available when legislative bodies return to session and final legislation re-emerges.

Harbor Compliance closely follows legislative updates pertaining to charitable solicitation. Subscribe to our blog for articles that highlight new trends and regulations.

Until Next Year

Denver, Colorado, has been selected as the host city for the 2021 NAAG/NASCO conference. Harbor Compliance looks forward to the opportunity to safely participating in person. Until then, NASCO will continue to be a source of open communication around nonprofit and charitable regulation issues. As the world adapts to a new normal, Harbor Compliance will continue to monitor trends, regulatory updates, and online fundraising changes. We’re committed to our involvement with NAAG/NASCO, and we’ll continue to provide you with the relevant updates you need.

Harbor Compliance does not provide tax, financial, or legal advice. Use of our services does not create an attorney-client relationship. Harbor Compliance is not acting as your attorney and does not review information you provide to us for legal accuracy or sufficiency.