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If you raise funds for a nonprofit in Florida, chances are that you have heard of the Florida Solicitation of Contributions Act, the law which governs nonprofit fundraising. This year, the Florida Legislature amended the Act hoping to cut down on financial fraud, but while providing new tools to state investigators, ambiguities in the law left nonprofit lawyers and accountants alike scratching their heads.
The new law prohibits “any person in connection with the planning, conduct, or execution of any solicitation or charitable or sponsor sales promotion to . . . [c]ommingle charitable contributions with noncharitable funds.” According to a statement on the website of the Florida Department of Agriculture and Consumer Services, the agency that oversees compliance with state fundraising laws, this means that “contributions should be kept in a separate account from funds that are not used for a charitable purpose.” It sounds simple enough – keep charitable and non-charitable funds in different bank accounts. But as any nonprofit professional knows, nonprofits only raise and spend money for their charitable purpose. What could these ‘noncharitable funds’ possibly be? Without a legal definition of the term, some experts speculated that the state was now expecting nonprofits to keep management and fundraising expenses in a separate bank account, a nightmare scenario for any nonprofit accountant.
Fortunately, the State recently clarified its position in an email written by the Bureau Chief for the Department’s Division of Consumer Services:
If the charity doesn’t have a for profit business attached to it there is no comingling of funds…for example, if there is a stand alone charity…and they use some of the funds for management, some for fundraising and some for the program services (charitable purpose) they do not need separate accounts. This change was meant to address issues when a for profit has a non profit arm.
In short, if your nonprofit doesn’t have a for-profit entity associated with its operations, then the new law doesn’t apply to you. If it does, well, you shouldn’t have been commingling those funds anyway.
Check the status of your nonprofit’s fundraising registration here.
J
ustine Thompson Cowan is an attorney with over two decades of experience in the nonprofit sector. She is the President of Cowan Consulting for Nonprofits which provides strategic and legal solutions that help nonprofits grow and thrive.
The Edyth Bush Institute for Philanthropy & Nonprofit Leadership at Rollins College offers six certificate programs designed to provide specialized education to strengthen your organization and your professional development.
Certificate in Leadership Practice learn more >
October 3, October 10, October 17, & October 24
Certificate in Proposal Writing learn more >
October 5, October 19, November 2, November 16, & December 7
Certificate in Fundraising & Development learn more >
Required course: Fundamentals of Successful Fundraising learn more >
September 7, 14, 21, & 28
Certificate in Board Member Orientation learn more >
August 21
Certificate in Nonprofit Management learn more >
Registration is ongoing
Visit the Edyth Bush Institute website for more information at rollins.edu/ebi.
The Edyth Bush Institute for Philanthropy & Nonprofit Leadership’s 3rd Annual Leadership Panel: “Reposition Yourself: A Discussion for Current & Emerging Nonprofit Leaders”.
Learn from this panel of distinguished Central Florida nonprofit leaders about what drives them and how they have such a prolific impact on their employees, organizations and the community. Attendees will receive valuable insights into questions such as how to become a recognized leader in your organization, how to position yourself as a strong candidate in the selection process, what people and resources you should seek within your organization to take the next step in your career, and how to inspire staff, donors and beneficiaries alike.
Panelists:
Panel Moderator: Margaret Linnane, Executive Director, Edyth Bush Institute for Philanthropy & Nonprofit Leadership at Rollins College
The event is FREE and open to the public.
Date: Friday, May 19, 2017
8:30 a.m. Networking, 9 a.m. Panel Discussion, 10 a.m. Q&A
By: Kate Martin, J.D., Edyth Bush Institute
As board members, we have heard that our responsibilities include overseeing a nonprofit’s assets, operational accounts, and reserve accounts, and ensuring proper financial safeguards and policies are in place. What does this mean?
If you’re like me, you instantly think of a front-page newspaper article announcing theft, insolvency or squandering of nonprofit funds. (Oh My!) While preventing such behavior is part of it, financial oversight also means using financial information to improve nonprofit performance.
Naturally, boards should establish strong financial systems with detailed financial reports, and good policies & controls (i.e. two signatures on large checks or prior board approval for large expenditures) to prevent financial malfeasance. Once policies are in place, we should continue to be vigilant and thoughtful about those systems and policies. Do not hesitate to question reports or systems if you do not understand them, lack confidence in, need clarification, or see a possible irregularity.
Board members also should consider financial information during decision making. New ideas or programs to better fulfill the mission? Great! But first, turn to the financials – they inform us how the nonprofit is fulfilling its mission and strategy. Will our nonprofit cover its costs? If we spend the money on this does it provide a real benefit in programs and services? What’s the ROI: the impact it will have on our constituents and community? Does spending follow the priorities of the strategic plan? These questions and others you think of can be your guide.
We need to be careful though. As the saying goes, don’t miss the forest for the financial trees. A balance must be struck between relying on financial information and paying close attention to other aspects of our organization’s performance. Financial information can tell us about performance, but it does not tell us why it happened, or how we can better serve our constituents. Keep the financials and the financial policies in mind but do not let them impede nonprofit creativity in fulfilling our mission.
Also see William P. Ryan, “Financial Responsibilities of Boards” in the Nonprofit Quarterly.
Sign up to attend Kate’s workshop, Legal and Ethical Issues for Nonprofit Boards on March 28, 2017. Sign up online at http://bit.ly/2lTlKS4.
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