Article

Wednesday, June 9, 2004
Massachusetts Attorney General Focuses Resources on Monitoring Charities and Proposes New Regulations

While the Attorney General’s Division of Public Charities has in the past focused much of its resources on fraudulent solicitation, the past year’s publicity of nonprofit abuses has shifted the office’s priorities.

Addressing nonprofit leaders and practitioners at a meeting at the Massachusetts Bar Association on June 9, 2004, the charities division chief, Jamie Katz, explained that the majority of his office’s time would be spent in negotiation with or litigating against charities.

With the recent hire of a financial expert, Mr. Katz’s office is also reviewing informational returns that in the past have gone unchecked. These returns are being scanned and will be published on the internet in the next few years.

Mr. Katz acknowledged that by making this information public (and accessible to anyone with access to a computer), the media would be charities’ biggest problem as bad publicity would certainly have significant impact on donor contributions.

Mr. Katz also stated that his office was investigating types of charities that had previously been ignored. For example, the AG’s office is currently investigating three churches.

Recently the AG’s office filed a consent judgment against a Boston congregation that allows the Division of Public Charities to hire an independent financial officer and require approval from members of the congregation for expenditures over $10,000. This judgment came as a result of financial impropriety in the form of excessive compensation, improper spending, self-dealing by church leaders, and failing to follow the congregation’s corporate governance. The investigation had been triggered by angry members witnessing the financial abuses.

The Attorney General has also initiated legislation to be considered this fall that would place new regulations on charities. The proposed legislation would require clearer standards with respect to financial oversight by nonprofit officers and boards. The legislation calls for certification of financial reporting, audit committees, whistleblower protections, procedures for complaints, and procedures for related party transactions.

For an overview of the proposed legislation, click here.