Regulating Vermont nonprofits
There is a sector of the Vermont economy that is so significant and all the while, has stayed under the radar of state scrutiny – and that is the nonprofit sector.
According to a recent publication by Common Good Vermont, a statewide organization that is "dedicated to uniting and strengthening all of the mission-driven organizations that serve the Green Mountain State," Vermont's nonprofits have annual revenues exceeding $7.1 billion. To put this in context, the sector, when public charities – 501(c)(3)s – and all other 501(c) sections (goes up to 501 (c) (29)) are combined, their annual output represents over 24% of the State's Gross State Product.
The Common Good VT report notes that the $7.1 billion is derived from 4,284 organizations with about 600 or so having annual revenues in excess of $500,000. The employment significance of this is also astounding as it relates to Vermont's total employment. The nonprofit sector accounts for 15 percent of total state employment and this does not take into account public schools, UVM, municipalities, and religious organizations.
As far as oversight of this sector is concerned, it is non-existent. The Vermont Attorney General's office, under state statute, has the authority. The AG's office, for the most part, only reacts to issues provided to them regarding the operation of a nonprofit. Unlike its counterpart in New York State, the office does not have a "Charities Bureau." That bureau plays a very active role in monitoring New York's approximately 100,000 nonprofits.
Vermont's nonprofits have done a good job in carrying out their missions, but that is not to say there haven't been a few exceptions that got caught up in, misleading information, embezzlements, employee lawsuits and lack of board governance.
Given the number of existing nonprofits and those added each year, it seems like now is the time to give some thought to having an independent agency overseeing the sector. This is not to suggest a state government agency.
Four specific areas would be evaluated by the proposed agency – financial matters, adherence to mission, human resources, and board governance. While the optimistic side of me believes that nonprofits are committed to "best management practices," the pragmatic side thinks otherwise. Perhaps areas such as fundraising, salaries, and overhead items as they relate to total revenues might be reviewed and commented on by the overseeing agency.
Funding for the review agency could come from an annual assessment, based on revenue, of each of the State's registered NPOs.
Another interesting fact that came from the Common Good Vermont report is that a significant majority of Vermont's nonprofits are quite small, under $100,000 in revenue, with approximately 2,200 having no revenue at all. The smaller the nonprofit, the more likely that there is little oversight with respect to financial, governance and personnel matters. These are areas where, if the regulations are not adhered to, trouble can quickly follow – and for many it does.
Each one of the thousands of nonprofits must have a board of trustees. Assuming no crossover and that each nonprofit has seven members (minimum is three), that comes to over 30,000 board members. I wonder how diligent are these board members in understanding their duties and responsibilities? This happens to be one area where the Vermont Attorney General's office has played a positive role. Late last fall, the office published a booklet, Understanding the Duties and Responsibilities of Being a Board Member in Vermont. The question is: have all board trustees taken the time to read the booklet?
I believe that the nonprofit sector in Vermont should take a proactive role in creating a self-regulating agency that is charged with oversight responsibility. I urge that it be done before it becomes a mandate of the legislature/government. At the rate the nonprofit sector is growing and its influence on the state's economy, government oversight is surely on the horizon.
Don Keelan writes a bi-weekly column and lives in Arlington.
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