We thought that this weekend’s Annual Jerry Lewis MDA Telethon would be another victim of Hurricane Katrina. The Wall Street Journal is reporting today that more than $400 million has already been collected for Katrina relief. That’s well ahead of the pace that was set in December 2004—January 2005 for South Asia tsunamis relief. See, E. Bernstein, Katrina Prompts Record Pace of Giving (September 6, 2005). With that much money being sucked out of the system for Katrina relief, it is truly amazing...
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Federal review, thereby taking the matter out of the hands of the Mississippi courts.
that MDA’s take from its annual telethon only dropped by about 8% from about $59.4 million in 2004 to $54.9 million this year.
Rather than ignoring the potential problem posed by Katrina, Mr. Lewis acknowledged the devastation that this natural disaster caused. He provided viewers with the opportunity to contribute not only to his kids, but to Katrina relief. According to an August 31, 2005 press release, Telethon viewers were given a special 800 number to call to make contributions for Katrina relief. A September 5, 2005 press release indicated that these efforts had raised more than $1.0 million. Both press releases also indicated that MDA would be making a separate $1.0 million donation to the Salvation Army for Katrina relief efforts. Let’s be clear about this: Mr. Lewis clearly added Katrina relief to the MDA Telethon out of a genuine desire to help the victims of that tragedy. We made a point of watching the opening segment of the MDA Telethon this year, and Mr. Lewis was clearly sincere about his efforts.
But….we also suspect that this was a good business decision on Mr. Lewis’ part. Consequently, we would not be at all surprised to see other charities that have no direct connection to disaster relief also integrate Katrina relief into their fundraising efforts. For many local social service agencies this will not be a stretch. We have already heard of many agencies in the Chicago-area opening their doors to victims of Katrina, providing food, shelter, and psychological services to those folks. No doubt this is happening around the county. These charities should be able to mention such efforts in their fundraising materials and campaigns. However, these charities would be well-advised to provide the public with a breakdown of how much they plan to devote to Katrina relief. In our view, it would be fraudulent to ride Katrina’s coattails without actually committing resources that are commensurate with the level of emphasis placed on Katrina relief in fundraising campaigns.
But what about those charities that have no direct connection to Hurricane Katrina relief—they don’t provide food or shelter to victims that have been relocated to another city or state? For example, what about the art museum or zoo that decides to introduce Katrina relief into its fundraising appeals. Any organization considering what we will term a “mixed fundraising appeal” should:
A. Make sure that its governing documents (e.g., articles of incorporation) permit it to use any money raised for Katrina relief for such relief. Arguably an art museum that has a provision in its articles of incorporation limiting its expenditures and activities to art-related matters cannot transfer funds to Katrina victims if it raises those funds itself. Granted, no one may object, but that does not validate a violation of the organization’s governing documents.
B. If the organization is legally permitted to direct funds to Katrina relief, it should make sure that those giving money know what percentage of the funds raised as part of a mixed fundraising appeal will go to Katrina. In other words, there should be a statement that 20% of each dollar raised will go toward Katrina relief.
C. If the fund raising campaign is being conducted in partnership with a relief agency, both organizations should develop policies and procedures for handling the transfer of the money, Form 990 reporting, and required tax confirmations. We called MDA to ask how they handled the 800-number donations. According to an MDA spokesperson, those contributions did not go through MDA's books. The telephone number was provided by the Salvation Army and the calls went straight to a Salvation Army call center.
D. If the organization is a local organization, it may only be required to register in its home state, but accepting Katrina relief through Internet solicitation could potentially subject the organization to registration requirements in other states. Organizations using the Internet should take a look at the Charleston Principles that came out of a NAAG-NASCO meeting a few years back, as well as relevant state registration requirements.
THE FOREGOING IS NOT AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. IF LEGAL ADVICE IS REQUIRED, THE NON-PROFIT OR OTHER PARTY IN QUESTION SHOULD SEEK THE ADVICE OF QUALIFIED LEGAL COUNSEL.
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