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Attorney details red tape for nonprofits, shares research tools to use before donating

Attorney details 'red tape' for nonprofits, shares research tools to use before donating
Posted at 8:12 PM, Nov 30, 2022

DENVER — As the state grapples with moving forward after another tragedy, the latest in Colorado Springs, questions are being raised about how donations are collected and distributed to those most impacted.

Survivors of mass shootings in Orlando and Las Vegas held a press conference on Sunday, calling for 100% of donations collected by the Colorado Healing Fund (CHF) to go towards survivors and victims' families of the Club Q shooting. The nonprofit has served as the state's primary donation center for those impacted by mass casualty incidents.

Currently, the CHF takes 10% of each donation for administrative fees.

"We have one message: give the Club Q victims 100% of the funds donated to them. After the shooting in Orlando, we received 100% of what was collected for us because grieving people from other mass shootings fought for us," Tiara Parker said.

Parker is a survivor of the Orlando Pulse shooting and gave remarks at Sunday's press conference, as reported by Denver7's sister station KOAA.

Denver7 brought the concerns to legal experts, who said administrative fees are not uncommon for larger charities.

"Once you're bringing in, you know, over $50,000 a year, you really need to start having bookkeepers, tax preparers, and, you know, just spending money on either staff or even consultants or contractors," said Cara Lawrence, a partner at Tierney Lawrence LLC who specializes in working with tax-exempt organizations across the state. The Colorado Healing Fund is not one of them.

Some nonprofits have administrative roles because of IRS requirements, according to Lawrence. One of them requires nonprofits to publish their Form 990s, while another requires nonprofits to investigate how funds are distributed.

"Organizations that are putting out funds into the public or helping victims or helping other beneficiaries are required by the IRS to investigate and to make sure that the money is going to the appropriate people," Lawrence said.

The attorney explained that smaller nonprofits and those with fewer overhead costs are able to forego administrative fees. Nonetheless, charities that have them remain "highly rated" if the costs are kept below 25%, Lawrence said.

Food For Thought Denver has kept its operations "lean" since its 2012 inception, according to founder, Bob Bell. Because of that, Bell said they've never incorporated administrative fees.

"We obviously don't have a building, we work under a bridge for God's sake," he said. "But you know, as long as you play by the rules, by the game of 501(c)(3), we are as transparent of an organization you're ever gonna find."

Bell's nonprofit provides bagged meals for Denver area children to take home over the weekend.

"We're doing 24,000 bags every single month, without one employee," he said. "We just have people in all walks of life who've stepped up and said, 'Yeah, I'm good at this and I'll help you with that. Most of these kids we serve get on fine in school, right? They get hot lunch, they get breakfast, [but] they go home on Fridays without a real source of food for the weekend."

Despite variances in nonprofit operations, Lawrence recommends people turn to the Colorado Secretary of State's website or GuideStarbefore donating.

On Wednesday, Cynthia Coffman, board president of the CHF, released a statement saying the nonprofit is considering adjustments to its administrative fees.

“We recognized that there was a gap in terms of responding after a mass tragedy, and it took time in each situation to establish a secure place to donate funds. After hearing this weekend from survivors of past tragedies, the organization is working on other ways to meet its operating costs and eliminate the need to collect an administration fee on donations," the statement read.

CHF is holding a press conference on Thursday at noon.