The D.C. government wants to ramp up its sway over nonprofits by handing prosecutors more power to seek justice against those that abuse their tax-exempt status or play loose with their money.
The nonprofit community, however, is questioning whether the District should be assuming the role of corporate investigator.
Legislation currently before the D.C. Council would authorize the city’s attorney general to investigate whether a nonprofit has acted in a manner inconsistent with its purpose, paid unreasonable or excessive compensation to a director, or made extravagant purchases. The bill was inspired in part by the American University and Jack Abramoff scandals, brouhahas the District could only watch from the sidelines.
“We had no personal interest in that,” Traci Hughes, Attorney General Robert Spagnoletti’s spokeswoman, said of the uproar surrounding former AU President Benjamin Ladner. “We could have had this legislation been in place.”
The D.C. Code contains more than 70 titles covering nonprofit regulation, but it provides little authority to take action against organizations that abuse their status.
The bill would empower the attorney general to subpoena witnesses, administeroaths and compel production of records — and then take a nonprofit to court. A judge could then place a culpable nonprofit in receivership or impose a constructive trust on a director’s salary.
“I’m surprised that there isn’t the ability already,” said Ward 1 D.C. Council Member Jim Graham.
The nonprofit community wants to ensure that abuses are clearly addressed, but it is already well-regulated by the IRS, said Chuck Bean, executive director of the Nonprofit Roundtable of Greater Washington. The District has more important priorities “than a few apples that don’t quite smell right,” he said.
