A recent joint initiative between the Federal Trade Commission (FTC) and charity officials in every state demonstrates the extent of inter-governmental agency cooperation with respect to charity regulation.
The recently announced “Operation Donate with Honor” is an inter-agency enforcement action involving the FTC, NASCO, and law enforcement officials and charity regulators from every state, focused on fraudulent charities that induce donors by falsely promising that their donations will support veterans and active duty servicemembers. As a result of the action, the FTC and various states have entered into settlements with several purported charities and their leadership that, among other requirements, ban the individual defendants from soliciting charitable contributions and prohibit them from participating in charity management and oversight of charitable assets. The FTC and NASCO collaborated on a similar national charity fraud action in 2015.
Several lessons to nonprofit health care systems arise from this initiative. First is that state and federal agencies will cooperate to address what they identify as widespread violations of law involving actual or purported charities. Second is that this cooperation extends to activities conducted across state lines (e.g., the activities of a multi-state health care system). Third is that such cooperation at the federal level is not limited to the FTC; Internal Revenue Code Section 6104(c) permits the Internal Revenue Service to notify state officials when an organization fails to qualify for exemption or its exemption is revoked (see, e.g., the “Bishop Estate” controversy). While the circumstances prompting such inter-agency cooperation are usually egregious in nature, avenues for such cooperation do exist.