“Keeping it Legal” A Lawyer’ s Look at Private Organizations & Fundraising

“Keeping it Legal” A Lawyer’s Look at Private Organizations & Fundraising Lt Col Bryan Watson Staff Judge Advocate Aviano AB, Italy

Today’s Approach I have slides and prepared remarks, but we’ll talk about whatever you want to talk about.

Today’s Approach I have slides and prepared remarks, but we’ll talk about whatever you want to talk about. Your comments/questions can be “off the record.” My comments are as “on the record” as you want them to be.

Overview Leading volunteers “Nuts and Bolts” rules applicable to military private organizations Ethics rules Relationships inside your organization Tax rules

Leading Volunteers (“Watson’s $0.02”) Volunteers have a lot of options …

Leading Volunteers Some basic principles … Be a prepared & organized leader. One

Leading Volunteers Some basic principles … Be a prepared & organized leader. One Do you know where your constitution, bylaws, and budget / financial records are?

Leading Volunteers Some basic principles … Volunteers want to feel welcome. Two

Leading Volunteers Some basic principles … Be a teacher & trainer. (After all, someone taught you…!) Three

Leading Volunteers Some basic principles … Tell (warn?) them about how much time is required. Four

Leading Volunteers Some basic principles … Appreciate them. Five

Leading Volunteers Some basic principles … Communicate with your team. - Well - Often Six

Leading Volunteers Some basic principles … Tell them how they are helping the community (not how they are helping you) … yes, there is a difference. Seven

Leading Volunteers Some basic principles … Eight Relationships are important. Connect them with each other.

Leading Volunteers Some basic principles … Nine Understand what they want. - To help their child? - To spend time with their family? - A social outlet? - A sense of community?

Leading Volunteers Some basic principles … Nine Understand what they want. - To help their child? - To spend time with their family? - A social outlet? - A sense of community? - (Personal agenda?)

Leading Volunteers Some basic principles … Think about transitions. Ten

Leading Volunteers Some basic principles … Think about transitions. Ten Do you know where your constitution, bylaws, and budget / financial records are? torch

“Nuts and Bolts” Rules for Military Private Organizations

Fundamental Concepts: POs are self-sustaining special interest groups. Composed of people acting exclusively outside the scope of any official capacity. Are not Federal entities. They are not part of the military, and are not NAFIs. Do not get official endorsement. The federal gov’t does not have any vested interest in a PO – neither the gov’t nor its NAFIs will make any claim to PO assets or incur or assume any obligation of a PO. Operate on installation with the consent of the commander.

Army and Air Force RulesPrivate organizations in general … 8 pages 10 pages

Army and Air Force RulesFundraising, specifically: 8 pages 16 pages

FundraisingGeneral rules Air Force and Army rules are not identical in this area. Consider: Can the fundraising be “officially endorsed”? Is it taking place in the “workplace”? Impact of CFC timetable? In the AF, there is no de minimis rule -- the size and nature of the fundraiser is irrelevant (e.g., Girl Scout cookies…?) Is there an effort to solicit DOD contractors, solicit subordinates? use an official title, position or organization name? use Government resources (time, materials, subordinates)? Consult the regulation and get legal advice

EthicsFor example: Air Force fundraising rules

What’s Coveredin the ARs & AFIs: Commanders’ Responsibilities Establishing a PO Operating a PO Financial Management of a PO Audit Requirements ** Insurance ** Limits of allowable government support Dissolution of a PO and disposal of assets

Responsibilities of Command • Authorizes establishment and operation of a PO upon determining that it will make a positive contribution to the quality-of-life of personnel. • Ensures compliance with regulations / instructions. • Does not control or dictate internal PO activities or structure. • Withdraws authorization to operate when no longer making a positive contribution to the installation. • If the PO prejudices or discredits the Government, conflicts with Government activities, and for other appropriate reasons and just cause. • Approves requests for fundraisers (may be delegated).

Establishing a Private Organization • Laid out in AFI 34-223 and AR 210-22. • Submit written application, constitution, by-laws and other similar documents. • Through SJA to the installation commander. • Should include: • Nature, function, objectives, membership eligibility, and sources of income of the PO. • Notice of financial responsibility. • Responsibilities of the PO officers. • Disposition of residual assets upon dissolution.

Operating Policies There are restrictions on the use the seals, logos, or insignia of the DoD or any DoD component, DoD organizational unit, or DoD installation on letterhead, correspondence, titles, or in association with organization programs, locations or activities.

Operating Policies(Continued) POs may not engage in unlawful discrimination. Service regulations describe how violations are addressed. POs must be self-sustaining, primarily through dues, contributions, service charges, fees, or special assessments of its members. There will be no financial assistance to a PO from a NAFI in the form of contributions, repairs, services, dividends, or donations of money or other assets. POs must properly plan and adequately control the money aspects of their goals and objectives, including cash and other assets. POs and unofficial activities/organizations will not engage in activities that duplicate or compete with AAFES or Services activities.

Operating Policies(Continued) • Occasional fundraisers are authorized and require approval. • For example, bake sales, car washes or similar functions. • In the Air Force, “occasional” is specifically definedas not more than two (2) fund-raising events per calendar quarter. • Specifically see AFI 36-3101, Fundraising within the Air Force and AR 600-29, Fundraising Within the Department of the Army.

Operating Policies(Continued) POs may be the beneficiaries of gifts and donations. POs are prohibited from actions that give the appearance the installation is endorsing or giving special treatment to the donors or givers involved.

Operating Policies(Continued) • Liability: • PO members must be aware that they can be jointly and severally liable for obligations of the PO. • Insurance. • POs must comply with all applicable federal, state, local, and foreign laws governing like civilian activities. Some POs may qualify for tax-exempt status. • It is the responsibility of PO to obtain the proper tax exempt information and forms through the regional Internal Revenue office and the state taxing authority if eligible and desired.

Financial Management Budgets • Are detailed plans for operations that should occur, expressed in $s for the year (may be broken out by month or quarter). • Reflect projected activities (income & expense), as well as purchased equipment/property. • Establish financial objectives to generate sufficient income to cover planned expenses. • Are comprehensive, realistic, and subject to revision. • Consolidated budgets may be comprised of separate detailed income and expense projections. • Comparing with actual financial statement is an excellent management performance indicator.

Audit RequirementsAir Force: AFI 34-223, para 10.7: • Gross annual revenues more than $5,000, but less than $100,000: • Submit annual financial statements to the Services Resource Management Flight Chief (RFMC) not later than 20 days following the end of the PO’s fiscal year. • IC may require more frequent submissions. • Gross annual revenues of $100,000 or more, but less than $250,000: • Financial review performed by an accountant. • Written verification of accounting information by competent authority knowledgeable in financial reporting methods. • Paid with PO funds. • Conducted annually. • Gross annual revenues of $250,000 or more: • Audit performed by a CPA. Use of a Certified Government Financial Manager is permitted in overseas locations when unavailability of a CPA is documented through the RMFC.

Audit RequirementsArmy: See AR 210-22, para 3-3: Organizations with gross annual revenue of $1,000 or more will arrange for an audit at least once every 2 years, at their own expense. (More specific guidance is in the regulation.)

Logistical Support • POs must furnish their own equipment, vehicles, supplies, and other materials. • POs generally do not get either Appropriated or Nonappropriated support (there can be exceptions). • For example, POs may be provided space. • POs may have to reimburse for services or costs incurred by the Air Force.

Logistical Support The use of government equipment and systems for other than official purposes is extremely limited. There are very tight controls and restrictions on the use of official email, mail, computers, copiers, BITS, etc., to provide notice of PO activities.

Ethics Rules

The Military and Ethics IssuesToday’s reality

Ethics RulesJoint Ethics Regulation (JER) Implements OGE and DoD Standards of Conduct A (very) partial list: Gifts from subordinates; Gifts to superiors; Gifts to/from foreign governments; Official travel; Spouse travel; Relationships with contractors; Membership in and support to private organizations; Conflicts of interest; Personal financial holdings & financial reporting obligations; Use of government resources

Ethics RulesJoint Ethics Regulation (JER) Implements OGE and DoD Standards of Conduct A (very) partial list: Gifts from subordinates; Gifts to superiors; Gifts to/from foreign governments; Official travel; Spouse travel; Relationships with contractors; Membership in and support to private organizations; Conflicts of interest; Personal financial holdings & financial reporting obligations; Use of government resources Portions of JER are punitive!

Ethics (What I tell my clients about support to “official” v. “personal” activities) Under the JER, there are only 2 types of activities: official and personal • When supporting official activities, leaders may attend and support meetings, conferences, seminars at Government expense if there is a legitimate Air Force interest. • Because of leaders’ positions, they should exercise care when lending even personal support to charities and private organizations (especially when the event involves fundraising) unless they have a close, historical connection. • Exercise care in deciding which organizations to actively support in a personal role -- some will try to take advantage of a leader’s official position, not realizing this may generate problems for the leader. And -- leaders must recuse themselves from making official decisions that will affect any outside organization they actively support in a personal capacity. What about “uniform wear” at PO events….?

Ethics (What I tell my clients about conflicts of interest) Question: Is the leader’s family involved in any off-base organizations? If so, should the leader act on requests for support from that organization, or delegate the decision to someone else? Question: Is the leader receiving recommendations or advice regarding support to a non-Federal organization from someone who is prohibited from providing same, i.e., someone who is an officer, director, trustee, general partner or employee of the non-Federal organization? Definition: A conflict of interest is a personal interest or relationship that conflicts with the faithful performance of official duty • If official involvement creates even the appearance of a conflict of interest,leaders should remove themselves from that matter or, at a minimum, seek legal advice.

Ethics (This can get a little complicated …) Question: The XYZ Foundation, a well-regarded PO, just raised a lot of money for the educational trust fund for the surviving child of an Airman who died in Iraq. The Foundation’s leader contacted the spouse of ___, to come thank the volunteers and hand out some organizational coins to thank them for their work. They will provide transportation and lunch for the spouse.

Ethics (This can get a little complicated …) Question: The XYZ Foundation, a well-regarded PO, just raised a lot of money for the educational trust fund for the surviving child of an Airman who died in Iraq. The Foundation’s leader contacted the spouse of ___, to come thank the volunteers and hand out some organizational coins to thank them for their work. They will provide transportation and lunch for the spouse. Should the spouse go? Is there a conflict of interest here? What about preferential treatment to this PO? Ride/Lunch:They are gifts under the JER and may be imputed to the sponsor Coins:What kind of coins? Bought w/ APFs? If so, this isn’t IAW applicable AFI/AR… Legal advice – please get some.

Ethics (This can get a little complicated …) Question: The XYZ Foundation, a well-regarded PO, just raised a lot of money for the educational trust fund for the surviving child of an Airman who died in Iraq. The Foundation’s leader contacted the spouse of ___, to come thank the volunteers and hand out some organizational coins to thank them for their work. They will provide transportation and lunch for the spouse. Should the spouse go? Is there a conflict of interest here? What about preferential treatment to this PO? Ride/Lunch: They are gifts under the JER and may be imputed to the sponsor Coins:What kind of coins? Bought w/ APFs? If so, this isn’t IAW applicable AFI/AR… Legal advice – please get some.

Ethics (This can get a little complicated …) Question: The XYZ Foundation, a well-regarded PO, just raised a lot of money for the educational trust fund for the surviving child of an Airman who died in Iraq. The Foundation’s leader contacted the spouse of ___, to come thank the volunteers and hand out some organizational coins to thank them for their work. They will provide transportation and lunch for the spouse. Should the spouse go?Is there a conflict of interest here? What about preferential treatment to this PO? Ride/Lunch:They are gifts under the JER and may be imputed to the sponsor Coins: What kind of coins? Bought w/ APFs? If so, this isn’t IAW applicable AFI/AR… Legal advice – please get some.

“Keeping it Legal” A Lawyer’ s Look at Private Organizations & Fundraising