Regulators See Uptick in Mergers, Divestments

Increased divestment of real property, liberalization of guidance on the sale of art by museums, and an uptick in mergers. Those are some of the pandemic-era trends among nonprofits that Yael Fuchs is seeing in her role as co-chief of the enforcement section with the New York State Attorney General’s Office Charities Bureau. 

Fuchs provided the insights during a recent session of the 2021 National Association of Attorneys General (NAAG)/National Association of State Charity Officials (NASCO) Virtual Charities Conference held via Zoom.

There’s been an increased divestment of real property with an increased number of petitions to the attorney general, according to Fuchs. With a financial strain by charities, they’re looking to monetize real property, she said. “A lot of charities are realizing they don’t need their physical space since they’ve been able to successfully move programs online,” said Fuchs, who serves as president of NASCO for 2020-21. There’s also been “liberalization of guidance on deaccessioning of art.”

Officials are seeing an increase in mergers, which Fuchs said, is “often a good thing.” Organizations that were previously competitors are putting aside differences and coming together to take advantage of scale, she said.

There has been an increased number of applications for certain amendments in mission statement filings, often for an expansion of purposes. “As certain nonprofits were unable to provide certain forms of programming,” she said they’re filing to make amendments to be able to include new forms of programming.

What Fuchs hasn’t yet begun to see is a “material increase in applications for endowment modifications” or a jump in filings for voluntary dissolutions. “The lack of material increase in these areas is a good thing,” she said, although they may still be coming down the pike because there’s often a tail in any sort of traumatic financial event. “Many state offices are ready for that possibility,” Fuchs said.