Charity Leaders Call for Changes to California’s Nonprofit Legislation

Charity leaders around the country are raising concerns about provisions in a bill passed by the California Senate that would change the way many nonprofit organizations seek contributions in the state and operate internally.

The bill, parts of which would also affect commercial fund raisers, is based on recommendations by California Attorney General Bill Lockyer and is designed to prevent fund-raising abuses by charities and “shore up donor confidence,” according to Mr. Lockyer.

As currently worded, the measure is opposed by the California Association of Nonprofits, an umbrella group that represents more than 1,700 organizations in the state. It says the bill would make unnecessarily extensive and complicated changes to current law and be especially burdensome for small charities. “We just don’t think this leads to any resolution of stopping the bad guys,” says Florence L. Green, the association’s executive director.

The DMA Nonprofit Federation also opposes the bill, and the Association of Fundraising Professionals says that it has concerns about the measure.

The bill would, among other things:

• Require charities and commercial fund raisers to include specified new disclosures in written and oral solicitations. For example, the bill says that solicitations would have to include “a full, fair, and accurate description of the charitable purpose or purposes for which the contributions raised by the solicitation will be used.” If asked by a person solicited, a charity that pays a commercial fund raiser a fixed fee would have to disclose the fee and provide “an accurate estimate of what percentage the fee will constitute of the total contributions received.”
• Permit a charity to accept contributions “only for a charitable purpose that is expressed in the solicitation.”
• Require charities to “maintain records, including any electronic records, regarding their activities for at least 10 years after the end of the registration period to which the records relate and shall make those records available for inspection upon demand by the attorney general.” Ms. Green of the California Association of Nonprofits says her organization is pressing for a clarification that only financial records be kept for such a period. “As it is, the requirement is driving us crazy,” she says. “Does it mean invitations to a Christmas party? Does it mean every e-mail that goes out the door? This needs to be defined.”

The bill also requires charities with annual gross revenue of $2-million or more to file annual financial statements prepared by independent certified public accountants. Charities would be required to have audit committees appointed by their boards of directors. A previous version of the bill had tougher provisions, but nonprofit groups requested and obtained changes.

Steven Gevercer, a deputy attorney general of California, says that the bill will be amended in coming weeks in ways that should ease the concerns of charities as the measure moves through the State Assembly.

“We didn’t draw up this bill with the intent of harming nonprofits; we want them to flourish,” says Mr. Gevercer. “We simply want to have a little more of an idea of what organizations are doing and make sure that they are operating under good governance procedures.”

The bill would apply to nonprofit organizations that file with the Attorney General’s Registry of Charitable Trusts, but it would not affect groups that are exempt from registration, such as schools, colleges, universities, hospitals, and some others.

To read the bill, S.B. 1262, and obtain more information about it, go to the Legislative Counsel of California’s Web site at http://www.leginfo.ca.gov.