AN ACT CONCERNING THE REGULATION OF CHARITABLE FUNDS.

This bill increases, from $ 200,000 to $ 500,000, the minimum gross revenue threshold for the requirement that a charity's annual report be audited. By law, all charitable organizations that solicit funds must register and file annual financial reports with the Department of Consumer Protection (DCP). Organizations above the gross revenue threshold must also file an audit report prepared by a certified public accountant.

The bill allows the DCP commissioner to waive audit requirements and waive or reduce late fees. The bill also extends the deadline the commissioner may grant for filing reports.

The bill changes the definition of “paid solicitor” to include a person who for consideration, rather than compensation, solicits or arranges the solicitation of contributions.

The bill also specifies that nothing in the statute regarding the release or modification of restrictions contained in a gift instrument on the management, investment, or purpose of institutional funds in the Uniform Prudent Management of Institutional Funds Act can be construed to amend or alter the existing standards in the law (which apparently includes the common law), rather than the general statutes. Related common law doctrines include cy pres or approximation and equitable deviation actions (see BACKGROUND).

*House Amendment “A” removes a provision in the original bill (File No. 72) that increased the license fee for a fundraising counsel from $ 120 to $ 500.

EFFECTIVE DATE: October 1, 2009, except for the provision relating to the Uniform Prudent Management of Institutional Funds Act, which is effective upon passage.

The bill authorizes the commissioner to (1) waive the audit requirement and (2) waive or reduce late fees by written request showing good cause. Under current law, he may grant a 180-day extension to late filers; the bill allows him to grant up to six months. By law, the $ 25 per month late fee is not due in extension months.

The bill changes the definition of “paid solicitor” to include a person who for consideration, rather than compensation, solicits or arranges for solicitation of contributions, excluding salaried non-temporary officers or employees. This does not include nonmonetary, nominal gifts given to volunteers as an incentive or token of appreciation.

Under this statute, an institution may release or modify, in whole or in part, a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund with the donor's consent on record. The fund still must be used for a charitable purpose of the institution.

A court, upon application of the institution, may modify a restriction that becomes impracticable or wasteful, impairs the management or investment of the fund, or because of unanticipated circumstances, could be modified to further the purposes of the fund. In such cases, the institution must notify the attorney general, who must be given an opportunity to be heard. To the extent practicable, any modification must be made in accordance with the donor's probable intent.

The act applies to institutions, which are defined as entities organized and operated exclusively for charitable purposes; government or government subdivisions, agencies, or instrumentalities, to the extent that they hold funds exclusively for a charitable purpose; and trusts that had both charitable and noncharitable interests, after all noncharitable interests have terminated. The term “charitable purpose” includes purposes related to relieving poverty, advancing education or religion, promoting health, and other purposes that are communally beneficial (CGS § 45a-535, et seq. ).

The cy pres doctrine allows the court to amend the terms of a charitable trust as closely as possible to the original intention of the deceased when the original objective becomes impossible, impracticable, or illegal to perform. Approximation is, like cy pres, a legal principle that a court may vary the terms of the administration of a trust to carry out the intentions of the trustor or to preserve the trust.

Equitable deviation is distinguishable from cy pres or approximation in that it changes only the administrative provisions of a trust, while cy pres involves an alteration of the purpose to which the rest of the trust is to be applied.

The General Law Committee favorably reported SB 780, which also increases, from $ 200,000 to $ 500,000, the minimum gross receipt threshold for charitable organizations required to include an audit report with their annual financial statements. That bill has an effective date of July 1, 2009.

Yea

Nay

(02/26/2009)