PA 09-102—HB 6433

General Law Committee

AN ACT CONCERNING THE REGULATION OF CHARITABLE FUNDS

SUMMARY: This act increases, from $200,000 to $500,000, the minimum gross revenue threshold requirement for a charity's annual report to 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. By law, government grants and trust fund revenue do not count towards the threshold.

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

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

The act 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).

EFFECTIVE DATE: July 1, 2009.

WAIVERS, EXTENSIONS, AND LATE FEES

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

ORGANIZATION EMPLOYEES

The act expands 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.

BACKGROUND

Release or Modification of Restrictions Contained in a Gift Instrument

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. The term “charitable purpose” includes purposes related to relieving poverty, advancing education or religion, promoting health, and other purposes that are communally beneficial.

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 (CGS 45a-535, et seq. ).

Common Law Doctrines

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 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.

OLR Tracking: MR: km: pf: tjo: df