A bill that would crack down on fraudulent charities found no opposition in the California State Assembly, setting the table for stricter enforcement in the state.
AB2077, written by Assemblyman Travis Allen (R-Huntington Beach) passed 76-0 and will now be sent to the state Senate. If it gains approval there it will go to Gov. Jerry Brown for his signature.
The law would allow the California Department of Justice to use funds from registration fees paid by nonprofits and professional fundraisers to crack down on charities that are determined to not spend enough money on their mission. Currently these funds – which add up to more than $7 million – are off limits to DoJ invesitgators.
“Californians donate hundreds of millions of dollars each year to charities with the belief that their hard-earned money is being used for the betterment of their local community,” said Allen. “This legislation is an important step in cracking down on scam charities, protecting California consumers and the integrity of our legitimate nonprofits throughout the state.”
According to a legislative analysis of the bill, it will cost the state $1.4 million a year to allow the state’s attorney general to create 13 staff positions to handle administrative and court proceedings related to suspect nonprofits, help unregistered charities comply with paperwork requirements, and review charities’ applications and financial reports.
Kris Lev-Twombly, director of public policy at the California Association of Nonprofits (CAN), said that his organization was first alerted to Assemblyman Allen’s intent to crack down on fraudulent nonprofits in the beginning of the legislative year. An article in the Orange County Register hinted he was looking at placing a cap on the amount of money nonprofits were allowed to spend on overhead. This was a proposal that Lev-Twombly said concerned them.
“That would have really wreaked havoc on smaller organizations,” said Lev-Twombly. “There are a lot of legitimate organizations that rely on in-kind donations that don’t show up as program expenses. We don’t think that kind of law is a good fit for California.”
Lev-Twombly said CAN immediately reached out to Allen’s staff after reading the article. Though they acknowledged that was one of the ways they were looking at to solve the problem of scam charities, they listened to CAN’s concerns and that proposal was not bought forward.
As for the current version of the law, Lev-Twombly said that CAN has not weighed in on it as it has more to do with giving the state Attorney General’s Office more power to enact existing law. Lev-Twombly acknowledged that the AG’s office is “very limited” under current law.
“We didn’t weigh in when we heard that [the new law] was just to free up funds for the AG’s office to use,” said Lev-Twombly. “We’re continuing to look out for any kind of cap they may be passed in the future.”
AB2077 is currently awaiting vote in the state Senate. Should it pass there it will go to the Governor’s office for a signature before becoming law.
As we celebrate our 36th year, NPT remains dedicated to supplying breaking news, in-depth reporting, and special issue coverage to help nonprofit executives run their organizations more effectively.