Registration and other requirements for charitable organizations, professional fund-raisers, fund-raising counsel, and professional employer organizations and modifying rules promulgated by the Department of Financial Institutions. (FE)

and a person who, for compensation, plans or manages, or advises or prepares material with respect to, solicitations in this state for a charitable organization, but who does not make solicitations or employ or engage others to make solicitations, and who has custody of contributions solicited for a charitable organization (fund-raising counsel).

This bill makes numerous changes relating to DFI's regulation of charitable organizations, professional fund-raisers, and fund-raising counsel, including all of the following:

1. The bill modifies DFI's application procedures and requirements for initial or renewal registration with DFI as a charitable organization, professional fund-raiser, or fund-raising counsel, as well as certain post-registration requirements.

2. The bill increases, from $5,000 to $25,000, subject to adjustment for inflation, the amount of annual contributions a charitable organization may receive without being required to register with DFI if other conditions are satisfied.

3. The bill modifies requirements for financial information included with an application for registration as a charitable organization. Current law requires the applicant to submit to DFI an annual financial report if the charitable organization received annual contributions of more than $5,000 but not more than $100,000 and an audited financial statement if the charitable organization received annual contributions of more than $100,000. The bill requires initial registration applications to include a reviewed financial statement if the charitable organization received annual contributions of more than $300,000 but not more than $500,000 and an audited financial statement if the charitable organization received annual contributions of more than $500,000, with these amounts subject to adjustment for inflation. The reviewed and audited financial statements must be prepared in accordance with generally accepted accounting principles (GAAP). The reviewed financial statement must include a review of the financial statement by an independent certified public accountant (CPA), and the audited financial statement must include the opinion of an independent CPA.

4. The bill modifies the requirements for charitable organizations' annual reporting to DFI. Under the bill, a charitable organization must file an annual report with DFI, in a form prescribed by DFI, rather than an annual financial report as under current law. The bill also eliminates certain content requirements for the report. The bill increases, from $200,000 to $300,000, subject to adjustment for inflation, the contribution threshold that triggers a requirement that a charitable organization annually file with DFI a financial statement prepared in accordance with GAAP and reviewed by an independent CPA. The bill also increases, from $400,000 to $500,000, subject to adjustment for inflation, the contribution threshold that triggers a requirement that the financial statement be audited and include the opinion of an independent CPA. Under the bill, the financial statement or audited financial statement is in addition to the charitable organization's annual report, not in lieu of its annual financial report as under current law, and the bill extends the filing deadline for the financial statement. The bill also creates a process by which DFI may waive the financial statement filing requirement and eliminates an exception to the current law requirement that a charitable organization file an annual financial report.

5. The bill requires fund-raising counsel and professional fund-raisers to file an annual report with DFI, in a form prescribed by DFI.

6. The bill requires a charitable organization for which a fund-raising counsel or professional fund-raiser performs services to take certain actions, which include ensuring that the fund-raising counsel or professional fund-raiser is registered with DFI or is not required to be registered, contracting in writing with the fund-raising counsel or professional fund-raiser, retaining certain documentation, and satisfying certain financial institution account requirements.

7. The bill modifies content requirements for the required contract between a charitable organization and a professional fund-raiser.

8. The bill modifies content requirements for a solicitation notice required to be filed by a professional fund-raiser before performing services for a charitable organization, eliminating specific requirements and instead providing DFI with discretion over the contents of the notice.

9. The bill modifies disclosure requirements related to requests made by professional fund-raisers, or by persons who solicit but are not professional fund-raisers or their employees (unpaid solicitors), for contributions on behalf of charitable organizations and creates an exception to disclosure requirements if the charitable organization is not required to be registered with DFI or has obtained a disclosure exemption. The bill eliminates the requirement that DFI specify by rule criteria for this disclosure exemption, instead allowing DFI to prescribe forms and procedures without rule making, and changes the definition of an unpaid solicitor to expressly exclude bona fide employees of professional fund-raisers.

10. The bill shifts the requirement for retaining certain accounting records from the charitable organization receiving the records to the fund-raising counsel or professional fund-raiser generating the records, and requires the records to be made available to DFI upon DFI's request.

11. The bill modifies a provision relating to prohibited acts in the planning, management, or execution of a solicitation or charitable sales promotion so that the provision applies more specifically to a charitable organization, fund-raising counsel, or professional fund-raiser, rather than to a "person," but also applies more broadly to the conduct of the affairs of the charitable organization, fund-raising counsel, or professional fund-raiser, not solely to the planning, management, or execution of a solicitation or charitable sales promotion. The bill also adds certain acts to the list of prohibited acts, including acts related to misrepresenting the tax-deductible status of contributions, misrepresenting a person's prior contributions or a person's prior agreement to make a contribution, or failing to apply contributions consistently with the solicitation.

12. The bill allows DFI to adjust, without rule making, certain threshold dollar amounts related to registration or reporting, but creates a passive review process with the Joint Committee for Review of Administrative Rules for these adjustments.

13. The bill makes changes to DFI's rules relating to charitable organizations, professional fund-raisers, and fund-raising counsel, which changes correspond to statutory changes.

Professional employer organizations Under current law, a person engaged in the business of contracting to provide to its clients a nontemporary, ongoing employee workforce, paid by the person from its own account (professional employer organization), but not including a temporary help agency or temporary help company, must be registered with DFI. This bill makes changes relating to DFI's regulation of professional employer organizations, including all of the following:

1. The bill modifies DFI's application procedures and requirements for initial or renewal registration with DFI as a professional employer organization, as well as certain post-registration requirements.

2. The bill modifies provisions related to the financial capability requirements for professional employer organizations, which under current law may be satisfied by maintaining working capital of at least $100,000 or, as an alternative, maintaining a bond, certificate of deposit, escrow account, or irrevocable letter of credit in at least a specified amount. The bill eliminates an exception to the $100,000 working capital requirement and provides that the only alternative to meeting this working capital requirement is to maintain a bond.

3. The bill eliminates a requirement that DFI's alternative registration process for professional employer organizations be specified by DFI rule, and makes the alternative registration process permissive rather than mandatory.

4. The bill eliminates a requirement that DFI maintain on its Internet site a list of all professional employer organizations, but requires DFI to make this list available on request.

Other changes The bill makes other changes applicable to charitable organizations, professional fund-raisers, fund-raising counsel, and professional employer organizations, including all of the following:

1. The bill eliminates a provision that allows an individual, if the individual must provide to DFI his or her social security number, telephone number, street address, or e-mail address (personal identifier) in connection with a registration, to opt out of disclosure of the individual's personal identifier in any list that contains personal identifiers of at least ten individuals and that DFI furnishes to other persons.

2. The bill eliminates a requirement that DFI cooperate with certain other state agencies to develop and maintain a computer linkup to provide access to registration information.