BILL ANALYSIS Ó
AB 556
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Date of Hearing: May 6, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
556 (Irwin) - As Amended April 7, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill:
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1)Expands the definition of "commercial fundraiser for
charitable purposes" with regard to the Attorney General's
(AG's) authority to enforce disclosure requirements for
charity fundraisers.
2)Establishes a ten-year statute of limitations for enforcement
actions against charity fundraisers, consultants, and other
third parties who engage in fraud or other prohibited conduct.
FISCAL EFFECT:
Any additional costs to the AG's office would be minor and
absorbable within its existing resources.
COMMENTS:
1)Background. The AG is responsible for regulating charities and
the professional fundraisers who solicit on their behalf. This
oversight is meant to protect charitable assets for their
intended use and ensure that charitable donations contributed
by Californians are not misused and squandered through fraud
or other means. All charitable trustees and fundraising
professionals are required to register and file annual
financial disclosure reports with the Registry of Charitable
Trusts in the AG's office before soliciting in California.
The attorneys and auditors of the AG's Charitable Trusts
Section investigate and bring legal actions against charities,
their officers and directors, and fundraising professionals
that misuse charitable assets or engage in fraudulent
fundraising practices.
2)Purpose. According to the author, recent enforcement cases
have highlighted examples where persons performing
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professional fundraising services attempted to circumvent
disclosure requirements by registering as fundraising counsel
rather than as commercial fundraisers. In response, this bill
would revise the definition of "commercial fundraiser for
charitable purposes" to include additional actions and types
of fee arrangements that the author believes warrant a
disclosure to the public that the actions are being carried
out by a third party fundraiser for compensation. For
example, the bill would require a person or entity that plans,
manages, counsels, advises, or prepares material for the
solicitation of funds for charitable purposes to register as a
commercial fundraiser if he or she is compensated by a
percentage interest in the funds received through solicitation
rather than by a flat fee.
3)Statute of Limitations. Under Section 12596 of the Supervision
of Trustees and Fundraisers for Charitable Purposes Act, the
AG may bring an enforcement action for fraud or other
violations by the trustees, officers, or directors of a
charitable organization at any time within ten years of the
cause of action. Because cases involving charity fraud are
often complex and cover misconduct from an extended period of
time, the author contends, the ten-year statute of limitations
is appropriate. However, Section 12596 does not apply to other
parties such as fundraisers, consultants, or accountants who
may have directly participated in, or aided and abetted the
fraud; instead they are subject to either a three- or four-
year statute of limitations, depending on the cause of action.
Accordingly, this bill would establish a ten-year statute of
limitations for all persons or entities involved in the fraud
to make this consistent with the same period that applies to
directors and officers of the charity.
Analysis Prepared by:Chuck Nicol / APPR. / (916)
319-2081
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