Assemblyman ANDREW ZWICKER
District 16 (Hunterdon, Mercer, Middlesex and Somerset)
Assemblywoman YVONNE LOPEZ
District 19 (Middlesex)
Revises financial reporting requirements for charitable organizations; excludes non-monetary in-kind donations from gross revenue for purpose of reporting requirements.
CURRENT VERSION OF TEXT
An Act concerning financial reporting requirements of charitable organizations and amending P.L.1994, c.16.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 7 of P.L.1994, c.16 (C.45:17A-24) is amended to read as follows:
7. a. Every charitable organization operating or soliciting within this State, except for those provided for in section 8 of this act or exempt pursuant to section 9 of this act, shall file a long form registration statement with the Attorney General.
b. The long form shall contain the following:
(1) The name of the organization and any other name or names under which it intends to solicit contributions and the purposes for which it was organized;
(2) The name, street address and telephone number of each officer, director and trustee and each principal salaried executive staff employee and whether the person has been adjudged liable in an administrative or civil action, or convicted in a criminal action, involving theft, fraud or deceptive business practices. For the purposes of this paragraph:
(a) a plea of guilty, non vult, nolo contendere or any similar disposition of alleged criminal activity shall be deemed a conviction;
(b) "each principal salaried executive staff employee" shall be limited to no more than the five most highly compensated employees in the organization; and
(c) a judgment of liability in an administrative or civil action shall include, but not be limited to, any finding or admission that the officer, director, trustee or principal salaried executive staff employee engaged in an unlawful practice or practices related to the solicitation of contributions or the administration of charitable assets, regardless of whether that finding was made in the context of an injunction, a proceeding resulting in the denial, suspension or revocation of an organization's registration, consented to in an assurance of voluntary compliance or any similar order or legal agreement with any state or federal agency.
(3) A copy of the most recent Internal Revenue Service Form 990 and Schedule A (990) for every registrant if the organization filed these forms;
(4) A clear description of the specific programs and charitable purpose for which contributions will be used and a statement whether such programs are planned or are in existence;
(5) A statement disclosing pertinent information concerning
whether any of the organization's officers, directors, trustees or principal salaried executive staff employees as defined in subparagraph (b) of paragraph (2) of subsection b. of this section:
(a) Are related by blood, marriage or adoption to each other or to any officers, agents or employees of any fund raising counsel or independent paid fund raiser under contract to the organization, or are related by blood, marriage or adoption to any chief executive employee, any other employee of the organization with a direct financial interest in the transaction, or any partner, proprietor, director, officer, trustee, or to any shareholder of the organization with more than a two percent interest of any supplier or vendor providing goods or services to the organization and, if so, the name and business and home address and telephone number of each related party; or
(b) Have a financial interest in any activity engaged in by a fund raising counsel or independent paid fund raiser under contract to the organization or any supplier or vendor providing goods or services to the organization and, if so, the name and business address and telephone number of each interested party.
(6) The amount of any grant or financial assistance from any agency of government in its preceding fiscal year;
(7) A statement setting forth the place where and the date when the organization was legally established and the form of the organization;
(8) The principal street address and telephone number of the organization and the address and telephone number of each office in this State. If the organization does not maintain an office in this State, the name and address of the individual having custody of its financial records pertaining to operations or solicitations in this State shall be disclosed;
(9) The name, street address and telephone number of each affiliate which shares in the contributions or other revenue raised in this State;
(10) The date when the organization's fiscal year ends;
(11) A statement whether:
(a) The organization is authorized by any other state to solicit contributions and, if so, a listing of the states in which authorization has been obtained;
(b) The organization is or has ever been enjoined in any jurisdiction from soliciting contributions or has been found to have engaged in unlawful practices in the solicitation of contributions or the administration of charitable assets;
(c) The organization's registration has been denied, suspended or revoked by any jurisdiction, together with the reasons for that denial, suspension or revocation; and
(d) The organization has voluntarily entered into an assurance of voluntary compliance agreement or any similar order or legal agreement with any jurisdiction or federal agency or officer;
(12) Whether the organization intends to solicit contributions from the general public; and
(13) Any other information as may be prescribed by rules adopted by the Attorney General. In prescribing the requirements of the long form, the Attorney General shall permit a charitable organization to incorporate by reference any information reported by the organization on its Service Form 990 and Schedule A (990).
c. With initial registration only, every charitable organization required to file a long form registration shall also file a copy of the organization's charter, articles of organization, agreement of association, instrument of trust, constitution or other organizational instrument and bylaws, and a statement setting forth the organization's tax exempt status with copies of federal or state tax exemption determination or exemption ruling letters; provided that any changes in the accuracy of this information shall be reported to the Attorney General pursuant to subsection e. of section 14 of this act.
d. (1) Every charitable organization required to file a long form registration shall file an annual financial report with the Attorney General. The annual financial report shall include: a balance sheet; a statement of support revenue, expenses and changes in fund balance; a statement of functional expenses at least divided into program, management, general, and fund raising; and such other information as the Attorney General shall by rule require.
(2) The annual financial report of every charitable organization which received gross revenue in excess of [$250,000] $500,000 in monetary donations, or any greater amount that the Attorney General may prescribe by regulation, during its most recently completed fiscal year shall be accompanied by: (a) a financial statement prepared in accordance with generally accepted accounting principles or other comprehensive basis of accounting approved for use by the Attorney General by regulation which has been audited in accordance with generally accepted auditing standards by an independent certified public accountant; and (b) any management letters prepared by the auditor in connection with the audit commenting on the internal accounting controls or management practices of the organization.
The annual financial reports of all organizations receiving more than $25,000 but less than [$250,000] $500,000 in monetary donations, or any greater amount that the Attorney General may prescribe by regulation, shall be certified by the organization's president or other authorized officer of the organization's governing board and at the request of the Attorney General, the organization shall submit: (a) a financial statement prepared in accordance with generally accepted accounting principles or other comprehensive basis of accounting approved for use by the Attorney General by regulation which has been audited in accordance with generally accepted auditing standards by an independent certified public accountant; and (b) any management letters prepared by the auditor in connection with the audit commenting on the internal accounting controls or management practices of the organization.
Notwithstanding any other provision of law to the contrary, non-monetary donations in the form of in-kind contributions directly related to any stated purpose or mission of the charitable organization, including food for food pantries or food banks, supplies for shelters, and such other forms of in-kind contributions as may be permitted by the Attorney General, shall not constitute gross revenue with respect to the requirement of an annual financial report with a financial statement audited by an independent certified public accountant under this subsection. In addition to any other requirement under this subsection, annual financial reports and statements shall include a summary of all non-monetary in-kind contributions and the value attributed to those contributions.
(3) The Attorney General may accept a copy of a current financial report previously prepared by a charitable organization for another state agency or officer in compliance with the laws of that state, provided that the report filed with the other state agency or officer shall be substantially similar in content to the report required by this subsection.
(4) An independent member agency of a federated fund raising organization shall independently comply with the provisions of this subsection.
e. In order to register its qualified local units pursuant to subsection d. of section 9 of this act, a parent organization registered pursuant to this section shall include with its initial registration and annual renewal statement a separate statement that provides the following:
(1) The name, principal street address, and phone number of all local units within this State that it is registering;
(2) The amount of gross contributions received by each such unit and the purpose or purposes for which these funds were raised in the preceding fiscal year; and
(3) A statement asserting that each such local unit has provided the parent organization with a written statement reporting the information included on its behalf and asserting that the local unit meets all of the requirements of subsection d. of section 9 of this act.
f. Any management letters prepared by the auditor in connection with the audit commenting on the internal accounting controls or management practices of the organization submitted pursuant to paragraph (2) of subsection d. of this section shall not be considered a public record under P.L.1963, c.73 (C.47:1A-1 et seq.) or P.L.2001, c.404 (C.47:1A-5 et al.), shall not be made available for public inspection nor used for a purpose inconsistent with P.L.1994, c.16 (C.45:17A-18 et seq.), and shall be removed from the record in the custody of the Attorney General at such time that such information is no longer necessary for the enforcement of that act. The records required pursuant to this section shall be maintained for a period of at least three years after the end of the period of time to which they relate.
(cf: P.L.2005, c.283, s.3)
2. This act shall take effect immediately.
This bill would amend the New Jersey “Charitable Registration and Investigation Act” by revising the thresholds of gross revenue amounts received by charitable organizations that determine their annual financial reporting requirements with the Attorney General’s office. The bill also would exclude non-monetary in-kind donations directly related to the mission of the charitable organization from gross revenue for the purpose of requiring annual disclosure reports to include a financial statement which has been audited by an independent certified public accountant. In-kind donations would include food for food pantries or food shelters, supplies for shelter, and any other in-kind contributions the Attorney General permits.
The bill provides that a charitable organization operating or soliciting within the State which receives annual gross revenue in excess of $500,000 in monetary donations must file with its annual disclosure report a financial statement which has been audited by an independent certified public accountant. The threshold for this audited financial statement requirement under current law is $250,000 of gross revenue, including in-kind donations, or any greater amount that the Attorney General may prescribe by regulation.
Regulations adopted by the Attorney General increased the threshold to $500,000 of gross revenue. The regulations also specify that for the purpose of determining if an audit is required, a charitable organization’s gross revenue shall not include: one-time bequests, fund raising campaigns for capital property in a single fiscal year, the value of services performed by volunteers, or items purchased by other entities for the use of the charitable organization in situations in which ownership of the item is retained by the original purchaser. The bill would exempt certain non-monetary in-kind contributions from inclusion as gross revenue as well.
In addition, the bill makes a corresponding adjustment by providing that organizations that have annual gross revenues in excess of $25,000 and up to $500,000 must file an annual financial report that is certified by the organization’s president or other authorized officer.
Charitable organizations incur significant expenses associated with providing audited financial statements on an annual basis. These expenses, or some portion of them, could otherwise be used to further the charitable mission of these organizations. The burden of annual financial reporting expenses borne by some charitable organizations may be relieved by increasing the threshold at which organizations must file audited financial statements, and excluding certain non-monetary in-kind contributions from gross revenue.