Monday, August 6, 2012

California Considers Nonprofit Mismanagement Bill

The California state Legislature is considering a bill that would give the state attorney general's office more power to crack down on nonprofits that are found to be mismanaging charitable funds.

California Watch reported today that a bill by Assemblyman Mike Feuer (D-West Hollywood) would give the attorney general the ability to take legal action against a charity or fundraiser if it fails to provide the required documents or makes a false statement in application or report. Current law requires the state to prove that there was intent to deceive before taking action.

Organizations would be given a penalty of up to $1,000 per violation after a five days' notice. The bill passed the Assembly, and will be heard in the Senate Appropriations Committee today.

According to analysis by staff from the Assembly Judiciary Committee, the attorney general's office is unable to prevent fraud from occurring with its current powers. The report claimed that this is the case even in instances when concerns are raised about a nonprofit before charitable donations are lost.

The state of California has dealt with many cases of alleged fraud in recent years. In 2010, the attorney general's office reached a settlement with the Association for Firefighters and Paramedics Inc. The state accused the Santa Ana-based organization of spending thousands of dollars meant for burn victims on a Caribbean cruise, trips to resorts, and other personal expenses. The nonprofit denied any wrongdoing in the case.

Bill AB 2327 is very similar to laws that are already in place in other states. The one difference is that the law, if passed, would require fiscal sponsors of charities to have directors' and officers' insurance in case they lose the money the are managing.

You can read the full story in California Watch.

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