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Charitable Solicitations in Pennsylvania – Keeping Tabs On The Money
From time to time all of us are asked contribute either time or money for various good and worthy causes. Recent events have led to unprecedented levels of giving both locally and nationally. Unfortunately, now and again a few bad eggs take the noble intentions of many of us and divert our beneficent gifts to their own private use. The Pennsylvania Legislature has enacted a system administered by the Department of State’s Corporation Bureau to ensure that the charities and the public alike are protected. The law is aptly titled the Solicitation of Funds for Charitable Purposes Act, and it may be found at 10 P.S. § 162.1 et seq.
In general, the law provides that there will be full public disclosure of the identity of persons who solicit contributions from the public, the purposes for which the contributions are solicited and the manner in which the solicitations are actually used. The act is further designed to promote consumer education about charitable concerns and to punish deception and dishonest statements and conduct with criminal and civil penalties. Additionally, the act publicizes matters relating to fraud, deception and misrepresentation perpetrated in the name of charity. Individuals and businesses who make gifts to charities or who solicit gifts for charities are wise to familiarize themselves with the requirements of this law.
The act requires charitable organizations to file registration statements within 135 days after the end of the charity’s fiscal year. These statements set forth information needed to identify all of the principals of the charity and those who have been engaged to do fundraising on its behalf. Additionally, the larger charities are required to provide financial information and audits for entities that raise more than $100,000 per year. There are other financial disclosures required for entities that raise less than this amount. Filing fees for the registration similarly are scaled to reflect the amounts collected.
Certain charitable entities are exempt from registration under the act. Generally these are educational institutions, hospitals, federally chartered veterans’ organizations, volunteer fire, ambulance, or rescue squads or their auxiliaries, public libraries, senior citizen centers and parent teacher associations.
The long form registration may be replaced by a short form if the solicitation is for the benefit of a single named individual and all of the proceeds are turned over to the named beneficiary provided that there is an appropriate trust for that person. Additionally, the short form of registration may be used for solicitations made by organizations who raise less than $25,000 per year and all of the money is raised by their own volunteers and employees provided that none of the money is paid to any officer, member, professional fundraising counsel, professional solicitor or commercial coventurer. Similarly, the short form may be used in cases where organizations receive less than $100,000 per year and no money is paid to a professional solicitor. When the short form is allowed to be used, the organization does not need to file the financial report that is required when the long form is used.
There are special rules in the act for “Professional Fund Raising Counsel,” defined as any person who is retained to plan, manage, consult, or plan material for the solicitation of contributions for charitable purposes, but who does not employ or engage any compensated person to solicit contributions and does not have custody of any contributions. These persons must also register with the Commonwealth and they must work only under written contract. The contract with the charity must have certain information in it and must be approved by the Bureau on Charities.
There are also special rules for “Professional Solicitors,” defined as a person retained by a charity to solicit contributions including the production of fund raising events. These individuals also must register with the Bureau of Charities and must pay an annual fee of $250 and must file a bond. Professional Solicitors prior to commencing work on a campaign must file the written contract of engagement setting forth among other things the financial terms under which they will be making solicitations. Additionally, they must file, at the same time, a solicitation notice which provides the following information:
- A description of the solicitation event or campaign,
- Each location and telephone number from which the solicitation is to be made,
- The legal name and resident [sic] address of each person responsible for directing and supervising the conduct of the campaign and each person who is to solicit during the campaign,
- A statement as to whether the professional solicitor will at any time have custody or control of contributions,
- The account number and location of each bank account where receipts from the campaign are to be deposited,
- A full and fair description of the charitable program for which the solicitation campaign is being carried out, and
- The date the solicitation campaign or event will begin and the termination date.
The Professional Solicitor prior to an oral solicitation and contemporaneously with a written solicitation is required to disclose:
- The name of the professional solicitor as on file with the department and that the solicitation is being conducted by a professional solicitor who is being paid for his services, and
- If the individual acting on behalf of the professional solicitor identifies himself by name, the individual’s legal name, and
- The legal name of the charitable organization as registered with the department and description of how the contributions will be utilized for a charitable purpose.
At the end of the campaign, the Professional Solicitor must file a financial report with the state.
All of the act’s requirements may be enforced by the Pennsylvania Secretary of State, the Attorney General or the District Attorney. These officers have the ability to conduct investigations and may require written or oral statements and issue subpoenas. The Secretary of State may issue administrative remedies including refusal to grant an exemption, issuing cease and desist orders and imposing administrative fines of up to $1,000 for each act or omission which constitutes a violation, not to exceed $100 per day for the period during which the violation continues.
Additionally the Attorney General or District Attorney may seek criminal penalties for willful and knowing violations of any of the provisions of the act with intent to deceive or defraud any charity or individual. A violation is graded as a first degree misdemeanor, which provides a penalty of up to $10,000 fine and up to five years in prison. Other violations of the act that do not involve the willful and knowing intent to deceive or defraud may be punished with up to a $2,500 fine and up to one year imprisonment.
If you or your business make charitable donations to Pennsylvania charities, you can rest assured that our state government keeps tabs on who is doing what with your gifts. If you are asked to solicit gifts or to engage in fund raising activities on behalf of a charity, you may be subject to the requirements of this act and should consult legal counsel to make sure that you are in compliance with the law.
If you require legal representation for a nonprofit corporation or information on the Charitable Solicitation Act, the attorneys of Wolf, Baldwin & Associates, P.C. have the experience to represent you. Click here now to contact us and to schedule an appointment. We will be happy to advise you about your rights under Pennsylvania law.