Legislature(2013 - 2014)BUTROVICH 205

04/10/2014 09:00 AM Senate STATE AFFAIRS


Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 75 CONTRIBUTION FROM PFD: AUDITS; UNIVERSITY TELECONFERENCED
Moved CSHB 75(FIN) Out of Committee
+ HJR 32 RELIGIOUS PERSECUTION AND PEACE IN SYRIA TELECONFERENCED
Moved CSHJR 32(STA) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
        HB  75-CONTRIBUTION FROM PFD: AUDITS; UNIVERSITY                                                                    
                                                                                                                                
                                                                                                                                
9:01:47 AM                                                                                                                    
VICE CHAIR GIESSEL announced the consideration of HB 75. [CSHB
75(FIN) was before the committee.]                                                                                              
                                                                                                                                
9:02:02 AM                                                                                                                    
REPRESENTATIVE PAUL SEATON, Alaska State Legislature, Juneau,                                                                   
Alaska, introduced HB 75 as sponsor speaking to the following                                                                   
sponsor statement: [Original punctuation provided.]                                                                             
                                                                                                                                
     HB   75    allows   greater   participation    in   the                                                                    
     Pick.Click.Give program by  small non-profits that meet                                                                    
     all of  the eligibility  requirements for  the program,                                                                    
     but  do not  participate  due to  the cost  prohibitive                                                                    
     audit requirement.                                                                                                         
                                                                                                                                
     The creation of the  popular Pick.Click.Give program by                                                                    
     the  25th  Alaska  State Legislature  gave  Alaskans  a                                                                    
     simple  and convenient  option to  donate to  charities                                                                    
     and non-profits  of their choice.  These organizations,                                                                    
     which  provide important  services to  our communities,                                                                    
     rely on donations to function.                                                                                             
                                                                                                                                
     One  criterion  that  must   be  met  by  organizations                                                                    
     wishing  to  participate  often stops  smaller  Alaskan                                                                    
     charities and  non-profits from  applying. This  is the                                                                    
     required  financial  audit  for  organizations  with  a                                                                    
     total budget  of $250,000 or  greater. The cost  of the                                                                    
     required  financial audit  for smaller  groups is  much                                                                    
     greater  than the  donations received  by these  groups                                                                    
     through  the   Pick.Click.Give  program,   which  makes                                                                    
     participation  in  the  program impractical.  Not  only                                                                    
     does  this  mean that  these  smaller  groups will  not                                                                    
     receive  donations  through  the program,  some  groups                                                                    
     have found that exclusion  from the program gives their                                                                    
     supporters  the mistaken  impression that  they are  no                                                                    
     longer certified non-profits.                                                                                              
                                                                                                                                
     This  bill   eases  the   financial  burden   on  these                                                                    
     organizations  and  allows  Alaskans  a  more  complete                                                                    
     choice  of organizations  by eliminating  the financial                                                                    
     audit requirement for organizations  that do not file a                                                                    
     federal   audit.  This   does   not  remove   financial                                                                    
     accountability.     All    Pick.Click.Give     donation                                                                    
     recipients must be  501(c)(3) tax-exempt organizations,                                                                    
     which are required  to file the form  990 annually with                                                                    
     the IRS. The IRS form 990  was overhauled in 2008, is a                                                                    
     public  record and  accessible  online  to donors.  The                                                                    
     annual  filing  now  requires disclosure  of  not  only                                                                    
     detailed   financial    information,   but   governance                                                                    
     practices,  policies,   program  services,   and  other                                                                    
     compliance    measures.   This    rigorous   test    of                                                                    
     accountability  is  already  required  and  provides  a                                                                    
     complete  picture  of  finance   and  management  of  a                                                                    
     nonprofit.  Additionally,  an   audit  is  required  of                                                                    
     organizations that  expend $500,000 or more  in federal                                                                    
     awards. These organizations will  be required to submit                                                                    
     a  copy  of this  audit  to  the state.  Entities  that                                                                    
     expend less  than $500,000 in federal  funds still must                                                                    
     still make  their records available  for review  by the                                                                    
     federal government.                                                                                                        
                                                                                                                                
     This bill  further requires  each campus  of University                                                                    
     of  Alaska   to  pay  the   $250  application   fee  to                                                                    
     participate in the program, just  as all other eligible                                                                    
     organizations do.                                                                                                          
                                                                                                                                
     The  Pick.Click.Give  program  encourages  Alaskans  to                                                                    
     give  back  to their  community  by  bringing the  many                                                                    
     worthy state programs right  to their doorstep. Smaller                                                                    
     non-profits nourish  Alaskan communities on  a personal                                                                    
     level, open  pathways for budding artistic  talents and                                                                    
     provide educational  opportunities that fit  just right                                                                    
     with community  needs. These organizations  deserve the                                                                    
     chance  to  connect   through  Pick.Click.Give  to  the                                                                    
     Alaskans they serve.                                                                                                       
                                                                                                                                
REPRESENTATIVE SEATON  reported that  the current version  of the                                                               
bill addresses  the ongoing administrative  costs of  the program                                                               
that the Rasmuson  Foundation has funded for the  last six years.                                                               
Through  a poll,  a  majority  of the  nonprofits  agreed that  a                                                               
percentage contribution  of the donation  is an equitable  way to                                                               
sustain the program. The bill  now includes a coordination fee of                                                               
seven percent of the amount  of the contributions reported by the                                                               
nonprofit. The intent is to make the program self-sustaining.                                                                   
                                                                                                                                
9:06:38 AM                                                                                                                    
SENATOR COGHILL asked  if the provision in paragraph  (9) on page                                                               
3, lines  9-10, addresses the  new requirement  regarding federal                                                               
audits.                                                                                                                         
                                                                                                                                
REPRESENTATIVE SEATON  replied he  didn't know the  exact federal                                                               
code, but the  federal government does require  a certified audit                                                               
for  nonprofits  that  receive  more  than  $500,000  in  federal                                                               
grants.  HB 75  says that  any  nonprofit that  falls under  that                                                               
requirement must submit a copy  of the audit with the application                                                               
in order to participate in the Pick Click Give program.                                                                         
                                                                                                                                
SENATOR COGHILL asked  for an explanation of the  new language on                                                               
page 3, lines 4-6.                                                                                                              
                                                                                                                                
REPRESENTATIVE  SEATON  explained  that   the  bill  removes  the                                                               
current  requirement  for  nonprofits   who  participate  in  the                                                               
program to have  a certified public audit if  their annual budget                                                               
exceeds $250,000. Nonprofits that  receive federal grants of more                                                               
than $500,000 are  required to have a certified  public audit and                                                               
the bill requires  a nonprofit that falls  under that requirement                                                               
to submit a copy of the audit with their application.                                                                           
                                                                                                                                
SENATOR   COGHILL  offered   his  understanding   of  the   audit                                                               
requirement.                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON agreed with the characterization.                                                                         
                                                                                                                                
9:10:24 AM                                                                                                                    
SENATOR  WIELECHOWSKI  asked  how  many  new  organizations  will                                                               
participate in Pick Click Give as a result of the bill.                                                                         
                                                                                                                                
REPRESENTATIVE   SEATON   said   he    didn't   know,   but   the                                                               
representatives  from the  Rasmuson  Foundation  and the  Foraker                                                               
Group might have the information.                                                                                               
                                                                                                                                
SENATOR WIELECHOWSKI asked if  eliminating the original financial                                                               
audit requirements might attract un-reputable nonprofits.                                                                       
                                                                                                                                
REPRESENTATIVE SEATON replied the  enhanced requirement under the                                                               
Internal Revenue Service Form 990 gives some security.                                                                          
                                                                                                                                
9:13:26 AM                                                                                                                    
SENATOR  WIELECHOWSKI  warned  that  the  list  of  participating                                                               
organizations grows  annually and at  some point the  number will                                                               
become overwhelming  to Alaskan  contributors. He  reiterated his                                                               
desire  to  ensure  that  all   organizations  on  the  list  are                                                               
reputable   and  that   Alaskans  not   become  overwhelmed.   He                                                               
acknowledged that he didn't have the answer.                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON   pointed  out   that  there  is   a  $250                                                               
application  fee so  an organization  can't get  its name  on the                                                               
list without some financial commitment.                                                                                         
                                                                                                                                
VICE CHAIR GIESSEL asked if the $250 is an annual fee.                                                                          
                                                                                                                                
REPRESENTATIVE SEATON answered yes.                                                                                             
                                                                                                                                
9:15:53 AM                                                                                                                    
DAN   DEBARTOLO,  Director,   Permanent   Fund  Division   (PFD),                                                               
Department of Revenue, introduced himself.                                                                                      
                                                                                                                                
VICE  CHAIR  GIESSEL  asked  if  he  could  answer  some  of  the                                                               
questions that were asked.                                                                                                      
                                                                                                                                
MR. DEBARTOLO responded  that he would be speculating  if he were                                                               
to say  how many  organizations will return  to the  program with                                                               
the removal  of the  audit requirement.  This year  512 qualified                                                               
organizations  participated in  the  program and  as the  program                                                               
grows he  expects that number  to grow.  With regard to  the idea                                                               
that the list  might become overwhelming, he  said the department                                                               
can  only improve  the search  tools it  has. The  $250 fee  goes                                                               
towards programming  to improve those tools  and improvements are                                                               
made  each based  on suggestions  from the  public, the  Rasmuson                                                               
Foundation,  and the  Alaska Community  Foundation. The  $250 fee                                                               
also  helps offset  the division's  direct administrative  costs.                                                               
United  Way  currently   has  a  $40,000  contract   to  vet  the                                                               
applications to  ensure that  the 501  (c)(3) applicants  are all                                                               
above  board. The  new  seven percent  coordination  fee will  be                                                               
contracted out  to handle outreach  and advertising. It  seems to                                                               
be a reasonable amount.                                                                                                         
                                                                                                                                
SENATOR  WIELECHOWSKI  asked  how many  organizations  have  been                                                               
turned away.                                                                                                                    
                                                                                                                                
MR. DEBARTOLO offered to follow up with the number later today.                                                                 
                                                                                                                                
SENATOR WIELECHOWSKI noted that a  parents guild at an elementary                                                               
school in  his district  was interested  in participating  in the                                                               
program but  wasn't successful. He  asked if anything  else would                                                               
prohibit  a local  PTA or  parent group  from joining  Pick Click                                                               
Give.                                                                                                                           
                                                                                                                                
MR.  DEBARTOLO  replied he  didn't  see  any hurdles  that  would                                                               
prevent a small organization from  participating, as long as they                                                               
meet the 501  (c)(3) requirements, pay the  $250 application fee,                                                               
and apply on time.                                                                                                              
                                                                                                                                
9:19:45 AM                                                                                                                    
SENATOR  COGHILL asked  if an  organization will  receive $93  of                                                               
every $100 contribution.                                                                                                        
                                                                                                                                
MR. DEBARTOLO answered  yes. If the bill passes,  the division in                                                               
2015 will  need to change  the process after the  PFD application                                                               
to let  people know that seven  percent of their donation  may be                                                               
appropriated for coordination fees for  the program. At the point                                                               
of  distribution of  the PFD  in  October, seven  percent of  all                                                               
pledges that  did pay will be  put into a separate  account. That                                                               
amount will  be reported to  the legislature in January  and will                                                               
go through  the normal appropriation  process. The fees  would be                                                               
available at the beginning of the following fiscal year.                                                                        
                                                                                                                                
SENATOR  WIELECHOWSKI asked  if  nothing has  been collected  for                                                               
administrative fees to date.                                                                                                    
                                                                                                                                
MR.  DEBARTOLO   replied  the  $250  application   fee  has  been                                                               
collected. That has been used  for programing and the contract to                                                               
administer the applications.                                                                                                    
                                                                                                                                
SENATOR  WIELECHOWSKI asked  how much  was contributed  this year                                                               
under Pick Click Give.                                                                                                          
                                                                                                                                
MR.  DEBARTOLO  replied  the  pledges  this  year  for  the  2014                                                               
dividend   application   period   totaled  $2.75   million.   The                                                               
contributions since  the inception  of the  program is  about $10                                                               
million.                                                                                                                        
                                                                                                                                
SENATOR  WIELECHOWSKI  asked  what  it costs  the  department  to                                                               
administer the program.                                                                                                         
                                                                                                                                
9:22:38 AM                                                                                                                    
MR. DEBARTOLO replied  nothing has come out of  the dividend fund                                                               
itself  because DOR  collects the  $250 fee.  This last  year the                                                               
fees amounted  to $128,000. In the  last fiscal year he  was only                                                               
authorized  to use  $71,000  and the  remainder  rolled into  the                                                               
following  year and  is available  for other  projects to  ensure                                                               
that  the  program  keeps  going.  The  seven  percent  would  be                                                               
appropriated  and managed  by  another  statewide nonprofit  like                                                               
United Way or the Alaska Community Foundation.                                                                                  
                                                                                                                                
SENATOR WIELECHOWSKI  asked him to  recap where seven  percent of                                                               
the charitable donations would go and how it would be used.                                                                     
                                                                                                                                
MR. DEBARTOLO said his understanding  is that the money would not                                                               
go into  the general fund. It  would be in an  account from which                                                               
the money  could be appropriated.  The remaining funds  would not                                                               
be reabsorbed into the general fund each year.                                                                                  
                                                                                                                                
SENATOR  WIELECHOWSKI asked  if DOR  asked  for 7  percent to  be                                                               
withheld from the contributions.                                                                                                
                                                                                                                                
MR. DEBARTOLO  said DOR didn't  ask for  it, but believes  it's a                                                               
good idea.  The Rasmuson Foundation administered  the program and                                                               
advised that the program wasn't self-sustaining.                                                                                
                                                                                                                                
SENATOR COGHILL  asked if the  Rasmuson Foundation  suggested the                                                               
seven percent.                                                                                                                  
                                                                                                                                
CHAIR DYSON joined the committee.                                                                                               
                                                                                                                                
MR. DEBARTOLO  explained that the  Rasmuson Foundation did  a lot                                                               
of outreach to the nonprofits to  discuss how to make the program                                                               
sustainable.  He suggested  the committee  ask Mr.  Marshall from                                                               
the Rasmuson Foundation about that.                                                                                             
                                                                                                                                
SENATOR WIELECHOWSKI  suggested that  DOR ask the  programmers to                                                               
try to  make it easier for  people to scroll through  the list of                                                               
nonprofits because he found it cumbersome.                                                                                      
                                                                                                                                
MR. DEBARTOLO  reported that DOR  is working to  better interface                                                               
with  the numerous  new electronic  devices for  both Pick  Click                                                               
Give and the general online PFD application.                                                                                    
                                                                                                                                
9:28:15 AM                                                                                                                    
JORDAN MARSHALL,  Staff, Rasmuson Foundation,  Anchorage, Alaska,                                                               
explained that  for the  last six  years the  Rasmuson Foundation                                                               
and  its funding  partners  have covered  the  cost of  statewide                                                               
coordination, outreach  in the form  of personnel  and assistance                                                               
to the  organizations, and marketing  of the campaign. A  poll of                                                               
the participating nonprofits showed  that 86 percent believe that                                                               
the  statewide coordination  and outreach  is fundamental  to the                                                               
success of the program. They  also agreed that the most equitable                                                               
way to  cover the cost of  the basic statewide outreach  and work                                                               
was  through  implementation of  a  fee.  The seven  percent  was                                                               
reached by  factoring the $350,000  annual cost of  the statewide                                                               
effort and the annual contribution goal of $5 million.                                                                          
                                                                                                                                
MR. MARSHALL explained that  the statewide coordinator, currently                                                               
based at  the Alaska Community Foundation,  oversees training and                                                               
outreach  through participating  nonprofits  and coordinates  the                                                               
broad-based  statewide  education  campaign   on  behalf  of  the                                                               
program  participants. This  coordinator  provides expertise  and                                                               
serves  as  a   primary  point  of  contact  for   the  500  plus                                                               
participating organizations.  This is  what the  coordination fee                                                               
would be used for.                                                                                                              
                                                                                                                                
9:31:46 AM                                                                                                                    
SENATOR  WIELECHOWSKI asked  how  much it  costs  to sustain  the                                                               
program because  he doesn't want  any of the coordination  fee to                                                               
end up in the general fund.                                                                                                     
                                                                                                                                
MR.  MARSHALL  explained  that   seven  percent  of  this  year's                                                               
contributions of  $2.75 million  wouldn't come close  to covering                                                               
the  cost   of  the  statewide  coordinator   and  outreach  that                                                               
philanthropic  and  private  funds   have  covered  to  date.  He                                                               
reiterated his understanding  that the fees would  be withheld at                                                               
the  point  that  the  donated   funds  are  distributed  to  the                                                               
nonprofits.  The fees  would be  held in  a separate  account for                                                               
another nine months until they  could be appropriated in the next                                                               
fiscal year and  made available immediately for  use in statewide                                                               
coordination in the next calendar year.                                                                                         
                                                                                                                                
SENATOR WIELECHOWSKI  asked if he  had a  sense of the  number of                                                               
organizations  that apply  but don't  qualify for  participation,                                                               
how to ensure  that un-reputable nonprofits don't  make their way                                                               
into   the   program,   and  the   potential   for   overwhelming                                                               
contributors if the list is too long.                                                                                           
                                                                                                                                
MR. MARSHALL  estimated that a  couple dozen  organizations apply                                                               
and don't  qualify or don't  apply because of the  current rules.                                                               
With regard  to reputability, any  organization that  applies has                                                               
to have  an IRS  letter designating  that they  are a  501 (c)(3)                                                               
organization in  good standing and  submit the IRS Form  990. The                                                               
organizations have to have a  volunteer board that has a majority                                                               
of Alaska  residents and must  have provided services  within the                                                               
state for the previous two years.  These rules were put in by the                                                               
legislature  seven years  ago to  ensure  that the  participating                                                               
organizations are known, reputable,  and have a responsibility to                                                               
the residents  of the state.  Another eligibility criteria  is to                                                               
have $100,000 or five percent  of the annual budget in individual                                                               
contributions.  This  ensures  that   the  organization  have  an                                                               
infrastructure   that   can    accept   and   manage   individual                                                               
contributions. The  forgoing qualifications  make it  very likely                                                               
that the participating organizations  are reputable. However, the                                                               
Pick  Click  Give  program doesn't  have  the  infrastructure  or                                                               
desire to  police the participants. Finally,  the enhanced search                                                               
feature on  the PFD online  application is improved each  year is                                                               
less cumbersome that it was the first year.                                                                                     
                                                                                                                                
CHAIR  DYSON  asked  what  happens  if  DOR  receives  notice  of                                                               
apparent unethical conduct.                                                                                                     
                                                                                                                                
MR. MARSHALL  said the department  manages that but he  does know                                                               
that DOR's  contractor receives the  applications and  makes sure                                                               
the correct documentation is provided.                                                                                          
                                                                                                                                
9:41:22 AM                                                                                                                    
CANDACE WINKLER, Alaska  Community Foundation, Anchorage, Alaska,                                                               
offered   to  answer   questions   related  to   the  number   of                                                               
organizations on the list and the cost of the outreach program.                                                                 
                                                                                                                                
CHAIR DYSON asked the sponsor if anyone opposed the bill.                                                                       
                                                                                                                                
REPRESENTATIVE SEATON answered no.                                                                                              
                                                                                                                                
CHAIR DYSON found no further questions and solicited a motion.                                                                  
                                                                                                                                
9:42:21 AM                                                                                                                    
SENATOR GIESSEL  moved to report  CS for HB 75(FIN),  labeled 28-                                                               
LS0323\O,  from  committee  with individual  recommendations  and                                                               
attached indeterminate fiscal note(s).                                                                                          
                                                                                                                                
CHAIR DYSON found no objection and announced that CSHB 75(FIN)                                                                  
is reported from the Senate State Affairs Standing Committee.                                                                   

Document Name Date/Time Subjects
Audit Requirement Bullets v2 (3-12-14).pdf SSTA 4/10/2014 9:00:00 AM
HB 75
HB75-About Pick Click Give .pdf SSTA 4/10/2014 9:00:00 AM
HB 75
HB75-Explanation of Changes.pdf SSTA 4/10/2014 9:00:00 AM
HB 75
HB75-Fiscal Note - University.pdf SSTA 4/10/2014 9:00:00 AM
HB 75
HB75-Legislation - Version O - HFIN CS.pdf SSTA 4/10/2014 9:00:00 AM
HB 75
HB75-Letters of Support.pdf SSTA 4/10/2014 9:00:00 AM
HB 75
HB75-Pick Click Give Application.pdf SSTA 4/10/2014 9:00:00 AM
HB 75
HB75-Sponsor Statement.pdf SSTA 4/10/2014 9:00:00 AM
HB 75
Pick Click Give sustain survey 031014.pdf SSTA 4/10/2014 9:00:00 AM
HB 75
HB75-Alaska Statute 43 23 062.pdf SSTA 4/10/2014 9:00:00 AM
HB 75
HB75-Fiscal Note - University.pdf SSTA 4/10/2014 9:00:00 AM
HB 75
HB75-Fiscal Note - Revenue.pdf SSTA 4/10/2014 9:00:00 AM
HB 75
HJR 32 Sponsor Statement.pdf SSTA 4/10/2014 9:00:00 AM
HJR 32
CSHJR032B.pdf SSTA 4/10/2014 9:00:00 AM
HJR 32
HJR032A.pdf SSTA 4/10/2014 9:00:00 AM
HJR 32
CSHJR32-04-02-14.pdf SSTA 4/10/2014 9:00:00 AM
HJR 32
HJR 32 Summary of Changes.pdf SSTA 4/10/2014 9:00:00 AM
HJR 32