02/27/2012 01:30 PM House FINANCE

HOUSE BILL NO. 302                                                                                                            
                                                                                                                                
     "An Act repealing certain audit requirements for                                                                           
     entities receiving contributions from permanent fund                                                                       
     dividends."                                                                                                                
                                                                                                                                
3:43:43 PM                                                                                                                    
                                                                                                                                
Co-Chair   Thomas   MOVED   to  ADOPT   proposed   committee                                                                    
substitute  for  HB  302, Work  Draft  27-LS1264\I  (Kirsch,                                                                    
2/23/12).                                                                                                                       
                                                                                                                                
Co-Chair Stoltze OBJECTED for purpose of discussion.                                                                            
                                                                                                                                
KACI  SCHROEDER-HOTCH,  STAFF, REPRESENTATIVE  BILL  THOMAS,                                                                    
explained that the CS added new  Sections 1 and 2. Section 1                                                                    
clarified that the University of  Alaska was required to pay                                                                    
a $250 application fee to  the Pick, Click, Give program for                                                                    
every  program  or  campus that  was  submitted.  Section  2                                                                    
outlined that  the university should  apply for  the program                                                                    
in a manner described by the department.                                                                                        
                                                                                                                                
Co-Chair Thomas  noted that the  university had found  a way                                                                    
to not  pay the  application fee for  the Pick,  Click, Give                                                                    
program in  the past.  The bill  worked to  treat applicants                                                                    
equally and required all applicants  to pay the $250 fee. He                                                                    
discussed that there was a  cost associated with running the                                                                    
program.                                                                                                                        
                                                                                                                                
Representative  Doogan asked  for  more detail  on the  term                                                                    
"university program."                                                                                                           
                                                                                                                                
Co-Chair  Thomas noted  that there  were different  programs                                                                    
within the university system.                                                                                                   
                                                                                                                                
Co-Chair Stoltze  suspected that there were  elements of the                                                                    
university   that   had   more  fundraising   success   than                                                                    
individual campuses.                                                                                                            
                                                                                                                                
Representative Doogan  wondered how  much it would  cost the                                                                    
university if the fee was applied program by program.                                                                           
                                                                                                                                
Co-Chair  Thomas  explained  that  non-profit  organizations                                                                    
included in the  program all paid the fee  to the Department                                                                    
of Revenue (DOR) to be  listed as a recipient. He reiterated                                                                    
that the goal was to treat all applicants equally.                                                                              
                                                                                                                                
Co-Chair   Stoltze  discussed   the   minimum  barrier   fee                                                                    
requirement  that had  been  set  at $250  to  show that  an                                                                    
entity  was  a   serious  fund-raiser.  Ms.  Schroeder-Hotch                                                                    
responded in the affirmative.                                                                                                   
                                                                                                                                
Vice-chair   Fairclough   noted    her   support   for   the                                                                    
legislation. She discussed that  the university was included                                                                    
in the drop down list  in multiple areas. She clarified that                                                                    
the university would be required  to pay $250 to receive the                                                                    
benefit of  each of its  advertising opportunities.  She had                                                                    
received multiple  solicitations from the university  in her                                                                    
legislative  and  private  email  inboxes;  somehow  it  had                                                                    
figured  out how  to avoid  paying  the $250  fee that  non-                                                                    
profits were required to pay to the program.                                                                                    
                                                                                                                                
3:48:43 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze WITHDREW  his  OBJECTION.  There being  NO                                                                    
further OBJECTION, Work Draft 27-LS126\I was ADOPTED.                                                                           
                                                                                                                                
REPRESENTATIVE  PAUL  SEATON,  SPONSOR, discussed  that  the                                                                    
bill had been introduced because  he had heard from a number                                                                    
of  small non-profits  including the  Seward Senior  Center.                                                                    
The center had a $260,000  budget; it had been participating                                                                    
[in the  Pick, Click,  Give program],  but audit  costs were                                                                    
$15,000  and it  had only  received approximately  $8,000 in                                                                    
contributions.  The  question  that arose  was  whether  the                                                                    
audit was necessary  for individuals to donate  to a charity                                                                    
that was  required to be  a 501(c)(3). The  program required                                                                    
entities to maintain their  501(c)(3) status, which involved                                                                    
the  completion  of  the lengthy  Internal  Revenue  Service                                                                    
(IRS) 990 form.  There was a federal  audit requirement that                                                                    
kicked in  if the entity  received over $500,000  in federal                                                                    
funds  to   distribute.  There  were   multiple  non-profits                                                                    
throughout the  state (Juneau  Arts and  Humanities Council,                                                                    
Seward  Senior Center,  Ketchikan  library,  etc.) that  had                                                                    
difficulty  with the  $15,000 audit  requirement and  people                                                                    
had challenges donating  to the entities when  they were not                                                                    
included  as non-profits  on the  Pick, Click,  Give program                                                                    
lists.  There had  been a  common misperception  that if  an                                                                    
entity did  not appear on  the program  list that it  was no                                                                    
longer a non-profit organization.                                                                                               
                                                                                                                                
Representative Seaton  explained that  the bill  proposed to                                                                    
delete  the  audit  requirement  for  entities  with  annual                                                                    
budgets  above  $250,000  in order  to  provide  equity  for                                                                    
entities  included in  the program  and  to avoid  confusion                                                                    
about an  organization's non-profit  status. He  opined that                                                                    
that  the   mandatory  annual  IRS  990   form  sufficiently                                                                    
satisfied all the necessary requirements.                                                                                       
                                                                                                                                
3:52:02 PM                                                                                                                    
                                                                                                                                
JORDAN   MARSHALL,   SPECIAL  PROJECTS   MANAGER,   RASMUSON                                                                    
FOUNDATION,  ANCHORAGE  (via  teleconference),  thanked  the                                                                    
committee for its support of  the Pick, Click, Give program.                                                                    
He   reported  that   presently  $1.59   million  had   been                                                                    
contributed to  the program  since January  1, 2012  by more                                                                    
than  17,000  Alaskans,  which was  higher  than  the  prior                                                                    
year's total; the  program was on track to  reach $2 million                                                                    
in donations  to the  400-plus organizations  and university                                                                    
campuses.                                                                                                                       
                                                                                                                                
Mr.  Marshall  highlighted  detail related  to  the  program                                                                    
filing    fee   requirement.    Every   organization    that                                                                    
participated paid  an annual filing  fee, which  covered the                                                                    
cost  of  basic  administration  of  the  program  including                                                                    
vetting  the   eligibility  of  applications,   sending  out                                                                    
checks,  managing the  online donation  form, and  providing                                                                    
technical assistance for non-profits  wishing to enroll. The                                                                    
campuses  of   the  University  of  Alaska   were  the  only                                                                    
organization entities  not paying the fee.  The CS clarified                                                                    
that  all  names on  the  program  list for  permanent  fund                                                                    
dividend charitable  contributions were required to  pay the                                                                    
filing   fee  to   help  pay   the  costs   associated  with                                                                    
administering the program.                                                                                                      
                                                                                                                                
Mr.  Marshall  clarified  that   the  CS  would  allow  each                                                                    
individual campus program to elect  to pay the filing fee to                                                                    
be listed  separately as a  potential beneficiary.  He added                                                                    
that  it  would  be  a non-profit's  prerogative  to  decide                                                                    
whether  to  submit  an application  for  inclusion  in  the                                                                    
program.                                                                                                                        
                                                                                                                                
Vice-chair Fairclough  thanked Mr. Marshall for  his work on                                                                    
the program.  She wondered why  other non-profits  might not                                                                    
follow the example of the  university and submit programs in                                                                    
$250 increments  in order  to be  listed more  frequently on                                                                    
the program list.                                                                                                               
                                                                                                                                
Mr.  Marshall  replied  that   each  organization  was  only                                                                    
entered into  the database  once, but  they could  appear in                                                                    
several different  categories depending  on the  search that                                                                    
an  individual   conducted  when   making  a   donation.  He                                                                    
expounded that  every organization only had  one record, but                                                                    
it  could  be found  in  numerous  ways depending  on  which                                                                    
search characteristics  were applied. For example,  a person                                                                    
searching for  organizations based  in Fairbanks  would find                                                                    
each  of the  University  of Alaska  Fairbanks campuses  and                                                                    
rural  campuses listed;  the campuses  would also  appear if                                                                    
the search was related to educational organizations.                                                                            
                                                                                                                                
3:57:44 PM                                                                                                                    
                                                                                                                                
Vice-chair  Fairclough   referred  to  the  Forget   Me  Not                                                                    
children  program  that  was  housed  within  the  Anchorage                                                                    
Hospice  program.  She believed  she  had  seen the  various                                                                    
campuses  listed  differently  in the  drop-down  menu.  She                                                                    
thought  the university  was represented  in more  than just                                                                    
one form.  She wondered whether  she needed to  direct other                                                                    
non-profits  to  start  entering specific  programs  to  the                                                                    
list.                                                                                                                           
                                                                                                                                
Mr. Marshall responded that each  of the university campuses                                                                    
were listed separately. Currently  none of the programs were                                                                    
listed  in  the Pick,  Click,  Give  program. There  were  a                                                                    
number of  non-profits that listed  a particular  program as                                                                    
their common  name; each  organization had  an option  to be                                                                    
listed as their official name  or a common name (e.g. Anchor                                                                    
Arms  conducted   business  as  Safe  Harbor   Inn  and  was                                                                    
typically listed as Safe Harbor).                                                                                               
                                                                                                                                
Vice-chair Fairclough  had heard several years  earlier that                                                                    
a $500 filing fee came  closer to covering the program costs                                                                    
than the current  $250 fee. She wondered whether  a $500 fee                                                                    
would be more appropriate.                                                                                                      
                                                                                                                                
Mr.  Marshall replied  that  when the  filing  fee had  been                                                                    
reset there had been a couple  of years of data available to                                                                    
establish  the  program's  basic administration  costs.  The                                                                    
$250 fee  was a  very good guess  so that  each organization                                                                    
was  making that  much  or more  through  the program  while                                                                    
paying for  program costs.  He relayed that  to the  best of                                                                    
his  knowledge  $250 had  been  proved  to be  an  excellent                                                                    
number to enable DOR to carry out its work.                                                                                     
                                                                                                                                
4:02:16 PM                                                                                                                    
                                                                                                                                
MIKE WALSH,  VICE PRESIDENT,  FORAKER GROUP,  FAIRBANKS (via                                                                    
teleconference), thanked  the committee for  the opportunity                                                                    
to speak  on the  legislation. He felt  it was  important to                                                                    
discuss the  purpose of the  program audit  requirement, but                                                                    
the group did  not have a position on the  amount or removal                                                                    
of the program audit requirement.  He was very happy to hear                                                                    
the update on the progress  of the program. The initial idea                                                                    
of the legislation  was to help Alaskans  decide where their                                                                    
charitable dollars  should be  best spent.  Another critical                                                                    
piece of the  bill was related to talking  about the ability                                                                    
of a  non-profit to  meet the  IRS requirements  of mission,                                                                    
fiduciary   responsibility,   legal  responsibility,   etc.;                                                                    
however, there  had been  no way  to add  an extra  layer of                                                                    
confidence for  a donor. He  furthered that the  idea behind                                                                    
the  audit requirement  was that  it was  an added  level of                                                                    
scrutiny,  which  allowed  for  an outside  opinion  on  the                                                                    
finances and  general management principles of  a non-profit                                                                    
organization.                                                                                                                   
                                                                                                                                
Dr.  Walsh   discussed  that  the   reason  for   the  audit                                                                    
requirement  was because  donors wanted  to have  confidence                                                                    
that  an organization  would spend  their  funds well  (i.e.                                                                    
being good  stewards of the  dollars and spending them  in a                                                                    
way that made the most of  the money). He believed the audit                                                                    
was also a  very valuable tool for  organizations whether or                                                                    
not they took part in the  Pick, Click, Give program; it was                                                                    
valuable  internally  to   help  organizations  track  their                                                                    
management and financial practices and  to meet the needs of                                                                    
external   funders  who   were   interested  in   management                                                                    
practices.                                                                                                                      
                                                                                                                                
4:07:31 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze CLOSED public  testimony. He referenced the                                                                    
zero fiscal note.                                                                                                               
                                                                                                                                
Co-Chair  Thomas  MOVED  to  report  CSHB  302(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
                                                                                                                                
Co-Chair Stoltze  OBJECTED for discussion. He  asked whether                                                                    
there were any amendments.                                                                                                      
                                                                                                                                
Vice-chair  Fairclough mentioned  she  would  work with  the                                                                    
sponsor  to   determine  whether  one  program   could  have                                                                    
multiple donation  streams. She  understood that  a donation                                                                    
to the  university as a  whole could be used  throughout the                                                                    
university;  however, a  donation to  a specific  university                                                                    
program could only  be used for the  particular program. She                                                                    
believed  other  non-profits  should be  provided  the  same                                                                    
opportunity if  the university was allowed  to list multiple                                                                    
programs in the Pick, Click, Give list.                                                                                         
                                                                                                                                
There being NO further OBJECTION, it was so ordered.                                                                            
                                                                                                                                
CSHB  302(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass" recommendation and with one  new zero fiscal note from                                                                    
the Department of Revenue.                                                                                                      
                                                                                                                                
Co-Chair Stoltze  discussed the  schedule for  the following                                                                    
day.