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State Clears up Confusion on New Florida Fundraising Law

Tuesday, July 31, 2018   (0 Comments)
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State Clears up Confusion on New Florida Fundraising Law

If you raise funds for a nonprofit in Florida, chances are that you have heard of the Florida Solicitation of Contributions Act, the law which governs nonprofit fundraising. This year, the Florida Legislature amended the Act hoping to cut down on financial fraud, but while providing new tools to state investigators, ambiguities in the law left nonprofit lawyers and accountants alike scratching their heads.

The new law prohibits “any person in connection with the planning, conduct, or execution of any solicitation or charitable or sponsor sales promotion to . . . [c]ommingle charitable contributions with noncharitable funds.” According to a statement on the website of the Florida Department of Agriculture and Consumer Services, the agency that oversees compliance with state fundraising laws, this means that “contributions should be kept in a separate account from funds that are not used for a charitable purpose.” It sounds simple enough – keep charitable and non-charitable funds in different bank accounts. But as any nonprofit professional knows, nonprofits only raise and spend money for their charitable purpose. What could these ‘noncharitable funds’ possibly be? Without a legal definition of the term, some experts speculated that the state was now expecting nonprofits to keep management and fundraising expenses in a separate bank account, a nightmare scenario for any nonprofit accountant.

Fortunately, the State recently clarified its position in an email written by the Bureau Chief for the Department’s Division of Consumer Services:

If the charity doesn’t have a for profit business attached to it there is no comingling of funds…for example, if there is a stand alone charity…and they use some of the funds for management, some for fundraising and some for the program services (charitable purpose) they do not need separate accounts. This change was meant to address issues when a for profit has a non profit arm.

In short, if your nonprofit doesn’t have a for-profit entity associated with its operations, then the new law doesn’t apply to you. If it does, well, you shouldn’t have been commingling those funds anyway.

Check the status of your nonprofit’s fundraising registration here.

Justine Thompson Cowan is an attorney with over two decades of experience in the nonprofit sector. She is the President of Cowan Consulting for Nonprofits which provides strategic and legal solutions that help nonprofits grow and thrive.

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