Colorado Steps Up Charitable Fraud Enforcement Measures

Colorado Governor Hickenlooper last week signed into law HB 16-1129, which provides for enhanced enforcement measures for charitable fraud under the Colorado Charitable Solicitations Act. The Colorado Attorney General’s Office and the Colorado Nonprofit Association worked together to bring the bill to the legislation earlier this year.

As background, the Colorado Charitable Solicitations Act requires most organizations that solicit contributions for charitable purposes within Colorado to register with the Secretary of State’s Office, and to renew that registration annually. The Act also requires paid solicitors to register, and imposes some additional requirements in the fundraising area. Most other states have similar laws, which ultimately aim to protect the public from fraud by providing information about the organizations that are asking for charitable contributions, and by prohibiting those organizations from soliciting in a fraudulent or deceptive manner.

The Colorado Nonprofit Association points out that “even occasional media stories on charitable fraud can undermine the public’s trust in nonprofits generally and discourage donors from giving to causes they support.” The organization supported the new law as an additional measure to deter those who consider committing fraud.

The new law, which takes effect August 10, does the following:

  • Enhances civil penalties imposed by a court for knowing violations of the Colorado Charitable Solicitations Act (which can include failure to register), increasing the maximum penalty from $2,000 to $10,000 per violation, with a cap of $3 million for a series of related violations. The cap is to be adjusted annually for inflation.
  • Penalizes a nonprofit organization if it knows or should have known that a paid solicitor committed charitable fraud while soliciting funds for the nonprofit.
  • Requires a paid solicitor with certain relationships to a nonprofit (i.e. serving on the board, directing the operations, or having a financial interest in a nonprofit for which it solicits contributions) to provide a statement indicating that the relationship adheres to Colorado law on conflicting interest transactions.
  • Expands the definition of charitable fraud to include instances where solicitations indicate that an organization has a significant base of law enforcement, firefighters, first responders or veterans when that is not the case.

For more information on a high-profile charitable fraud case that prompted the efforts for enhanced enforcement measures, click here.

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