PUBLIC ACCESS TO NONPROFIT RECORDS

Transcription

1 PUBLIC ACCESS TO NONPROFIT RECORDS Richard Koontz, Director Larned A. Waterman Iowa Nonprofit Resource Center Laws affecting disclosure of nonprofit materials Open meetings and open records law in Iowa (Iowa Code 21 and 22). FOIA Public disclosure of fundraising costs and tax filings. Nonprofit corporation filings with Secretary of State Board and voting member access to records (i.e., insiders) Open Meetings, Open Records and FOIA

2 Open meetings law applies to nonprofits But only when the nonprofit is classified as a governmental body A nonprofit is a governmental body: only when the meetings conducted by the nonprofit corporations relate to the conduct of pari-mutuel racing and wagering pursuant to chapter 99D. (Iowa Code 21.2(1)(f)) Or when the nonprofit is licensed for charitable gambling under Iowa Code 99F (Iowa Code 21.2(1)(g)) Open meetings provisions Public notice of meeting Minutes of meeting Limitations on closed sessions Enforcement for failure to comply Meeting only open as to portion dealing with 99D or 99F issues See 2012 Iowa Attorney General memo at eetings_out.pdf Open records law applies to nonprofits But only when the nonprofit is classified as a governmental body A nonprofit is a governmental body when the: facilities or indebtedness are supported in whole or in part with property tax revenue and which is licensed to conduct pari-mutuel wagering pursuant to chapter 99D (Iowa Code 22.1) Chapter 99D is the gambling law in Iowa related to parimutuel wagering on dog and horse racing.

3 What if a nonprofit enters agreement with a government entity? Iowa law provides that government entities and nonprofits can enter into agreements to make efficient use of their powers by enabling them to provide joints services and facilities Iowa Code 28E.1 Government entities can be state, county or local government under 28E. The 28E agreement has to be filed with the Secretary of State s office. Siouxland Economic Development Corporation On the SOS site we see that Siouxland Economic Development Corporation entered a 28E agreement with the City of Sioux City in February, The purpose of the agreement is to undertake certain projects to further the economic development of Sioux City. More specifically it involves working with business loans under Title IX of the Public Works and Economic Development Act. 28E agreements with state agencies Is your economic development nonprofit enters a 28E with a government agency and there is not a separate legal entity to conduct joint undertakings with a government entity, there still must be a joint board created. (Iowa Code 28E.(1)) The joint board is a government body for purposes of Iowa s open meeting and open records law. (Iowa Code 28E.6(2)) Iowa Code 28E.6(2) says The joint board specified in the agreement shall be a governmental body for purposes of chapter 21 and the entity created shall be a government body for purposes of chapter 22 unless the entity created or agreement includes public agencies from more than one state.

4 28E agreement provisions Are all documents created by your nonprofit subject to disclosure once you enter a 28E agreement with a state agency? No. Just the documents relating to the activity your nonprofit does pursuant to the agreement are subject to disclosure. So it s important to clearly define your nonprofit s role in the 28E agreement so that it is clear what must be disclosed. What is a public record under Iowa Code 22? all records, documents, tape, or other information, stored or preserved in any medium, of or belonging to this state or any county, city, township, school corporation, political subdivision, nonprofit corporation [and] also includes all records relating to the investment of public funds including but not limited to investment policies, instructions, trading orders, or contracts, whether in the custody of the public body responsible for the public funds or a fiduciary or other third party. Iowa Code 22.1(3) Confidential records There are 64 kinds of confidential records are listed in the statute, which are not subject to disclosure (Iowa Code 22.7) Reports to governmental agencies which, if released, would give advantage to competitors and serve no public purpose. (Iowa Code 22.7(6)) Economic development authority information on an industrial prospect with which the authority is currently negotiating. (Iowa Code 22.7(8)) Individually identifiable client information contained in the records of the state database created as a homeless management information system pursuant to standards developed by the United States department of housing and urban development and utilized by the economic development authority. (Iowa Code 22.7(56))

5 What is a trade secret? Information, including but not limited to a formula, pattern, compilation, program, device, method, technique, or process that meets both of the following: 1) Derives independent economic value, actual or potential, from not being generally known to, and by not being readily ascertainable by proper means by a person able to obtain economic value from its disclosure or use; and 2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy Recent Iowa case Filmmakers getting tax credits wanting to prevent state from releasing their final film budgets to Public, using 22.7(6) confidential record Iowa Supreme Ct., 2012, allows release. Iowa Film Production Services v Iowa Department of Economic Development Public officials on nonprofit boards If there are public officials on your private nonprofit board, does that make you subject to the open records law? Dubuque v. Dubuque Racing Association, Ltd, a 1988 Iowa Supreme Court case, established that the mere inclusion of public officials on non-profit boards of directors did not result in that non-profit becoming subject to the Iowa open records law.

6 Public officials on nonprofit boards House bill 8533 in 2009 (or 10?) proposes adding to definition of circumstances in which nonprofits are covered by the open meetings law the following: nonprofit corporation operated by a governing board whose membership was or is substantially comprised of state and local elected officials or appointees of governmental bodies Bill did not pass. Right of persons to examine If you are a governmental body and it is a public record, what does someone get to do? Every person shall have the right to examine and copy a public record and to publish or otherwise disseminate a public record or the information contained in a public record. Unless otherwise provided for by law, the right to examine a public record shall include the right to examine a public record without charge while the public record is in the physical possession of the custodian of the public record. The right to copy a public record shall include the right to make photographs or photographic copies while the public record is in the possession of the custodian of the public record. (Iowa Code 22.2) Injunction to prevent examination Custodian of public documents can seek an injunction to prevent public examination of records if it can show that: a. That the examination would clearly not be in the public interest. b. That the examination would substantially and irreparably injure any person or persons. (Iowa Code 22.8)

7 Iowa Public Information Board Created in 2012 IPIB created to provide an alternative means by which to secure compliance with and enforcement of the requirements of chapters 21 and 22. FOIA Freedom of Information Act (FOIA) provides that any person has a right to obtain access to federal agency records, except to the extent that such records (or portions of them) are protected from public disclosure by one of nine exemptions. If your nonprofit contracts with or gets grants from federal agencies, materials produced under that grant or contract may be subject to disclosure under FOIA. FOIA exceptions1 The exception to disclosure under FOIA probably relevant to economic development nonprofits is for: Trade secrets and commercial or financial information obtained from persons and privileged or confidential. A "trade secret" is defined as "a secret, commercially valuable plan, formula, process, or device that is used for the making, preparing, compounding, or processing of trade commodities and that can be said to be the end product of either innovation or substantial effort.

8 FOIA exceptions2 Records are commercial so long as the submitter has a "commercial interest" in them. Information "obtained from a person," is quite easily met in almost all circumstances. The term "person" refers to individuals as well as to a wide range of entities, including corporations, banks, state governments, etc. Commercial or financial matter is "confidential" for purposes of the exemption if disclosure of the information is likely to have either of the following effects: (1) to impair the Government's ability to obtain necessary information in the future; or (2) to cause substantial harm to the competitive position of the person from whom the information was obtained. FOIA exceptions3 Submitter's nonprofit status is not determinative of the character of the information it reports; instead information may qualify as 'commercial' even if the provider's interest in gathering, processing, and reporting the information is noncommercial. FOIA and state agencies If you get funding from or contract with a state agency (rather than a federal agency), FOIA will not apply, and so no disclosure will be required in those circumstances.

9 Iowa Secretary of State Filings Nonprofit corporation filings with Secretary of State All filings with the Iowa Secretary of State related to your nonprofit corporation are posted on the site for public review. This includes: Articles of incorporation and all amendments Biennial report Administrative dissolution Change of registered agent. So anyone can find online contact information, stated nonprofit purpose, names & addresses of board officers. Bylaws are NOT filed with SOS and so not posted on that website.

10 Biennial Report Registered agent and registered office Names and addresses of board officers

11 Ankeny Economic Development Corporation on SOS site On the Secretary of State s website I see that Ankeny Economic Development Corporation was stared on July 6, 1966 as the Ankeny Industrial Development Corporation and changed its name on February 16, Board members as of August, 2013 include Amanda Weathers of Des Moines, Barb Hokel of West Des Moines and Bill Woodruff of Ames. The official contact person is Craig Block from Ames. Tax Exemption and Fundraising Disclosures Public disclosure of tax filings An exempt organization must make available for public inspection its annual information return (e.g., Form 990, Form 990-EZ). Returns must be available for a three-year period beginning with the due date of the return (including any extension of time for filing) or, if later, the date it is actually filed. For this purpose, the return includes any schedules and attachments that are filed with the form.

12 Every nonprofit now files some version of Form 990 $0 to $50,000 gross receipts -- Form 990-N Over $50,000 gross receipts -- Form 990-EZ $200,000 gross receipts/ $500,000 total assets -- Form 990: All Form 990-N forms are posted on the IRS website at VJb9aaxd5YOXehcXn8g?mainSearchChoice=ePostcar d&dispatchmethod=selectsearch All Form 990-EZ and 990 are posted on GuideStar at Warren County Economic Development Corporation s 2011 Form 990 Fundraising disclosures Iowa law requires that charitable nonprofits to disclose to any potential donor who asks what the costs of fundraising was in the preceding fiscal year. (Iowa Code 13C.2(2)) Doesn t apply to 501(c)(6) nonprofits as they are not charitable. IRC 6113 requires certain tax-exempt organizations that are ineligible to receive tax deductible charitable contributions to disclose, in "an express statement (in a conspicuous and easily recognizable format)," the nondeductibility of contributions during fundraising solicitations. Membership fees could be deductible as a business expense, and this can be included in disclosure.

13 Form 990, Part IX, Statement of Functional Expenses Important to note that Form 990 also has a fundraising cost disclosure on it in column D. 501(c)(6) organizations don t have to do column D. List of donors on Form 990, Sch. B Schedule B of the Form 990 requires listing all donors who gave over $5,000 to your nonprofit. Each donor s name, address and total contribution amount for the year re listed. While the general rule is that all of Form 990 is subject to the public disclosure rules, Schedule B can be withheld. Nonprofit Corporation Law of Access to records

14 Board access to corporate records A director of a corporation is entitled to inspect and copy the books, records, and documents of the corporation at any reasonable time to the extent reasonably related to the performance of the director s duties as a director, including duties as a member of a committee, but not for any other purpose or in any manner that would violate any duty to the corporation. (Iowa Code ) What are corporate records for purposes of nonprofit corporate law? IC Minutes of all meetings of its members and board of directors, a record of all actions taken by the members or directors without a meeting, and a record of all actions taken by committees of the board of directors appropriate accounting records list of the names and business or home addresses of its current directors and officers a record of its members with names and addresses in alphabetical order articles of incorporation and all amendments bylaws and all amendments resolutions adopted by its board of directors most recent biennial report Voting members rights to see corporate records, Iowa Code A member is entitled to inspect and copy, at a reasonable time and location specified by the corporation, any of the records of the corporation, if the member gives the corporation written notice or a written demand at least five business days before the date on which the member wishes to inspect and copy.

15 Limitations on use of corporate records, Iowa Code Without consent of the board, no corporate record may be obtained or used by any person for any purpose unrelated to a member s interest as a member. Without limiting the generality of the foregoing, without the consent of the board, corporate records, including without limitation a membership list or any part thereof, shall not be used for any of the following: 1. To solicit money or property unless such money or property will be used solely to solicit the votes of the members in an election to be held by the corporation. 2. For any commercial purpose. 3. For sale to or purchase by any person. 4. For any purpose that is detrimental to the interests of the corporation. Nonprofit Policies and Ethics Codes Document retention schedules Both nonprofits and for profits have document retention schedules which state for how many years different kinds of documents must be retained. Different kinds of documents have different disclosure issues. For instance, there may be a significant risk in disclosing some HR records of individual staff, which doesn t exist for disclosing board minutes.

16 Document destruction policies The Sarbanes-Oxley Act s prohibition of the destruction of documents that are subject to review in litigation provides an additional rationale for every nonprofit adopting a document retention policy. Reported now on Form 990. Nondisclosure agreements Should board, voting members and staff sign a nondisclosure agreement about various aspects of working for the nonprofit? Board members of a non-profit corporation are in a fiduciary relationship with the corporation. This includes a duty to avoid conflicts of interest and a duty to avoid abusing their position to gain personal benefit. One component of board members fiduciary obligation is a duty to maintain the confidentiality of information that they acquire by virtue of their position. Nondiscloure agreement elements Define to whom the policy applies: board members? non-board committee members? staff? Identify the directors duty of confidentiality, and define its scope: for example, not to disclose or discuss with another person or entity, or to use for their own purpose, confidential information concerning the organization s affairs received in their capacity as directors, unless the board authorizes such disclosure. Provide that board members not make any statement to the press or the public unless authorized to do so by the board. Require that board members and anyone else to whom the policy applies review and sign the policy. Define what matters are considered confidential. Provide a process by which the board may authorize disclosure of confidential matters.

17 Public disclosure policy Nonprofits can adopt Public Disclosure Policies that spell out in advance for staff and board members what items it is OK to disclose. Transparency for nonprofits Iowa Principles and Practices for Charitable Nonprofit Excellence says: A goal of a charitable nonprofit s communication should be transparency which includes: a. continually building trust with the public by appropriate financial reporting b. communication with the public about significant contributions to the community with the charity s funds and programs c. strongly evident commitment to ethical behavior. Ethical concerns International Economic Development Council, Code of Ethics Professional economic developers shall openly share information with the governing body according to protocols established by that body. Such protocols shall be disclosed to clients and the public. See

18 Metro Denver Economic Development Corporation, Code of Ethics Confidentiality of Prospects In all instances members of the Metro Denver EDC shall honor the confidentiality of individual prospects. Whenever possible, specific information on particular transactions shall be shared within the realm of the Metro Denver EDC and the Governor's Office of Economic Development and International Trade. In those instances where prospects are dealing with individual communities, information will only be shared by Metro Denver EDC staff and the local ED representatives involved. Montana Economic Developers Association, Code of Ethics Respect the ownership and confidentiality of information received during the course of our duties, realizing that proprietary information may be disclosed only with the express permission of the owner of the information, and should never be used for personal gain. Good Jobs First Good Jobs First is a D.C. nonprofit group which wants public officials making economic development subsidies more accountable and effective. They want more online disclosure of the names of companies receiving state and local tax breaks, cash grants and other subsidies for job creation. See website at