WSR 02-06-037

PROPOSED RULES

GAMBLING COMMISSION


[ Filed February 26, 2002, 3:59 p.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 01-23-090.

Title of Rule: Charitable/nonprofit organization qualification reviews; amendatory sections WAC 230-08-255 Bona fide charitable or nonprofit organizations -- Significant progress required -- Procedures -- Exception and 230-04-064 Certification procedure -- All new licenses -- Formal commission approval.

Purpose: Currently, staff perform qualification reviews on Group IV and V charitable and nonprofit organizations each year and present the reviews to the commission each year. Staff will continue to review qualifications each year, however, formal presentations to the commission will be changed from once a year, to once every three years.

Statutory Authority for Adoption: RCW 9.46.070.

Summary: See Purpose above and Explanation of Rule below.

Reasons Supporting Proposal: See Purpose above and Explanation of Rule below.

Name of Agency Personnel Responsible for Drafting: Susan Arland, Lacey, (360) 486-3466; Implementation: Rick Day, Lacey, (360) 486-3446; and Enforcement: Bob Berg, Lacey, (360) 486-3452.

Name of Proponent: Staff, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: See also Purpose above.

WAC 230-08-255, several changes are proposed to the current qualification review procedures. First, organizations with pending administrative actions will not come before the commission for a qualification review until the action has been resolved. They would do so after the charges are resolved. Secondly, staff will continue to perform reviews on Group III, IV and V organizations each year; however, Group IV and V commission presentations will occur once every three years, rather than each year. This amendment strengthens the agency's regulatory program by giving staff more time to work with all licensees rather than primarily reviewing the qualifications of larger (Group IV and V) licensees.

WAC 230-04-064, currently, this rule encompasses two separate regulatory processes. First, this rule requires all new applicants for a gambling license to be approved by the commission prior to being issued a gambling license. Secondly, this rule sets forth the qualification review procedures for licensed charitable and nonprofit organizations, operating in Group IV or V. For streamlining purposes, the qualification review process has been moved from this rule to WAC 230-08-255, which contains significant process procedures nonprofit licensees must adhere to. Now all requirements for relating to charitable and nonprofit organizations making progress toward their stated purpose are contained in one rule. Furthermore, the remaining language regarding the initial application approval process has been reworded so it is easier to read.

Proposal Changes the Following Existing Rules: See Purpose and Explanation of Rule above.

No small business economic impact statement has been prepared under chapter 19.85 RCW. Proposal is exempt under RCW 19.85.025(2), therefore, a small business economic impact statement is not required.

RCW 34.05.328 does not apply to this rule adoption. This agency does not choose to make section 201, chapter 403, Laws of 1995, apply to this rule adoption.

Hearing Location: The Heathman Lodge, 7801 N.E. Greenwood Drive, Vancouver, WA 98662, (360) 254-3100, on April 12, 2002, at 9:30 a.m.

Assistance for Persons with Disabilities: Contact Shirley Corbett by April 1, 2002, TDD (360) 486-3637, or (360) 486-3447.

Submit Written Comments to: Susan Arland, Rules Coordinator, P.O. Box 42400, Olympia, WA 98504-2400, (360) 486-3466, fax (360) 486-3625, by April 1, 2002.

Date of Intended Adoption: April 12, 2002.

February 25, 2002

Susan Arland

Rules Coordinator

OTS-5446.1


AMENDATORY SECTION(Amending Order 358, filed 7/15/98, effective 1/1/99)

WAC 230-04-064   Certification ((procedure -- All)) of new licenses -- Formal commission approval.   The commission shall review and make a determination regarding the qualification of all persons or organizations requesting to operate gambling activities authorized by chapter 9.46 RCW. The following review procedures apply to applicants for a license:

(((1) Charitable and nonprofit organizations - To ensure that only bona fide charitable or nonprofit organizations are granted the privilege of raising funds from authorized gambling activities, the commission shall annually review the qualifications of each organization requesting a license to conduct such activities. As a part of this process, each organization shall clearly demonstrate that progress has been made in meeting its purpose(s) by submitting required information and answering such inquiries as deemed necessary by commission staff. The certification process shall be completed as follows:

(a) All organizations requesting to be certified to conduct any gambling activities in Group I, II, or III shall be reviewed by commission staff and forwarded to the commission for review and approval at a public meeting: Provided, That for any organization requesting to be certified to conduct gambling activities in Group III, the director may direct the staff to prepare a summary of qualifications, as required by subsection (1)(b) of this section, and provide such to the commission for review;

(b) Any organization requesting to be certified to conduct gambling activities in Group IV or V shall be reviewed by commission staff and a summary of the organization's qualifications shall be prepared and provided to the commission for review and approval. At the request of the director, at least one representative from the organization shall be present at the public meeting at which the summary of their qualification is presented;

(c) In addition, any organization requesting approval or an upgrade to conduct gambling activities in Group V shall be scheduled for formal review as a condition of licensure and periodically thereafter as determined by the director or the commission. The formal review shall be at a scheduled open meeting of the commission and, when possible, held in the general area which encompasses the organization's service area. The review will cover the organization's most recent annual financial report as required by WAC 230-08-122. If an organization desires to submit additional information, it must be submitted at least twenty days prior to the date of its scheduled review. The organization must be represented by at least three members of its board of directors, its chief executive officer, and the primary gambling manager. The organization may solicit testimony from clients, local social and welfare providing agencies, public agencies, and other charitable or nonprofit organizations. The commission may solicit information from the public or any other interested parties and shall notify local law enforcement agencies of the time and location of the review. The formal review will include a brief session for the organization to inform the commission on the progress made during its previous fiscal year in achieving its purposes, including the extent to which gambling income was used for charitable as opposed to nonprofit services and planned uses for any gambling income remaining from the previous fiscal year;

(d) At the conclusion of the review of qualifications for a charitable or nonprofit organization, the commission will approve the organization requested or:

(i) Require the organization to submit additional information;

(ii) Return the application to the staff for further investigation; or

(iii) Grant a temporary or conditional license;

(2) Commercial, individual and all other applicants - After the staff has completed its review of an application, a recommendation shall be made to the commission. The commission shall review each application at a public meeting. Each applicant found to be qualified will be issued the license requested. If the commission does not approve the application, it shall be returned to commission staff for further investigation;

(3) If an organization is currently licensed and the commission does not approve the application, the application shall be returned to commission staff for further investigation. A temporary or conditional license will be issued pending completion of the review process.)) Procedures.


(1) To determine if an individual, organization, and all other applicants for a gambling license are qualified to hold a license, staff shall:

(a) Investigate the qualifications of each applicant;

(b) Prepare a recommendation for the commission; and

(c) Present the recommendation to the commission at a public meeting.


Additional requirements for charitable organizations.


(2) As part of the review process, bona fide charitable or nonprofit organizations shall clearly demonstrate that progress has been made in meeting its stated purpose(s) in order to be granted the privilege of raising funds from authorized gambling activities.


Formal commission approval.


(3) The commission shall review each application at a public meeting. Each qualified applicant shall be issued the license requested. If the commission does not approve the application, it shall be returned to staff for further investigation.

[Statutory Authority: RCW 9.46.070. 98-15-073 (Order 358), 230-04-064, filed 7/15/98, effective 1/1/99. Statutory Authority: RCW 9.46.070 (1), (8-11), (14), (16) and (20). 96-07-075, 230-04-064, filed 3/19/96, effective 7/1/96. Statutory Authority: RCW 9.46.070 (7), (8), (9), (10), (14), (19) and (20). 89-09-047 (Order 190), 230-04-064, filed 4/18/89, effective 7/1/89.]

OTS-5447.1


AMENDATORY SECTION(Amending Order 393, filed 11/17/00, effective 12/31/00)

WAC 230-08-255   Bona fide charitable or nonprofit organizations -- Qualification review -- Significant progress required(( -- Procedures)) -- Exception.   A charitable or nonprofit organization requesting to be certified to conduct gambling activities must demonstrate it has made significant progress toward its stated purposes during the period under review. The following definitions and procedures will apply:


Progress toward stated purpose.


(1) An organization will be deemed to have made progress toward its stated purposes when it:

(a) Complies with all requirements set forth in its bylaws and articles of incorporation;

(b) Actively engages in providing services to the public or its members during the entire period under consideration, and such services directly relate to the stated purposes of the organization;

(c) Has held elections to select officers at least once in the previous two years; and

(d) Has held a general membership meeting to conduct the business of the organization at least once in the previous two years.


Available resources for stated purpose.


(2) An organization's progress towards its stated purpose will be deemed significant when a substantial portion of its available resources are used for providing program services during the period under review.

For purposes of this section, available resources:

(a) Include the income generated by or from the following sources for the period under review:

(i) All net fund-raising activities, including net gambling income;

(ii) Grants, gifts, and contributions from private sources; and

(iii) Public support.

(b) Does not include:

(i) Funds generated in periods other than the period under review;

(ii) Funds that are raised or contributed from outside the organization for purposes of purchasing land or capital assets or to endow future operations when such funds are specifically identified by the board or contributors as restricted and separately recorded in the organization's records;

(iii) Fees paid by members or the public to receive services or to participate in specific activities. Such fees shall be classified as a reduction to both program service and supporting service expenses on a pro rata basis and as a reduction to resources available for providing services in the current period; or

(iv) Net income from the sale of assets.


Groups IV and V - Significant progress.


(3) In addition to the criteria outlined above, any organization requesting to be certified to operate gambling activities at Group IV or V levels, as defined in WAC 230-12-076, shall demonstrate it has made significant progress by providing evidence that:

(a) It has expended at least sixty percent of net gambling income earned in the organization's most recently completed fiscal year on functional expenses to operate the organization's programs. Functional expenses consist of both program and supporting services; and

(b) Available resources were utilized in an efficient manner during the period. Available resources will be deemed to be utilized in an efficient manner when no more than thirty-five percent of total functional expenses are utilized to provide supporting services as defined by WAC 230-02-279: Provided, That if more than fifty percent of total program services expenses was utilized to provide program services through indirect methods (those which are external to the organization) such as grants, contributions, and/or scholarships, then supporting services expenses shall not exceed twenty percent of functional expenses.


Groups III, IV, and V - Formal qualification review.


(4) Any organization requesting to be certified to conduct gambling activities in:

(a) Group IV or V - shall be reviewed by commission staff and every three years a summary of the organization's qualifications shall be prepared and provided to the commission for review at a public meeting. At least one representative from the organization shall be present at the public meeting when the summary of their qualification review is presented; and

(b) Group III - may be reviewed by commission staff at the request of the director. A summary of the organization's qualifications, as required by this subsection, may be prepared by staff and provided to the commission for review.


Gambling income not separate from other income.


(((4))) (5) When an organization does not keep gambling income separate from all other income of the organization, the amount of net gambling income required to provide functional expenses in the year under review shall be the pro rata portion of net gambling income compared to the total net revenue from all sources.


Waivers.


(((5))) (6) An organization that is unable to demonstrate it has made significant progress by complying with the financial standards and procedures set forth elsewhere in this section may request the director to waive all or portions of the requirements. The following requirements and procedures shall be used to evaluate waivers:

(a) In determining whether to grant such a waiver, the director may consider the following:

(i) Whether the organization's inability to comply is temporary and due to unusual circumstances;

(ii) Whether the organization is reserving funds to start or expand specific programs in the future;

(iii) Whether the organization utilizes a substantial amount of capital assets that are not subject to depreciation or amortization to provide program services. Examples are: Fully depreciated building or equipment; fully amortized leasehold improvements; assets which are not normally depreciated such as land used for athletic fields, riding areas, parks, etc.; and

(iv) Whether the organization conducts a substantial portion of its services through volunteers.

(b) In order for the director to consider a waiver, the organization shall meet the following requirements:

(i) The organization's board shall acknowledge in writing that they are aware of the circumstances, have taken steps to correct the situation which prevented compliance, and have approved a plan that addresses delivery of program services in the future; and

(ii) The organization must expend at least twenty-five percent of its net gambling income to provide program services in the current period; however, the purchase of nondepreciable assets for program purposes may be considered as part of this percentage.

(c) The director will provide the licensee a hearing pursuant to WAC 230-50-010(6), if a waiver will be denied.

[Statutory Authority: RCW 9.46.070. 00-23-077 (Order 393), 230-08-255, filed 11/17/00, effective 12/31/00; 98-19-132 (Order 363), 230-08-255, filed 9/23/98, effective 1/1/99. Statutory Authority: RCW 9.46.070 (1), (8-11), (14), (16), (20). 96-07-075, 230-08-255, filed 3/19/96, effective 7/1/96. Statutory Authority: RCW 9.46.070, 9.46.0261 and 9.46.0209. 94-01-035, 230-08-255, filed 12/6/93, effective 1/6/94.]

Washington State Code Reviser's Office