Request By:
Hon. Joe A. Evans III
Moore, Morrow & Frymire
The Kentucky Bank & Trust Building
Madisonville, Kentucky 42431
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Joseph R. Johnson, Assistant Attorney General
In your letter dated October 24, 1978, you requested an opinion of this office regarding the legality of certain expenditures by charitable organizations. Specifically, you stated that the West Kentucky Coal Diggers C.B. Club, Inc. is a non-profit corporation which is organized to solicit contributions for the benefit of individuals who have lost their possessions through fires and for the benefit of other needful groups. You state that the club's efforts to raise money for such worthwhile projects range from holding dances to soliciting money from passing motorists at various intersections in addition to raising money through yearly membership dues. Your question is whether such funds may be used to pay the premium on an insurance policy covering the club's bus or other general operating expenses of the club.
The provisions of Kentucky's Consumer Protection Statute governing solicitation for charitable and civic purposes are found in KRS 367.650-367.670.
It is evident that the activity in which the club is engaged does constitute a "charitable or civic purpose" within the meaning of KRS 367.650(1) and, except for membership dues, funds received from the club's fund-raising activities meets the definition of "contributions" found in KRS 367.650(2). In addition, the club is actively engaged in the solicitation of charitable contributions within the meaning of KRS 367.650(3).
Although solicitations by a charitable organization of members and their families are exempted under KRS 367.660(1), no contributions solicited from members of the public are exempted from the provisions of the Consumer Protection Statute. Therefore, all fund-raising activities of the club with the exceptions of fund-raising through members' dues or fund-raising through contributions from members and their families, are governed by the Consumer Protection Statute.
KRS 367.655 states that it is an unlawful act for a charitable or civic organization to pay a professional fund raiser either directly or indirectly more than fifteen percent (15%) of gross contributions of money and property received or to pay the fund raiser more than fifteen percent (15%) of the net proceeds of social and spectator events and of sales of goods and services. This is the only statutory prohibition concerning the disbursement of money by a charitable or civic organization.
Assuming that the club does not regard payment to a professional fund raiser as a general operating expense or if it does that KRS 367.655 is not violated, payment of such expenses constitutes a legitimate and legal expenditure by the club. The payment of a premium for an insurance policy covering the club's bus is likewise a proper expenditure of the club's funds.