Center for Non-Profits - DCA Issues Pay to Play Clarification

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DCA Issues Clarification Regarding Pay to Play

Letter regarding contract eligibility will help many non-profits with county / local government contracts, but disclosure requirements still loom

(updated 1/14/08)

A communication issued May 18, 2007, by the New Jersey Department of Community Affairs (DCA) suggests that non-profits which do not contribute to political campaigns will NOT be endangering their eligibility for county and local government contracts, even if their trustees, directors, officers, employees or spouses made campaign contributions on an individual basis.

Responding to a request for clarification from the Center for Non-Profits, the New Jersey Department of Community Affairs, Division of Local Governmental Services (LGS), has stated that the pay-to-play county and local government ban on non-fair and open contracts applies to contributions made by the business entity and/or persons that control 10% or more of the assets of the organization - a situation that does not apply to the typical 501(c)(3) organization.

In an e-mail to the Center dated May 18, 2007, LGS specifically stated that:

"…to the extent that a non-profit does not have any individuals that control ten percent (10%) of the assets of the organization, and if the non-profit is not legally authorized to make political contributions….the ability of a non-profit to receive a non-fair and open contract with a contracting unit is not imperiled by political contributors when the contributions are by a non-profits [sic] employees, trustees, officers or spouses."

Although the LGS e-mail is not an advisory opinion and non-profits should consult with legal counsel for guidance with their own specific circumstances, this interpretation should prove helpful for many non-profits with county and local government contracts. The complete text of the e-mail message from LGS can be found on the Center's Web site at www.njnonprofits.org/DCA_P2P_Email_05182007.pdf .

Non-Profits Exempt from Pay-to-Play Disclosure Requirements

Notwithstanding the clarification regarding county and local contracting, non-profits are reminded that they are still subject to the various disclosure requirements under the pay-to-play statutes and regulations, which means that, barring government action to the contrary, non-profits will still have to disclose the reportable political contributions made by their directors, officers, trustees and respective spouses. For non-profits which received $50,000 or more in government contract payments during calendar year 2006, ELEC has extended the deadline for the first required online disclosure statement from November 30, 2007, to January 15, 2008. ELEC chose to continue to cover non-profits under the regulations despite a formal opinion from the Attorney General that suggested that non-profits could be excluded from the disclosure requirement. It issued the latest extension in response to a request from the New Jersey Senate (see this article for more information).

Under legislation signed into law on January 13, 2008, non-profits who contract with government agencies are no longer required to file annual disclosure statements with the Election Law Enforcement Commission (ELEC) regarding individual campaign contributions made by their directors, officers, trustees and respective spouses. Non-profits are also exempt from the requirement that similar disclosures be made with the government contracting agency prior to execution of a given contract.

This document is for informational purposes only and does not constitute legal advice or a legal opinion. For answers to specific questions concerning your situation, you should consult a knowledgeable attorney who can advise you regarding your particular circumstances.

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