Commission Agenda Item No. 5
Action
Nonprofit Partner Rules
April 5, 2007

1. Introduction.

The Texas Parks and Wildlife Department (the department) proposes the repeal of §§51.161-51.163, 51.165, and 51.166, and new §§51.161-51.167, regarding nonprofit organizations. The repeals and proposed new sections are necessary to implement the requirements of Parks and Wildlife Code, Chapter 11, Subchapter J, §§11.201-11.207 and Government Code, §2255.001(a).

The Parks and Wildlife Code authorizes the department to work with nonprofit organizations to carry out the mission of the department. Parks and Wildlife Code, §11.202, requires the Parks and Wildlife Commission (the commission) to adopt rules to “establish the best practices for nonprofit partners.” Parks and Wildlife Code, §11.203, requires the commission to adopt rules regarding “state standards and safeguards for accounting for state assets held by the nonprofit partner.” Parks and Wildlife Code, §11.205, authorizes the commission to designate an official nonprofit partner dedicated to meeting department goals. Parks and Wildlife Code, §11.205(f), requires the commission to establish by rule guidelines for the official nonprofit partner’s solicitation and acceptance of sponsorships and the best practices of the official nonprofit partner.

Similarly, Government Code, Chapter 2255, requires a state agency to adopt rules regarding the relationship between donors and the agency, including the agency’s employees if the agency is authorized to accept donations or if “a private organization exists that is designed to further the purposes and duties of the agency.” Tex. Gov’t Code §2255.001(a).

Nonprofit partners serve an important function for the department. These organizations provide valuable financial and in-kind support to the department.

The proposed rules categorize each of the department’s nonprofit partners as a general nonprofit partner (GNP), a closely related nonprofit partner (CRNP), or the official nonprofit partner (ONP). A general nonprofit partner is a nonprofit partner that is not a closely-related nonprofit partner or the official nonprofit partner and has an agreement of any kind with the department, has a representative serving on a department or commission advisory committee, or otherwise has a relationship with the department. A closely related nonprofit partner is a nonprofit partner whose primary purpose is to benefit a specific department property, facility or program. Closely related nonprofit partners include “friends groups” (e.g., Friends of Cedar Hill, Friends of San Angelo State Park). The official nonprofit partner is the entity designated as the official nonprofit partner of the department by the commission in accordance with Texas Parks and Wildlife Code, §11.205. In 2001, the commission designated the Texas Parks and Wildlife Foundation as the department’s official nonprofit partner. Because the ONP and CRNPs enjoy a closer relationship with the department, the rules proposed rules impose additional requirements on those organizations. The term “nonprofit partner” refers collectively to GNPs, CRNPs and the ONP.

To ensure clarity, proposed new §51.161, concerning Definitions, defines terms used in the proposed rule, including closely related nonprofit partner, commission, department, donor, director, general nonprofit partner, gift, improvement, IRS 990, in-kind donation, local sponsorship, nonprofit entity, nonprofit partner, official nonprofit partner, program, regional director, sponsor, sponsorship, and statewide sponsorship.

Proposed new §51.162, concerning Criteria and General Requirements, sets out the general criteria for all nonprofit partners, including designation by the commission, receipt of a nonprofit determination letter from the U.S. Internal Revenue Service (IRS), support of department’s goals, and disposition funds raised for the benefit of the department. In addition, the proposed new section provides that the ONP and each CRNP must enter an agreement with the department, must be incorporated in accordance with the Texas Nonprofit Corporation Act (Business Organizations Code, Chapter 22) and must notify the department of any change in tax status.

The proposed new rules describe four types of best practices: general best practices; best practices regarding officers and directors; best practices regarding fundraising; and best practices regarding sponsorships. Proposed new §51.163, concerning Best Practices (General), describes the general best practices. Proposed subsection (a) applies to all nonprofit partners. Proposed subsection (b) applies only to CRNPs and the ONP. Proposed subsection (c) applies only to the ONP. The proposed general best practices applicable to all nonprofit partners prohibit a NP from holding or obligating department funds, prohibit a NP from using department intellectual property without the department’s written agreement, prohibit a NP from using department facilities or services without department approval, and require a NP to comply with applicable law and department guidelines, including anti-discrimination laws. CRNPs and the ONP must comply with additional requirements. Each CRNP and the ONP must file with the department and make available to the public an annual IRS 990 (Return of Organization Exempt from Tax); conduct business in a manner to ensure transparency; file an annual report and organizational documents (bylaws, articles of incorporation, financial statements) with the department and make those documents available to the public; and notify the department of each meeting and allow a department representative to attend. The proposed rules prohibit CRNPs or the ONP from lobbying, as defined in Government Code, Chapter 305, or supporting a political candidate. Under the proposed rules, the ONP must also have an annual audit and maintain adequate officers and directors liability insurance.

Proposed new §51.164, concerning Best Practices (Officers and Directors), describes the best practices related to officers and directors. Proposed subsection (a) applies to all nonprofit partners; subsection (b) applies only to CRNPs and the ONP; and, subsection (c) applies only to the ONP. All nonprofit partner officers and directors must be provided a copy of the department’s Land and Water Resources Conservation and Recreation Plan (the Plan) or a link to the Plan on the department’s web site. This requirement is also contained in Parks and Wildlife Code, §11.204. In addition, the proposed new section requires that each CRNP and the ONP have a conflict of interest policy; pay only reasonable compensation to executives and managers; hold regular board meetings; and provide organizational and related documents to new board members and directors. In addition, each CRNP and the ONP must prohibit a department employee or commissioner from being an officer or director (except in a non-voting capacity),

Proposed new §51.165, concerning Best Practices (Fundraising), describes the best practices related to fundraising. Proposed subsection (a) applies to all nonprofit partners. Proposed subsection (b) applies only to CRNPs. Proposed subsection (c) applies to CRNPs and the ONP. The proposed new section allows all nonprofit partners to conduct fundraising and undertake programs to benefit the department as agreed in writing by the department, but prohibits a NP from obligating the department unless agreed in writing in advance by the department. This proposed section requires that all nonprofit partners have financial procedures governing the handling of funds raised for the benefit of the department and engage in reasonable and prudent financial management practices. In addition, this proposed section requires that funds raised and projects undertaken by a CRNP must benefit the facility, property or program with which the CRNP is associated or must further the CRNP’s mission related to the facility, property or program. These fundraising restrictions are not intended to limit the ability of a nonprofit partner to make an unrestricted donation to the department. The proposed new section also allows NPs, CRNPs and the ONP to work together towards a common goal for the benefit of the department.

Proposed new §51.166, concerning Best Practices (Sponsorship), describes the best practices related to sponsorships. Proposed subsection (a) applies to all nonprofit partners. Proposed subsection (b) applies only to CRNPs and the ONP. Under the proposed new section, any nonprofit partner must have prior written approval from the department to sponsor a department program. Under this proposal, the department will only provide the level of sponsorship recognition approved in advance by the department. Under the proposed new section, statewide sponsorships would require the approval of the director and local sponsorships would require the approval of the appropriate regional director. In addition, the proposal places other limits on sponsorship, including prohibiting the acceptance of a sponsorship from certain persons or entities where a conflict of interest may result, prohibiting sponsorship signage on vehicles that were purchased or are maintained with department funds, limiting sponsorship recognition to the programs for which sponsorship support has been provided, and prohibiting a department employee from acting as agent for a nonprofit partner in negotiating a sponsorship package with the department. The proposal also limits the level of sponsorship recognition that the department will provide, to ensure that such recognition does not overshadow the department and is appropriate when considering the level of sponsor support.

Proposed new §51.167, concerning Department Procedures, sets out general department procedures including the periodic designation of NPs and a prohibition on the department obligating NP funds or property. The proposed new section also allows the ONP to reimburse department employees for legitimate travel expenses, allows the ONP to award department scholarships, and requires commission approval of all donations of $500 or more.

2. Fiscal Note.

Ann Bright, General Counsel, has determined that for each of the first five years the rules as proposed are in effect, there will be no fiscal implications to state or local government as a result of enforcing or administering the rules beyond those currently existing.

3. Public Benefit/Cost Note

Ms. Bright has also determined that for each of the first five years the rules as proposed are in effect:

(A) The public benefit anticipated as a result of enforcing or administering the rules as proposed will be the provision of clear guidance to nonprofit entities that are engaging in activities for the benefit of the department. Nonprofit organizations provide important in-kind and financial support to the department.

(B) The proposed new rules will result in no adverse economic effects to small or micro businesses. Government Code, Chapter 2006, defines small and micro-businesses as entities “formed for the purpose of making a profit.” Tex. Gov’t Code §2006.00(1)(A), (2)(A). Since the proposed rules apply to nonprofit organizations, the proposed rules will not apply to small or micro-businesses.

(C) The department has not filed a local impact statement as required by the Administrative Procedures Act, §2001.022, as the agency has determined that the rules as proposed will not impact local economies.

(D) The department has determined that there will not be a taking of private real property, as defined by Government Code, Chapter 2007, as a result of the proposed rules.

(E) The department has determined that Government Code, §2001.0225 (Regulatory Analysis of Major Environmental Rules) does not apply to the proposed rules.

4, Request for Public Comment.

Comments on the proposed rules may be submitted by phone, written correspondence or e-mail to Ann Bright, Texas Parks and Wildlife Department, 4200 Smith School Road, Austin, Texas 78744; (512) 389-8558; or ann.bright@tpwd.state.tx.us.

5. Statutory Authority.

The repeals are proposed under the authority of Parks and Wildlife Code, §§11.202, 11.203, 11.205, and Government Code, §2255.001.

The proposed repeals affect Parks and Wildlife Code, §§11.201-11.207.

§51.161. Definitions.

§51.162. Closely Related Nonprofit Organizations.

§51.163. Conflict of Interest, Performance of Services, and Use of Department Facilities.

§51.165. Best Practices of the Official Nonprofit Partner (ONP).

§51.166. Sponsorship Requirements.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's authority to adopt.

Issued in Austin, Texas, on

The new rules are proposed under the authority of Parks and Wildlife Code, §§11.202, 11.203, 11.205, and Government Code, §2255.001.

The proposed new rules affect Parks and Wildlife Code, §§11.201-11.207.

§51.161. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Closely related nonprofit partner (CRNP)—A nonprofit partner that exists primarily for the purpose of a specific department property, facility, or program. Closely related nonprofit partners include, but are not limited to, friends groups associated with a specific department facility.

(2) Commission—The Texas Parks and Wildlife Commission.

(3) Department—Texas Parks and Wildlife Department.

(4) Donor—A person who makes a contribution to the department for which there is no consideration or expectation of consideration in return.

(5) Director—Executive director of the department.

(6) General nonprofit partner (GNP)—A nonprofit partner that is neither a closely-related nonprofit partner nor the official nonprofit partner.

(7) Gift—A donation of money or property other than volunteer time for which there is no consideration or expectation of consideration in return.

(8) Improvement—A permanent addition to real property which is in the nature of a fixture.

(9) IRS 990—United States Internal Revenue Service Form 990, Return of Organization Exempt from Tax.

(10) In-kind donation—A non-cash donation, such as services, personal property or real property.

(11) Local sponsorship—A campaign to raise funds in support of a department program that is intended to benefit a single department facility.

(12) Nonprofit entity—An incorporated entity that is exempt from federal taxation under §501(c) of the Internal Revenue Code of 1986 (Title 26, United States Code).

(13) Nonprofit partner (NP)—A nonprofit entity as defined by Parks and Wildlife Code, §11.201(1) that has been designated by the commission as a nonprofit partner of the department pursuant to Texas Parks and Wildlife Code, §11.202. “Nonprofit partners” include general nonprofit partners, closely-related nonprofit partners and the official nonprofit partner.

(14) Official nonprofit partner (ONP)—An entity designated as the official nonprofit partner of the department by the commission in accordance with Parks and Wildlife Code, §11.205.

(15) Program—An activity, event or project undertaken by a nonprofit partner for the benefit of the department.

(16) Regional director—A department manager who reports directly to a department division director and is responsible for the management of the portion of a division covering a defined geographic area of the state.

(17) Sponsor—A person, corporation, company, or other organization that provides funds in support of a specific department project, program or event.

(18) Sponsorship—The payment of money, transfer of property, or performance of services by a person, corporation, company, or other organization with respect to which there is no arrangement or expectation of any substantial return benefit other than recognition or a non-substantial benefit.

(19) Statewide sponsorship—A sponsorship or campaign to raise funds in support of a department program that is intended to benefit more than a single department facility or is intended to reach the majority of the population of the state.

§51.162. Criteria and General Requirements.

(a) All NPs must meet the requirements and criteria of this subsection.

(1) In order to be considered a NP of the department, the nonprofit organization must be designated by the commission voting in a public meeting. The commission will designate an ONP, as necessary.

(2) In order to maintain a current list of all nonprofit entities associated with the department, the commission will seek to designate as a GNP all non-profit partners, other than CRNPs and the ONP, that have an agreement of any kind with the department, have a representative serving on a department or commission advisory committee, or otherwise have a relationship with the department.

(3) The commission may remove a nonprofit partner from the NP list.

(4) All NPs must carry out the fiscal, business, legal, and tax responsibilities of a nonprofit entity as required by state and federal law.

(5) All NPs must have obtained from the Internal Revenue Service a valid determination letter that it is an organization described in §501(c) of the Internal Revenue Code of 1986 (Title 26, United States Code), as amended. Such a letter must be obtained no later than 180 days after being designated by the commission as a NP.

(6) All NPs’ work with the department must be consistent with the department’s mission and goals.

(7) Upon dissolution, a NP may be required to dispose of funds raised for the benefit of the department in a way that will benefit the department, in accordance with applicable law.

(b) In addition to the requirements and criteria stated in subsection (a) of this section, CRNPs and the ONP must comply with the requirements and criteria of this subsection.

(1) CRNPs and the ONP must be incorporated in accordance with the Texas Nonprofit Corporation Act (Business Organizations Code, Chapter 22).

(2) Within 60 days of its designation as a nonprofit partner, each CRNP and the ONP must enter into an agreement with the department detailing the responsibilities and duties of the nonprofit partner and the department. Each CRNP and the ONP must maintain such an agreement with the department for as long as the entity is designated as a CRNP or the ONP. The agreement may also address the obligations of a CRNP or the ONP upon termination of the relationship with between the CRNP or ONP and the department, including termination resulting from the dissolution of the CRNP or the ONP.

(3) CRNPs and the ONP must promptly notify the department of any change in its legal or tax-exempt status.

§51.163. Best Practices (General).

(a) All NPs must comply with the general best practices prescribed in this subsection.

(1) NPs shall not hold or obligate department funds.

(2) NPs shall comply with all applicable rules, regulations, and laws, including all applicable laws regarding discrimination based on race, color, national origin, sex, age, and disability.

(3) NPs shall not use or authorize the use of department intellectual property, including trademarks, logos, name, or seal, without the express written agreement of the department.

(4) NPs shall not employ a department employee in a paid position or otherwise provide compensation or a direct personal benefit to a department employee. Provided, however, unless otherwise prohibited by law, benefits authorized by Penal Code, Chapter 36, are not prohibited by this subsection.

(5) NPs may use equipment, facilities, or services of employees of the department only in accordance with an agreement that provides for the payment of adequate compensation and/or identifies the benefit to the department for such use. Notwithstanding this subsection, a NP may use department facilities to the same extent and for the same fee as members of the public.

(b) In addition to subsection (a) of this section, CRNPs and the ONP must comply with the general best practices prescribed in this subsection.

(1) CRNPs and the ONP shall conduct business in a way that will ensure public access and transparency. As used in this subsection, “transparency” shall mean that the CRNP’s and ONP’s business practices and internal processes are conducted in a way that is open, clear, measurable, and verifiable.

(2) CRNPs and the ONP shall file with the department and make available to the public an annual report that includes a list of the primary activities undertaken during the previous year, a summary of significant achievements and challenges over the previous year, and other information requested by the department.

(3) Regardless of whether a CRNP or the ONP is required to file an IRS 990 with the Internal Revenue Service, each CRNP and the ONP must complete and file an IRS 990 with the department each year, regardless of income, and must make the IRS 990 available to the general public, upon request.

(4) CRNPs and the ONP shall file with the department its articles of incorporation, by-laws, and most recent financial statements, and any updates to these documents and shall make these documents available to the public, upon request.

(5) CRNPs and the ONP shall not engage in activities that would require it or a person acting on its behalf to register as a lobbyist under Texas law, Texas Government Code, Chapter 305. However, this subsection is not intended to restrict CRNPs and the ONP from providing information to the legislature or to other elected or appointed officials.

(6) CRNPs and the ONP shall not donate funds to a political campaign or endorse a political candidate.

(7) CRNPs and the ONP shall notify the department of all meetings and allow a department representative to attend all meetings, including, but not limited to, meetings of its general membership, managing board, and committees. Meeting notices must be provided to the department sufficiently in advance of the meeting so that the department representative has ample opportunity to attend. Such notice may be provided by letter, email, or telephone.

(c) In addition to subsections (a) and (b) of this section, the ONP must comply with the general best practices prescribed in this subsection.

(1) The ONP must have an annual audit by an independent accounting firm and shall make the results of that audit available to the department.

(2) The ONP must maintain an adequate directors and officers liability insurance policy.

§51.164. Best Practices (Officers and Directors).

(a) All officers and directors of NPs must receive a copy of or a link to the department’s Land and Water Resources Conservation and Recreation Plan.

(b) In addition to subsection (a) of this section, CRNPs and the ONP must comply with the best practices regarding officers and directors as prescribed in this section.

(1) CRNPs and the ONP must adopt and maintain a conflict of interest policy, which includes safeguards to prevent board members or their families from benefiting financially from any business decision of the CRNP or the ONP.

(2) CRNPs and the ONP shall ensure that any compensation paid to executives or managers is reasonable.

(3) CRNPs and the ONP shall not elect or designate or otherwise select a department employee as an officer or director, other than as a non-voting uncompensated representative of the department.

(4) CRNPs and the ONP shall hold regular meetings of its Board of Directors.

(5) CRNPs and the ONP shall ensure that each board member and/or director is fully informed of activities and shall provide the following information to new board members:

(A) articles of incorporation and by-laws;

(B) most recent financial statements;

(C) department rules on NPs and sponsorship; and

(D) current agreements with the department.

§51.165. Best Practices (Fundraising).

(a) All NPs must comply with the requirements of this subsection regarding fundraising.

(1) NPs may conduct fundraising to provide additional funds for department operations, to enhance department programs, to provide long-term endowments for department programs, to facilitate special projects, or otherwise support the department in carrying out its mission, but only as agreed in writing by the department in advance.

(2) NPs may undertake programs for the benefit of the department, so long as such programs are related to and supportive of the department’s mission and are agreed to in writing by the department in advance. A single agreement may cover multiple programs.

(3) NPs shall decline donations that require actions, including recognition, by the department for which the department has not given prior written consent.

(4) Funds accepted by a NP on behalf of or for the benefit of the department are to be managed as a reasonably prudent person would manage funds if acting on his or her own behalf and such funds are to be accounted for according to Generally Accepted Accounting Principles (GAAP).

(b) In addition to subsection (a) of this section, CRNPs must comply with the provisions of this subsection.

(1) All projects undertaken for the department by a CRNP must be related to and supportive of the facility, property, or program with which the CRNP is associated or must further the CRNP’s mission related to the facility, property or program.

(2) All donations to the CRNP must benefit the facility, property, or program with which the CRNP is associated or must further the CRNPs mission related to the facility, property, or program.

(3) For purposes of this subsection, a donation for the purpose of defraying the CRNP’s operating costs furthers the CRNP’s mission related to the facility, property, or program.

(c) In addition to subsections (a) and (b) of this section, CRNPs and the ONP shall adopt financial procedures that govern acceptance of and access to funds raised for the benefit of the department.

(d) Nothing in this subchapter shall limit the ability of a NP to make an unrestricted cash donation to the department. Such a donation may be for a specific purpose or program.

(e) NPs, CRNPs and the ONP may work together towards a common fundraising goal for the benefit of the department, consistent with the requirements of this subchapter.

§51.166. Best Practices (Sponsorship).

(a) NPs may solicit and accept sponsorships for department programs, so long as the NP complies with the provisions of this subsection.

(1) All sponsorships of department programs and the level of sponsorship recognition provided by the department must have prior written approval of the department as set forth in this paragraph.

(A) A statewide sponsorship and the associated sponsorship recognition must have prior written approval by the director.

(B) A local sponsorship and the associated sponsorship recognition must have prior written approval by the regional director whose area of responsibility includes the facility, property or program to be supported by the local sponsorship.

(2) NPs shall not solicit or accept a sponsorship in support of a department program from:

(A) a person or entity that has been determined by the department to conflict with either the department's mission or legislative mandates;

(B) a person or entity that holds a commercial license issued by the department to the extent that the department is prohibited from accepting funds from such a person or entity under Parks and Wildlife Code, §11.026; or

(C) a person or entity that is in litigation with the department at the time of consideration.

(3) Sponsor recognition shall be limited as prescribed in this paragraph.

(A) Sponsor recognition shall be solely in the context of the department program that the sponsor has supported with a financial or in-kind contribution.

(B) Sponsor recognition shall be permitted only when the financial or in-kind contribution is greater than the costs associated with providing sponsor recognition.

(C) Sponsor recognition shall not include signage of any kind on state-owned motor vehicles or trailers that were purchased or are maintained with department funds.

(D) Sponsor recognition shall not overshadow the project, the purposes of the project, or the mission of the department or result in the role of the department being less prominent than that of the sponsor.

(4) In determining the level of sponsorship recognition to provide, the department will consider:

(A) the level of contribution as a percentage of the total funding required to execute or produce the program, event, or material;

(B) the level of contribution as a percentage of total sponsorship dollars received;

(C) the scope of exposure (e.g. statewide, regional, local, or a single location); and

(D) the duration of exposure (e.g. one day, one month or one year).

(5) Sponsorship recognition may not promote the sponsor’s products, services, or facilities. This subsection does not prohibit the broadcast or display of the sponsor’s logo or name and a reference to the sponsor’s location.

(6) No officer or employee of the department shall act as the agent for any NP or donor in negotiating the terms or conditions of any agreement relating to the provision of funds, services, or property to the department by the NP or donor.

(b) Nothing in this subchapter shall limit the ability of a NP to make an unrestricted cash donation to the department when no sponsorship recognition is provided. Such a donation may be for a specific purpose or program.

§51.167. Department Procedures.

(a) The department will maintain and periodically update a list of GNPs and a separate list of CRNPs. This list will be made available to the public.

(b) The department will not hold or obligate NP funds or property.

(c) The ONP may reimburse department employees for legitimate, documented expenses. Additionally, the ONP may award scholarships to department employees from private, donor-directed sources, so long as there is a benefit to the department.

(d) All donations to the department of $500 or more must be approved by commission, voting in public session.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's authority to adopt.

Issued in Austin, Texas, on