House File 1384 Signed by Governor: A Victory for All Minnesota Nonprofits

Contact: Susie Brown
Phone: 651-757-3060

House File 1384 Signed by Governor: A Victory for All Minnesota Nonprofits

St. Paul, Minn., April 4, 2012 — The Minnesota Council of Nonprofits (MCN) announces a policy victory for nonprofits throughout the state. On April 3, the Governor signed House File 1384, a bill which limits the amount of time a nonprofit can be subject to “clawback” of funds when the funds are found to be related to donor fraud.

Fraud clawbacks occur when there is an attempt to retrieve, or “clawback” money that was attained through fraud. In the case of nonprofit organizations, money that was donated to an organization can be “clawed back” if the donor is found to have raised the money fraudulently, even if the money was given years ago and has long ago been spent on the organization’s mission and programs. Several Minnesota nonprofits are currently facing this situation, as a result of donations accepted from Tom Petters, who was later found to be involved in a Ponzi scheme that defrauded investors.

MCN member organization Big Brothers Big Sisters (BBBS), a recipient of a contribution from Tom Petters, led the charge to make this change on behalf of all nonprofits that could unknowingly accept funds that were generated through fraudulent activities. BBBS CEO, Gloria Lewis, made their case before the legislature, explaining, “When Big Brothers Big Sisters accepted contributions, in good faith, from Mr. Petters, we had no way of knowing that he was engaged in fraud. Having spent the donations on programs that advanced our mission, we were shocked that we would be asked to return the money. Of course, we were unable to do so.”

The Big Brothers Big Sisters story is like many others in the nonprofit sector. Funds given for charitable purposes are done so with specific program goals in mind, and often tied to spending in a specific time period. Re-claiming those resources after the fact is unreasonable, and can put nonprofit organizations in a position of serious financial hardship. MCN worked closely with Big Brothers Big Sisters, and other affected organizations, to ensure that such funds could only be “clawed back” within two years of the contribution, not indefinitely, as the law allowed.

“Nonprofit organizations receive and spend charitable resources strategically and expediently to advance their mission,” states MCN executive director Jon Pratt, “Financial resources are immediately turned into tools for work in the community—whether it’s after school programs, health care, the arts, summer camps or disability services. Funds are spent in a timely manner in order to carry on the work that communities expect of us. Clarifying that funds may not be recouped through the legal system after two years makes good sense for the nonprofit sector.”

Big Brothers Big Sisters are not the only nonprofit that will benefit from this change. “This is a victory for all nonprofits who depend on the generosity of donors to provided needed resources to serve our communities” states Gloria Lewis. The Minnesota Council of Nonprofits and Big Brothers Big Sisters worked with, and thank, Representative Greg Davids and Senator Benjamin Kruse for their leadership on this important issue.


The Minnesota Council of Nonprofits (MCN) is the statewide association of 2,000 nonprofit organizations. Through its Web site, resource publications, workshops and events, cost-saving programs and advocacy, MCN continually works to inform, promote, connect and strengthen individual nonprofits and the nonprofit sector.

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