Date of Adoption: November 17, 2000.

Purpose: A rules package to simplify the net return and significant progress requirements bingo operators must follow for their gambling establishments was filed under WSR 00-20-086 and has been under discussion for the past several months. At the November meeting, the commission adopted one rule from this package (WAC 230-08-255 - significant progress required) and held the remaining rules over for further discussion. It is anticipated the remaining rules will be adopted in January 2001.

Citation of Existing Rules Affected by this Order: Amending WAC 230-08-255.

Statutory Authority for Adoption: RCW 9.46.070.

Adopted under notice filed as WSR 00-20-086 on October 3, 2000, with a publication date of October 18, 2000.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 1, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 1, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 1, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0. Effective Date of Rule: December 31, 2000.

November 17, 2000

Susan Arland

Rules Coordinator

OTS-4384.1

AMENDATORY SECTION(Amending Order 363, filed 9/23/98, effective 1/1/99)

WAC 230-08-255
Bona fide charitable or nonprofit organizations -- Significant progress required -- Procedures -- Exception.

A charitable or nonprofit organization requesting to be certified to conduct gambling activities must demonstrate ((that)) it has made significant progress toward its stated purposes during the period under review. ((Any organization that demonstrates compliance with all requirements of this section, during the fiscal year under review, shall be deemed as having made the progress required for its purposes.)) The following definitions and procedures will ((be utilized to measure an organization's progress)) 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; ((and))

     (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) ((Progress toward)) An organization's progress towards its stated purpose will be deemed ((to be)) significant when ((such organization uses)) a substantial portion of its available resources are used for providing program services ((in an efficient manner)) during the period under review.

     (((a))) For purposes of this section, available resources:

     (a) Include the ((net)) 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) ((Available resources do)) 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) ((Elections to select officers were held at least once in the previous two years;

     (b) A general membership meeting to conduct the business of the organization was held at least once in the previous two years;

     (c) A substantial portion of available resources was used to provide services during the period. An organization shall be deemed to have met this requirement when it demonstrates it has expended at least sixty percent of the net gambling income earned in the organization's most recently completed fiscal accounting year, for both program and supporting services (functional expenses); and

     (d))) 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 ((is)) 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, ((and/or sponsorships,)) then supporting services expenses shall not exceed twenty percent of functional expenses.

Gambling income not separate from other income.

     (4) ((For purposes of computing the percentage of functional expenditures utilized to provide supporting services in the year under review as set forth in subsection (3)(d) of this section, the following procedures apply:

     (a) Compute the amount of expenditures made for supporting services;

     (b) Divide supporting service expenditures by the total amount expended for functional expenses; and

     (c) The result of the computation made at (b) of this subsection must be equal to or less than the limitation set forth in subsection (3)(d) of this section.

     (5))) When an organization does not keep ((assets procured with gambling proceeds physically and functionally)) gambling income separate from all other ((assets)) income of the organization, the amount of net gambling income required ((to be utilized)) to provide ((program and supporting services ())functional expenses(())) in the year under review shall be ((determined as follows:

     (a) Compute the amount of net gambling income that must be used for functional expenses by multiplying net gambling income for the period by sixty percent;

     (b) Compute the ratio of net gambling income when compared to total net revenue from all sources for the period by dividing net gambling income by total net revenue from all sources;

     (c) Compute the amount of net gambling income used for functional expenses by multiplying total functional expenses by the result of the computation in (b) of this subsection; and

     (d) Total functional expenses must equal or exceed the result from (a) of this subsection)) the pro rata portion of net gambling income compared to the total net revenue from all sources.

Waivers.

     (((6))) (5) 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.      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.]

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