Government again tries to regulate nonprofits

Government is trying one more time to regulate nonprofit organizations.

Since 2010, a proposed Charities Bill had to be pulled on two occasions before lawmakers were able to debate it. Charities and churches claimed they would not be able to afford the additional expense for record-keeping and annual external audits called for by the bill.

The groups warned the law could bring an end to charitable giving in Cayman.

In preparing another attempt to bring a new Charities Bill, Attorney General Sam Bulgin told the Legislative Assembly last year that there was some misunderstanding about the scope of what government is attempting to do. The main reason for the regulation of charities is the potential for money laundering and terrorism financing in this as yet unregulated space, he said.

A U.S. State Department report on international narcotics control highlights each year the “weak supervision of nonprofits and non-financial organizations” in Cayman as a major anti-money laundering weakness.

A national evaluation of money laundering risks also identified the regulation of charities as a significant vulnerability. The National Risk Assessment was carried out last year with the assistance of the World Bank to prepare for an inspection by the Caribbean Financial Action Task Force, an inter-governmental body that develops and promotes policies to combat money laundering and terrorist financing.

A law regulating the financial activities of charities is needed before the CFATF will make its scheduled assessment of Cayman’s anti-money laundering regime early next year.

The bill for the regulation of nonprofit organizations, released on April 29, seeks to create a registration system which will deal with the regulation and monitoring of nonprofits.

The proposed law defines a nonprofit widely as any organization that solicits contributions from the public and that is established primarily for the promotion of charitable, philanthropic, religious, cultural, educational, social or fraternal objectives, or any other activities and programs for the benefit of a section of the public.

The bill does not apply to charitable or voluntary organizations that are regulated by a government entity, trusts that are registered under the Banks and Trust Companies Law and any other entities that are exempt through an order of Cabinet.

Only registered organizations will be able to raise funds from the public if the bill becomes law.

The register of nonprofit organizations will collect the name and contact details of the organization and the identity of the individuals who own, direct or control it.

Charities and other nonprofits will have to maintain proper accounts for the donations and other funds they receive, for the proceeds from the sale of property, and for any expenditures and non-monetary transactions.

Nonprofit organizations with a gross annual income of more than $250,000 must have their books audited by a qualified or licensed accountant.

However, it is within the discretion of the registrar to demand the audit of nonprofits that have annual income of less than $250,000.

All organizations must submit an annual return to the registrar within three months of the end of the financial year.

To enforce the law, it is proposed that the registrar can apply a penalty of $3,000 if organizations do not comply with bill’s provisions for registration, record-keeping, audit and annual returns.



  1. It is unfortunate that there must be consideration of regulations regarding nonprofits. However, in modern society, especially with the internet and social media in abundance, such protections must be put in place for protection of the public. Therefore it seems as though I find myself on the side of government in relation to the institution of regulations on such organizations if they are not otherwise specifically expempt by other laws and regulations.

    However, I would caution that government take very strong measures to ensure the cost of adhereing to new regulation does not put agencies out of business, as has been warned by some nonprofit managers. There is nothing like Sunshine to open the eves of the public. Whether it be in relation to government or private organizations. If you are asking the public to contribute, or receiving any type of government subsidy your books should be open to the public as a whole, or to donors at a minimum.

    Under proposed regulations, all nonprofit organizations should be required to post a copy of an annual accounting form on a public website available to the general public. This could be administered either by a government agency or any other organization/entity willing and qualified to do so. This is not rocket science, and such a system is in place in other countries.

    In essense, there should be limited but definate government regulation of nonprofits, but requirement for full disclosure of parties involved in managment of nonprofits, disclosure of subsidiary companies and profit making associations and most importantly reporting of managment and program costs to the public on an annual basis.

  2. Rodney

    As the treasurer of a Rotary club for many years I agree with much of you state. My club would be more than happy to publish our accounts with the one who exception that we would not wish to publish the names of the recipients of our donations.
    I am happy to be audited but who pays the estimated fee of $10,00o or more likely much more?
    All that leads me to the Cayman Islands Football Association which is by anyone’s definition a secret society. No website and no accounts …

    • I have not read the legislation that is referenced in the accompanying article, so my intention was only to provide my opinion about open records and business rules generally known as Sunshine Laws.

      I cannot conceive laws requiring organizaions to reveal the names of “clients” they serve under programs funded through charitable fundraising programs. That would never do, and as a lifelong volunteer and former officer of numerous charitable organizations, I would fight against any such rules.

      As far as the cost of audits go, I’m afraid those fees must be absorbed into the cost of doing business. This would of course reduce funds available for program services, but like fire, hurricane and liability insurance, the cost of an audit is reasonable preventive medicine beneficial to the public and donors in general.


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