HD9 - Regulatory Structure Review of Charitable Gaming in Virginia (2021 Appropriation Act, Item 105.D.1.)

Executive Summary:

The 2021 General Assembly Special Session HB 1800 Line Item 105 D1 directed that “the Office of the State Inspector General shall, with the assistance of the Office of Charitable and Regulatory Programs, review the regulatory structure of charitable gaming in Virginia, to include, at a minimum: (i) current permitting requirements and exemptions; (ii) net revenue dedicated to charitable activities and which types of gaming revenue is excluded from this calculation; (iii) charitable gaming occurring in remote locations not located in the same jurisdiction as the registered address of the charitable organization; (iv) enforcement of the “social quarters" and “members and guests" limitation; (v) the structure of the Charitable Gaming Board including any changes needed to prevent conflicts of interest; (vi) the adequacy of enforcement and resources dedicated to oversight activities of the Office of Charitable and Regulatory Programs; and (vii) whether regulation of charitable gaming would be more appropriately vested with the Virginia Lottery. The Office of the State Inspector General shall report on their findings to the General Assembly no later than October 1, 2021."

Code of Virginia § 18.2-340.15 outlines state control of charitable gaming. Per the Code, “A. Charitable gaming as authorized herein shall be permitted in the Commonwealth as a means of funding qualified organizations but shall be conducted only in strict compliance with the provisions of this article. The Department of Agriculture and Consumer Services is vested with control of all charitable gaming in the Commonwealth. The Charitable Gaming Board shall have the power to prescribe regulations and conditions under which such gaming shall be conducted to ensure that it is conducted in a manner consistent with the purpose for which it is permitted. B. The conduct of any charitable gaming is a privilege that may be granted or denied by the Department of Agriculture and Consumer Services or its duly authorized representatives in its discretion in order to effectuate the purposes set forth in this article."

In 1973, the General Assembly first authorized charitable gaming as a legitimate source of fundraising for qualified organizations. However, local governments had the regulation and enforcement of charitable gaming.

In 1995, the General Assembly created the Charitable Gaming Commission, moving the oversight of bingo and other legal forms of charitable gaming from local government oversight to state government oversight. Effective July 1, 1996, the Charitable Gaming Commission assumed statewide control over gaming activities conducted by qualified charitable organizations.

The 2003 General Assembly enacted legislation creating the Department of Charitable Gaming and abolishing the former Charitable Gaming Commission. This legislation created the Charitable Gaming Board as a policy board with nine members appointed by the Governor. In 2015, the membership of the Board was expanded to 11 members; six appointed by the Governor, three appointed by the Speaker of the House of Delegates and two appointed by the Senate Rules Committee.

In 2008, the Department of Charitable Gaming merged with the Virginia Department of Agriculture and Consumer Services and initially became the Division of Charitable Gaming. Subsequently, the Division of Charitable Gaming was changed to the Office of Charitable Gaming and moved within the Division of Consumer Protection.

The Office of Charitable and Regulatory Programs within the VDACS Division of Consumer Protection has the oversight of gaming activities. It follows prescribed regulations that look to ensure the integrity of charitable gaming and maintain a high quality environment to eliminate fraud, as well as provide assurance to qualified organizations to enhance their charitable fund raising activities.

In accordance with § 18.2-340.15, the conduct of charitable gaming is a privilege that may be granted or denied by the department. Except as provided in § 18.2-340.23 of the Code, every eligible organization, volunteer fire department and rescue squad with anticipated gross gaming receipts that exceed the amount set forth in § 18.2-340.23 of the Code in any 12-month period shall obtain a permit from the department prior to the commencement of charitable gaming activities. To be eligible for a permit, an organization must meet all of the requirements of Code § 18.2-340.24.

Code § 18.2-340.16 defines gross receipts as “the total amount of money generated by an organization from charitable gaming before the deduction of expenses, including prizes."

Per Code § 18.2-340.19, “Require, as a condition of receiving a permit, that the applicant use a predetermined percentage of its gross receipts for (i) those lawful religious, charitable, community or educational purposes for which the organization is specifically chartered or organized or (ii) those expenses relating to the acquisition, construction, maintenance or repair of any interest in real property involved in the operation of the organization and used for lawful religious, charitable, community or educational purposes." This predetermined percentage of its gross receipts is referred to as use of proceeds. The regulations have set this predetermined minimum percentage of gross receipts from charitable gaming at 10%.

Regulation 11VAC15-40-20E states, “If an organization fails to meet the minimum use of proceeds requirement, its permit may be suspended or revoked. However, the department shall not suspend or revoke the permit of any organization solely because of its failure to meet the required percentage without having first provided the organization with an opportunity to implement a remedial business plan." Regulation 11VAC15-40-20G states, “An organization whose permit is revoked for failure to comply shall be eligible to reapply for a permit at the end of one year from the date of revocation. VDACS may issue the permit if it is satisfied that the organization has made substantial efforts towards meeting its remedial business plan."