Opinion ID: 1058895
Heading Depth: 2
Heading Rank: 4

Heading: Actual Operation as a Charity

Text: Ola argues, however, that because of its manner of operation[,] the YMCA is not a `charitable institution.' In effect, Ola argues the presumption that the YMCA is a charitable organization is rebutted by its actual operation. Ola avers that, like the recreation center in Bailey, the YMCA operates as a private health club; it is staffed by paid employees, open only to dues-paying members, and carries liability insurance for situations like Ola's attack. Further, Ola points to the stipulated facts that the YMCA operated at a surplus for four of the previous five years (1999-2003), and its budget contained no separate expenditures for charitable activities. Ola also contends that the trial court erroneously relied on the fact that 29% of the YMCA's income comes from public donations and that many of its workers are unpaid volunteers. Ola maintains that these financial and personal contributions are not a relevant factor in determining whether the YMCA itself is a charitable institution. Rather, she argues, the determinative factor is the manner of the YMCA's operation and its charitable contributions to others. We agree with the trial court that Ola has not rebutted the presumption that the YMCA is a charitable organization operating in accordance with its charitable purpose. Ola's contention that the YMCA operates only as a private health club is without merit. The YMCA's activities go far beyond the operation of its athletic facilities. The stipulated facts demonstrate that the organization also operates a childcare program, teen leadership programs, literacy programs, parenting programs, wellness programs, and makes its facilities available to local community groups in order to promote its stated values throughout the community. As particularly applicable to Ola, under the We Build People campaign, the YMCA [a]ssist[s] families with the cost of membership and [e]nable[s] children to gain confidence in the water while learning ... swimming skills. The YMCA staff is trained, not only to staff its facility and administer its programs, but also to promote and communicate its core values to all who participate in YMCA programs. The fact that these programs, as well as the discounted memberships to needy families or individuals, are not separately accounted for as line items in the YMCA's financial statements was explained by Susan Ohmsen, the YMCA's Chief Financial Officer. Like other charities, the YMCA must adhere to the accounting rules established by the Financial Accounting Standards Board which are commonly termed as GAAP (Generally Accepted Accounting Principles). [3] Under GAAP, the YMCA is required to record its expenses according to function. The practical effect of this GAAP requirement in the financial statements is that charitable expenditures are embedded in every expense line. Further, a charitable organization may carry liability insurance and retain its charitable immunity. As we noted above, a charity's immunity is not absolute, and suits by invitees or strangers for negligence will not be barred by the doctrine of charitable immunity. Thus, it is often prudent and an exercise of fiduciary responsibility for a charitable entity to carry liability insurance for protection in the appropriate circumstance. Additionally, the fact that the YMCA generated an operational surplus in some years does not strip it of its charitable status. See Davidson, 817 F.Supp. at 614. Rather, the important consideration is whether any profit or surplus is used to further the charitable purpose of the organization. Id. Ms. Ohmsen testified that the YMCA's reliance on donated contributions makes it unable to gauge its financial situation from year to year. Therefore, the YMCA depends on any surplus to preserve the charitable programs in existence and facilitate further growth. Ms. Ohmsen noted that it is important for the organization to remain financially healthy in order to encourage donors to make donations. Again, prudence and the exercise of fiduciary responsibility fully justify a nonprofit organization accumulating a surplus, provided it continues to invest in the organization's charitable purpose or otherwise expends the surplus for a charitable purpose. Indeed, a charitable institution's inability to sometimes post a surplus may doom its existence and end its work of charity when nonsurplus years arrive. Finally, we cannot agree with Ola's contention that an entity's significant reliance on voluntary contributions is irrelevant to a determination of charitable status. In Weston's, we noted that the defendant hospital was a charitable entity, in part because it was not self-sustaining. 131 Va. at 590, 107 S.E. at 786. The public policy behind the doctrine of charitable immunity admits the necessity of public and private contributions to carry on the organization's charitable purpose. While the receipt of a minimal amount of an entity's total revenue as a charitable donation may augur against a finding that it operates in fact as a charity, the YMCA receives nearly one-third of its revenues from the public as donated funds. [4] Such a level of giving cannot be dismissed as de minimis, but should be recognized as a significant factor of charitable operation. The trial court's reliance on the YMCA's receipt of donations was appropriate. The trial court also correctly distinguished the recreation center in Bailey from the YMCA. While the YMCA is a members-only organization, it does not, like the center in Bailey, restrict membership only to those who can pay the published fee. Rather, those who seek membership, but cannot afford to pay all of the membership fee, are eligible for a subsidized membership at a discounted rate depending on the ability to pay. [5] Further, unlike the center in Bailey, the YMCA is a tax-exempt, nonprofit organization, with a significant portion of its mission funded by donations. As the YMCA is readily distinguishable under the multi-factor test from the recreation center in Bailey, that case is not determinative of the case at bar.