Nearly a third of U.S. states and territories have less than one full-time-equivalent lawyer or staff member dedicated to charity oversight, and the structure of state regulatory offices varies dramatically across the country, according to a new study.
Fundraising abuses were the most common area of enforcement, followed by trust enforcement and governance, according to the report by the Urban Institute’s Center on Nonprofits and Philanthropy, titled “State Regulation and Enforcement in the Charitable Sector.”
“Many of the actions taken by regulators and the enforcement community in this sector are quiet undertakings that involve communications directly with the entity but are not the subject of court proceedings and will not be seen in the media,” said study co-author Cindy Lott, a senior fellow at the Urban Institute. Another finding, according to Ms. Lott, is that states work very little with the Internal Revenue Service on regulation because of federal statutory prohibitions baring the IRS from sharing information with states about investigations.
There are about 355 state-level lawyers and staff who oversee the registration and regulation of charities. In addition to the nearly one-third of jurisdictions that reported less than one full-time-staff person for charity regulation, just over half said they have 1 to 9.9 full-time personnel, while 19 percent reported having at least 10 full-time staff members working on charity regulation.
In 21 states, the attorneys’ general offices oversee charities and fundraiser registration, the report found. In 15 states, the secretary of state offices are responsible, while in eight states it is overseen by other offices such as consumer affairs or business and financial regulation.
The report comes as state charity regulators are working on a new shared, digital charity registration website, an effort they have named the Single Portal Initiative. Under the system, charities and professional fundraisers will no longer have to mail paper documents, such as Form 990s, to individual states to register. Instead, they will log into the shared system, check off all the states where they want to register, and submit only the information and documents required in those places. Regulators also hope the centralized electronic system will help them spot and go after bad actors among charities.
Other findings from the report:
- In 41 percent of responding states and territories, a single office is responsible for charity oversight and regulation. In the remaining states, the work is shared among two or more agencies or offices.
- Sixty percent of states and other jurisdictions require charities to register to raise money or operate within their borders, the study found. Meanwhile, 68 percent of them require professional charitable fundraisers to register.
Lack of Information
There have been calls to improve oversight of charities at the state and federal levels, says Ms. Lott, who is also director of nonprofit management programs at Columbia University’s School of Professional Studies. This report provides the necessary baseline of regulation and enforcement of charities.
The new report is based on research collected in 2013 and 2014. Ms. Lott and her colleagues analyzed charity laws in all 56 U.S. states and territories and surveyed the offices of the state attorneys’ general and secretary of state and other offices responsible for charity regulation. Forty-seven offices responded. The researchers followed up with interviews with representatives from 39 of those offices.
