Hawaii to put full-time watch on charities
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By Rob Perez
Advertiser Staff Writer
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The state later this year is expected to hire its first employee dedicated exclusively to helping monitor charities and their fundraisers.
The legal assistant at the attorney general's office will help several deputies who provide charity oversight and enforcement on a part-time basis, juggling those duties with other noncharity-related ones.
The hiring, authorized by the Legislature this year, will underscore just how far Hawai'i lags many other states in budgeting resources to keep tabs on the thousands of charities that solicit money from the public.
New York, for instance, had more than 50 budgeted positions when Hawai'i Deputy Attorney General Hugh Jones conducted a December 2004 charity-oversight survey on behalf of the National Association of State Charities Officials. At the time, Hawai'i had none.
The state doesn't have more people in such jobs partly because it lacks a registration system. Hawai'i is one of only 11 states that do not require charities to register, a gap that national experts say opens the door wider for potential abuse.
Some states with more aggressive programs have entire divisions or sections devoted to monitoring the industry.
Oregon is one of them.
While not among the leaders in terms of the number of personnel devoted to charity oversight, Oregon's Department of Justice system is lauded by experts for applying the right mix of regulation and education in the marketplace. Some believe Oregon's system could serve as a guide for Hawai'i as politicians, nonprofit executives, regulators and others debate whether the state should play a larger role in keeping tabs on the industry.
"It's a good balance of protecting the public's interests and allowing nonprofits to emerge and provide important public services," said Linda Golaszewski, interim director of Portland State University's Institute for Nonprofit Management.
"I believe most Oregon charities find the Department of Justice oversight to be quite helpful and not burdensome," said Kay Sohl, a consultant who has worked with the industry there for years and co-authored a handbook on Oregon nonprofits.
SYSTEM'S BENEFITS
Cynthia Cumfer, an attorney who helped Sohl write the handbook, said the main benefit of Oregon's registration system is that it provides an independent form of oversight while giving the public a place to submit concerns or requests for information.
The independent oversight is important given that charity boards sometimes have a "cozy relationship" with the executives of the organizations they serve, Cumfer said. The system also has helped board members better understand their fiduciary duties to the nonprofit, she said.
Oregon requires charities to register only once, listing basic information such as the nonprofit's mission, primary county of operations and key officials. The charities also must submit annual financial reports. Even the smallest organizations must turn in the yearly reports, which cover such things as:
The organizations also must submit a copy of their federal tax returns, called 990s, if they are required to file such documents with the U.S. government. Nonprofits with income of $25,000 or less and most faith-based groups are exempt from filing returns.
The information compiled by Oregon enables the state to post a Web site that allows would-be donors to check financial data and other details of a registered charity — something lacking in Hawai'i.
Oregon's charitable activities section has a budget of roughly $2 million and employs about 18 people, including two full-time attorneys, three registrars, seven investigative personnel and one auditor, according to spokeswoman Victoria Cox. About 14,000 charities are registered with the section.
By contrast, Hawai'i has no oversight unit in a state with more than 5,000 charities. What oversight there is locally is handled largely by one deputy in the AG's office, with two others sometimes helping. The legal assistant to be hired will handle primarily charitable solicitation matters, which get regular attention from the office because of a Hawai'i law requiring paid fundraisers to register with the state.
In the 2004 survey done by Jones, Oregon was listed as having 12 positions, two more than the average for the 30 states that responded.
The Oregon section is funded by registration fees, including those for gaming activities, paid by charities.
Cox said the section does about 50 charity audits a year, mostly triggered by complaints. The complaints often come from disgruntled ex-board members, she said. The office also handles thousands of information requests a year from the public.
When the Oregon agency discovers that a charity has strayed from its mission, the state's goal is to work with the nonprofit to fix the problem, according to Cox.
Although the department has the authority to shut down a charity and remove directors from the board, it strives for rehabilitation over aggressive punishment, keeping with the state's mission of protecting charitable assets, she said.
LOW TOLERANCE
With professional fundraisers, however, the state is very aggressive if the companies mislead donors or violate other laws, Cox said. The state, for instance, will threaten to sue if the fundraiser misrepresents information, she said.
Oregon has provided independent oversight of the industry for years. It formed the activities section in 1981.
Hawai'i used to have a registration requirement for charities, but that law was repealed in the mid-1990s, and the industry helped thwart efforts in 2001 and 2002 by the AG's office to get the Legislature to approve a new system.
One of the chief industry concerns has been that a registration requirement could prove too costly in time and money, especially for smaller charities, hurting their ability to carry out their charitable duties.
But Sohl, the nonprofit consultant, said even tiny charities benefit from Oregon's oversight.
"For the very small and unsophisticated nonprofits, we've found that the requirement to report to the Department of Justice is often helpful," she wrote in an e-mail. "It's something of a wake-up call about the need to keep basic financial records."
Reach Rob Perez at rperez@honoluluadvertiser.com.
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