Folly #59: Regulation
Why does the Attorney General need to protect us from nonprofits?
It’s not uncommon for good intentions to go awry. Heck, the Follies is all about unintended consequences of doing good. But recently a client came face-to-face with the bad things that regulation can cause.
Most states require a special filing to solicit funds on behalf of a charitable organization. Given all the unwanted junk mail (revisit the sad truths shared in Folly #14) and the take-most-of-every-dollar-raised telemarketers out there, this isn’t such a bad idea.
According to AFR’s interactive map above, 38 states + Washington, D.C. enforce charitable solicitation registration. Lots more require other forms and filings. An additional two (AZ and TX) have very limited charity registration requirements, and these 10 don’t require any at all: DE, IA, ID, IN, MT, NE, SD, UT, VT & WY.
However, California seems to take it to an extreme. And it can really harm nonprofits.
The California Attorney General’s Registry of Charities and Fundraisers requires all nonprofits and all fundraising consultants to pay a fee and complete an annual registration with their office. (Including me. I am a fundraising consultant who supports small-staffed nonprofits in growing donor relationships, and never by junk mail/phone. I register annually, and have to submit a form to the AG every time I work with a new nonprofit.)
Who benefits from the CA Attorney General’s “protection”?
Today’s Folly is a cautionary tale about regulation from a favorite nonprofit.
This nonprofit is part of a national model that is highly regarded and well managed. And they made a terrible, horrible, no good, very bad mistake: they omitted a signature at the bottom of their annual registration. The form was mailed on time, and their fee was fully paid.
The California Attorney General deposited the check and declared the nonprofit delinquent.
The nonprofit corrected the error right away by resubmitting a signed form.
The California Attorney General continued to count the nonprofit as delinquent.
This nonprofit receives online/credit card donations through a reputable payment platform.
That payment platform stopped processing donations because the nonprofit was shown as “delinquent.”
The nonprofit contacted the Attorney General’s office multiple times to follow up and resolve the issue.
Each email received an automated, generic reply from the Attorney General’s office.
It took that office four months to remove the delinquency.
I always say in fundraising (and life): never make assumptions.
Next time you have a frustrating experience processing an online donation by credit card, I beg thee, have patience and try again. If you’re giving, you know that the organization is credible.
Our state’s Attorney General claims that the “purpose of this oversight is to protect charitable assets for their intended use and ensure that the charitable donations contributed by Californians are not misapplied and squandered through fraud or other means.”
If the California Attorney General doesn’t have the staff to read forms or reply to emails, it’s hard to believe that their Registry of Charities and Fundraisers adds any “protection” beyond what IRS filings and evaluation sites like Charity Navigator or Guidestar/Candid already provide.
I’m stumped about what the California Attorney General is adding to the process here. Clearly it causes a lot of busywork for nonprofits and, potentially, frustration for those who support them.
And isn’t it interesting that you can only file a complaint about a charity – not the Attorney General.