Although the vast majority of Hawai'i's 5,000 public charities follow the rules and have financial safeguards in place, the Honolulu Advertiser thinks they should have to pay for the misdeeds of a few. There is no evidence offered to demonstrate that registration reduces fraud in other states.
A curious series in the Honolulu Advertiser (Rob Perez) advocates for reinstitution of charity registration in Hawaii, which the state dropped in the mid-1990s. The stories in the series:
- Hawaii's rules lax on oversight of charities
- Registration of Hawaii charities doomed by political clout
- Hawaii charities left with little after fundraisers take cut
- Hawaii to put full-time watch on charities
What I find notable here is that Hawaii does have a registration and filing requirement for paid fundraisers. I've already talked about how ineffective this system appears to be in Hawaii, and the third article in the series further details how ineffective registration is in solving the problem of charities that spend most of their income on fundraising and executive salaries.
The whole series is based on anecdotes about bad actors in the charity sector, but it never explains how registration and filing of annual reports would make a difference. For instance, it rehashes the story of Timothy Janusz, who recently pleaded guilty of stealing $300,000 from the Salvation Army (we talked about it back in April, 2006). But how would charity registration have prevented that crime or brought it to light sooner?
The story explains that New York state has fifty-five employees in its charity regulation section, but we don't know that New York has significantly less charity-related fraud as a result.
One other peculiar claim is that local registration is needed because the federal Form 990 filed with the IRS is often inaccurate. I don't understand how a state registration form would be any more accurate, since it's typically going to be the same person filling out the form. And the Form 990 is a national standard that many people are familiar with. Having been responsible for filling out state registrations, I can vouch that there is no reason to expect them to be filled out with more care and study than the Form 990.
To me, state registration of charities is little more than an excuse to create a number of patronage jobs at the state level. It's burdensome to the charities (particularly the national charities that have to file again and again in every state that requires it, even though they are the least likely to be engaged in fraud) while it provides no measurable benefits to the public. Any additional resources should go into enforcement, not into setting up a registration bureaucracy.