A Regulator Predicts Charitable Benefits — and Abuses — for 21st Century

Dan Moore, New Mexico’s chief charity regulator, sees the Internet as “the most significant development for the philanthropic world in the last 10 years.”

As the next president of the National Association of State Charity Officials,

Mr. Moore envisions a future in which small, local, and new charities will compete successfully with bigger, better-financed national organizations for potential donors using low-cost Web sites.

But with the new opportunities, says Mr. Moore, will come new requirements from state regulators who want to insure that technological advances do not also make it easier for scam artists to swindle donors.

Mr. Moore, who is charities registrar in the New Mexico Attorney General’s Office, says he fears that abuses in the charitable world could increase in the new century, if predictions of staggering growth in charitable giving turn out to be accurate and if competition among non-profit groups continues to stiffen.

Of particular concern: Many financial-services companies have been promoting controversial tax breaks and other plans in anticipation of an intergenerational transfer of trillions of dollars in coming years.

“It’s like that famous Watergate saying: Follow the money,” says Mr. Moore. “Crooks will certainly be following the money and will want their ill-gotten share of it. So it’s especially important for state charity officials to make sure that the things going on are correct and proper.”

To that end, Mr. Moore has assembled an ambitious set of short- and long-term goals for state regulators. Among them will be to work more closely than in the past with organizations such as the National Center for Nonprofit Boards and the National Council of Nonprofit Associations to help educate board members about ways to improve their oversight of a quickly evolving charitable world.

“Strengthening non-profit governance protects against a host of problems that can crop up: hiring bad fund raisers or getting involved in conflicts of interest or other questionable activities,” says Mr. Moore.

Mr. Moore also hopes that new technology, while creating the need for increased state oversight, will also provide the means to make such oversight more feasible and effective.

He says that many non-profit groups that make fund-raising appeals on their Web sites or through electronic mail may soon be required to register with attorneys general or other regulators in numerous states for the first time. The association of state charity officials is currently working on a new policy to help clarify for non-profit groups how states plan to regulate Internet fund raising.

But Mr. Moore is determined to make sure that the expected rise in charity registration and reporting does not become a heavy burden for non-profit leaders or state regulators.

Through the National Association of State Charity Officials — or NASCO — Mr. Moore plans to develop a system in the next several years to allow charities to file their registration and fund-raising reports electronically with states. He sees development of such a system as the logical next step, now that most states have shown their desire to work together by agreeing to use a standardized registration form.

Ideally, charities will soon be able to transfer information to states directly from their own computerized accounting files, rather than filling out paper forms. And state officials will be able to stop retyping the information they get from charities into their computer data bases, freeing up more time for investigations and for efforts to educate charity board members on ways to identify and prevent problems at their organizations.

But several major barriers still stand in the way, not the least of which is money. Most states currently devote little money or manpower to overseeing charitable organizations.

“We’re probably talking in the order of millions of dollars and multiple years to create an electronic-filing solution,” says Mr. Moore. “But if you look at the hundreds of billions of dollars given to charity each year, millions of dollars to create an infrastructure to allow for more-efficient compliance with state laws is a small and wise investment.”

Mr. Moore hopes that Congress and private foundations will agree. He says state regulators have seen their work become increasingly important as the federal government has shifted responsibility for many social and other services to the states, which in turn have hired charities to perform those services.

Mr. Moore also plans to seek money to hire a full-time staff for NASCO, which has been run entirely by volunteers for the past 20 years. Mr. Moore says NASCO’s 12 board members must squeeze in time for the association while continuing to do their full-time jobs as state regulators. “So we have a lot of empathy with the volunteer-run non-profit groups we regulate,” he says. “We struggle with the same issues of trying to balance time and priorities.”

In addition to trying to raise money, says Mr. Moore, state regulators will need legislative help from Congress in coming years. In particular, he would like to see legislators give the Internal Revenue Service permission to share information with state charity regulators about its investigations.

Mr. Moore says the current prohibition on I.R.S. disclosure puts state regulators in a bind because they have no way of knowing whether the concerns they report to the I.R.S. lead to actual investigations. “We’re caught in a Catch-22,” he says. “Do we conduct our own investigation and possibly waste resources and duplicate effort? Or do we not do anything and run the risk that the I.R.S., for whatever reason, is unable to take a case?”

State charity officials have expressed their concerns to Congress, which is looking into the matter.

Freeing up the flow of information from the I.R.S. to state regulators, says Mr. Moore, “would be a great first step into the 21st century.”