The voices of Urban Institute's researchers and staff
June 18, 2018

Why do some states enforce charity regulations more than others?

Recent news that the New York State attorney general has filed suit against the Trump Foundation for violating restrictions on political activity, conflict of interest, and other private foundation prohibitions has highlighted the role states play in regulating nonprofit and philanthropic organizations.

Despite the important functions of state charity offices, few research studies have systematically examined their oversight activities and programs. For example, what factors incline some states to engage in more enforcement activities than others?

Analysis of a survey of state regulatory offices provides preliminary evidence that two key factors—the number of offices in each state that oversee charities and the level of staffing in those offices—might be associated with increased enforcement capacity.

To examine capacity, we looked at outreach and educational activities as well as actions taken to enforce registration requirements. Both enforcement and outreach are important aspects of charity offices’ work. Public education and outreach can increase compliance with legal and regulatory requirements, but enforcement activities identify and correct noncompliance.

Requiring organizations to register is one of the most common ways state charity offices oversee charities and their fundraisers. Eighty-five percent of states enforce violations of registration requirements. But “bifurcated” states with two regulatory offices (typically the attorney general and the secretary of state) were more likely than “unitary” states (attorney general oversight only) to report using a wide variety of registration enforcement actions.

Actions to Enforce Registration Requirements and Bifurcation of Authority

Similarly, bifurcated states were more likely to report engaging in every type of outreach activity included in the survey. These data do not permit us to identify what causes these differences, but one possibility is that states with two regulatory offices have more staff resources.

When we computed a “staffing score” based on the ratio of full-time equivalent staff to the number of public charities in the state, we found that bifurcated states had a higher staffing score, on average, than unitary states.

Outreach Activities and Bifurcation of Authority

Although these data do not include information on strength or amount of enforcement, these results suggest that resources might be an important correlate of state enforcement activity in the charitable sector.

As more responsibility for oversight of charities devolves to the states, the question of appropriate resources and structure to do this well becomes an important consideration for the charitable sector, for regulators, and for civil society.

Illustration by Tang Yau Hoong/Getty Images.

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