Advocates say creating an online financial disclosure system would prevent Iowans from being duped into donating to an organization that spend as little as 1 percent of what they raise on a charitable purpose.
Thousands of Iowa charities would be required to disclose how they raise money actually benefits their cause under legislation being drafted this year by Iowa’s attorney general.
Iowa is one of just 10 states that do not have state registries for charities.
“We believe the proposed measure would be minimally burdensome on charitable organizations,” said Bob Brammer, a spokesman for the attorney general’s office. “In the end it will help increase true charitable giving in the state by highlighting our many well-run charities, while shedding light on questionable organizations that use up almost all the charitable donations for their own costs and profits.”
But the measure could face a backlash at the Statehouse because of opposition from some charities, who would have to pay an annual registration fee. Many nonprofits already disclose financial information in tax filings that are open to the public; some say they would resist paying a new, revenue-based fee _ under $100 annually, for most _ to finance the new system.
“They should not be taking money away from charities that do good and important work in order to fund something that’s repetitive,” said Kyle Carlson, an attorney and lobbyist for Planned Parenthood of the Heartland. “It’s not appropriate. People don’t write a check to charities like Planned Parenthood to have us turn it over to the attorney general’s office for bureaucratic work.”
The state already requires some disclosure of financial information by professional fundraisers, but not the charities they serve. A Des Moines Register investigation published in January 2009 found less than a quarter of the money collected by those fundraisers typically goes to the actual charities.
There are 25,349 in-state nonprofits operating in Iowa. Another 823 out-of-state groups are registered, according to the secretary of state. The attorney general’s office estimates that 3,000 to 6,000 charities with headquarters inside and outside the state would be required to participate under the draft bill.
In 2007, the attorney general proposed legislation that would have created a new program to help weed out nonprofits that aren’t fulfilling their charitable mission. That proposal would have charged nonprofit groups $25 to $30 every other year to pay for more enforcement.
Lobbyists for the Iowa Girl Scout Councils, the Iowa State Police Association, Goodwill Industries of Iowa and Planned Parenthood successfully turned back the bill, saying it created a new tax on charities.
The new proposal would allow Iowa to tap into a registration program shared by 37 other states, according to information from the attorney general. That online system allows people to evaluate more easily any sanctions or actions taken by attorneys general in other states.
The proposed Iowa law would also give the attorney general the ability to obtain a court injunction to stop fundraising by charities that have failed to register. Groups could face civil court fines under the state’s consumer fraud act.
However, Danette Tipton of Mainstream Inc., a group that oversees state nonprofit associations in Iowa, Nebraska, Kansas and Missouri, said policing alleged violators could be difficult.
Some charities ignore, or are unaware of, state mandates to register financial information for inclusion in databases, and few of those who fail to submit such information face consequences, Tipton said. Some databases run by states are unreliable or incomplete, while others maintained by nonprofits like charity tracker Guide-star are more complete, she said.
“I feel like most sophisticated donors will go to Guidestar and see what people are making or what the management costs in general are versus program costs,” Tipton said. “Even if charities register, will the state have time to police? It just seems like we have so many other ways to track.”
Brammer noted some Iowa charities might not have to file the same tax forms that are public records and available on Guidestar.
Small local organizations that raise money for a school sports team or a community art project, for example, are not always required to file such reports.
The proposed Iowa system would include a more comprehensive list of charitable organizations registered in Iowa than what’s available on Guidestar and other groups.
It would also include how much money the organization raised in a given year, the percentage spent on fundraising and the percentage committed to the charitable cause.
That information is available on Guidestar, but it requires users to read through sometimes dozens of pages of tax forms and do their own calculations. The Iowa site would provide the information nearly instantaneously, Brammer said.
Rep. Clel Baudler, a member of the Legislature’s Government Oversight Committee and a former state trooper, said he’s aware of some charities that collect money in the name of Iowa law enforcement but give only a small fraction of what they raise to the causes.
Baudler, R-Greenfield, said he’s willing to examine the proposed legislation.
“It’s something that should be looked at, but I’m not sure if it’s needed at this time,” he said.
House Majority Leader Kevin McCarthy, D-Des Moines, said the proposal would receive “serious consideration.”
“The vast majority of charities in Iowa operate on the up and up, but there have been isolated examples where the vast majority of what’s raised goes to the telemarketer and not the charity,” McCarthy said. “There’s a push for more transparency and accountability. We’ll give it a good, hard look.”