States Criticized for Weak Enforcement of Charity Rules

Officials in many states, especially those strapped for cash, are not providing enough resources to adequately monitor nonprofit organizations, Reuters reports.

Faced with significant economic challenges, many states have cut their budgets for law enforcement and other services, including those rendered by the office of attorney general, which in most states is responsible for policing tax-exempt organizations. "We've kept our rules relatively loose for charities in the United States," Indiana University professor of public affairs and philanthropic studies Leslie Lenkowsky told Reuters. "The reason being that our philosophy is...we would like to see lots of private initiatives that aim to serve a public interest."

While a number of charity watchdog groups have emerged in recent years to help donors evaluate the effectiveness of the more than two million nonprofits in the United States, their views on individual organizations often differ. For example, the Central Asia Institute in Bozeman, Montana — the charity founded by Three Cups of Tea author Greg Mortenson, who recently was accused by "60 Minutes" of exaggerating the number of schools built by CAI and of improperly using funds donated to his charity — was awarded a four-star rating by Charity Navigator, but was criticized by the American Institute for Philanthropy in a 2010 report for inadequate transparency.

"The vast majority of donors are looking for information that is readily available; they don't have a lot of time to do research for their charitable giving," said Charity Navigator CEO Ken Berger. "We're trying to oversee what is basically a $2 trillion part of the American economy — one out of every ten jobs — 10 percent of GDP, and we are a very small operation. Creating further regulation would not be viable unless we get serious about enforcing existing laws more rigorously."

Michelle Nichols. "Weak Enforcement of Rules on U.S. Charities: Experts." Reuters 04/20/2011.