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The Honolulu Advertiser
Posted on: Thursday, April 24, 2008

State oversight of charities long overdue

Hawai'i has more than 5,000 charities and hundreds of Mainland-based organizations asking Hawai'i residents for donations.

Donors deserve a simple, accurate way to find out whether a charity is trustworthy and spends its donations properly.

Hawai'i is one of just 11 states with no registration system, which means all but the largest charities can do business here with little oversight.

Senate Bill 3171, which establishes a registration and financial reporting system, would change that. It would make that information publicly accessible online. The measure would require charities that solicit donations in Hawai'i to submit a one-time, three-page form that contains basic information about the charity, such as its contact information, its mission and who runs it — in short, information that any charity should be able to easily and quickly provide.

The bill also includes steps toward transparency: Financial reports from registered professional solicitors; annual audited financial statements for the largest charities; and copies of IRS forms 990 and 990-EZ, which most charities must file annually.

This bill should pass.

The IRS already recognizes the need: It is updating its 990 and 990-EZ forms, beginning with the 2008 tax season, to require more detailed data.

The Hawai'i Alliance of Nonprofit Organizations, which represents the largest Hawai'i charities, worries that this is too much regulatory change for charities to deal with all at once; it would prefer a year's delay. It also objects to the annual fees charities would pay to maintain the program — from $10 to $750, depending a charity's size.

But the state's basic form should not be difficult to complete; also, it would provide needed data about the estimated 90 percent of Hawai'i charities who can avoid filling out the detailed 990s because their small size exempts them.

As for user fees, they should be monitored to ensure they are not prohibitive, and should cover no more than the cost to maintain the system.

The inconvenience to charities in establishing a state regulation system is a short-term one. But in the long term, transparency will surely improve public confidence. And that's a good thing, both for the charities and those who support them.