Why Do States Require Annual Charitable Registrations?

As your nonprofit organization struggles to file your annual charitable state registrations, you may wonder why states require annual charitable registrations. Charitable registration and regulation is a method of protecting the public from fraudulent charity solicitations by individuals and entities and helps minimize instances in which an organization misuses funds that were donated to it. The California Office of the Attorney General posted a list of issues they are trying to limit and which they investigate. They are listed below:

  1. self-dealing transactions either between a director and the public benefit corporation, or by trustees
  2. loans by a corporation to a director or officer
  3. loss of substantial corporate funds or assets during one year
  4. losses of charitable assets through speculative investments
  5. excessive amounts paid by a public benefit corporation or charitable trust for salaries, benefits, travel, entertainment, legal and other professional fees
  6. sale of a charity or conversion of a public benefit corporation to for-profit status (authorized by statute under restricted conditions) at a price that is unfair to the charity
  7. illegal use of charitable funds
  8. diversion of charitable funds from their intended purpose

Their website states that the California Attorney General also investigates allegations of criminal activity by charities.

Hopefully, this understanding of the role of state regulators and the reason for charitable registrations and regulations make registering with states more bearable. If it is still a painful experience, contact us about our state registration services and have us prepare your annual charitable state registrations for you.