Enforcement transparency improves
The holiday season and the year-end cutoff for 2015 tax write-offs will have Americans handing millions of dollars to charity in the coming weeks. Charities are ramping up their fund drives with direct mailers, emails and telemarketing calls.
Consumers interested in knowing if any charities have run afoul of Georgia regulations have been stymied in recent months, though. The Secretary of State’s online database of enforcement orders has been lacking any records from 2014 or 2015, and showed zero orders related to charities.
After the AJC inquired, the Charities division posted links to its 14 orders dating back to 2010.
Most charities can also be checked on CharityNavigator.org, which analyzes public filings and grades charities on a four-star scale based on accountability and how much of their donations go toward altruistic programs.
The Better Business Bureau's Wise Giving Alliance, at Give.org, flags charities that refuse to produce records about their finances and activities.
Fourteen orders
The Atlanta Journal-Constitution requested records reflecting all enforcment or disciplinary actions taken against charities and professional solicitors over the past five years. Here’s what the Charities division found, broken down by year.
2010 — 2
2011 — 0
2012 — 7
2013 — 3
2014 — 1
2015 — 1
All 14 orders are now posted on the Secretary of State's office's website.
Fourteen orders
The Atlanta Journal-Constitution requested records reflecting all enforcment or disciplinary actions taken against charities and professional solicitors over the past five years. Here’s what the Charities division found, broken down by year.
2010 — 2
2011 — 0
2012 — 7
2013 — 3
2014 — 1
2015 — 1
All 14 orders are now posted on the Secretary of State's office's website.
A Henry County charity took in hundreds of thousands of dollars to house abused and abandoned children, even though its foster care home had been shut down for years.
A Georgia lawmaker's nonprofit raised nearly a million dollars to combat illiteracy and black-on-black violence, but instead he funneled it into his own bank account.
A network of cancer charities raked in $187 million from donors across the country, promising to help breast cancer patients and dying children. Most of the money, according to a sweeping multi-state compliant, propped up lavish lifestyles for a Tennessee man and his family. Luxury cruises. Cars. Jet-ski outings. Six-figure salaries.
Such are the hazards of blind generosity. In Georgia, standing between unscrupulous charities and an unwitting public is the Charities division in Secretary of State Brian Kemp's office, which is responsible for policing how the state's 4,600 registered charities and hired fundraisers solicit donations.
But a review of records by The Atlanta Journal-Constitution raises questions about how much Kemp’s office has been doing over the years to protect Georgians from charity scams.
It’s been almost three years since Georgia’s charities office initiated any significant punitive action. That was in January 2013, when a cease-and-desist order levied $11,000 in civil penalties against Indiana-based Automotive Recovery Services for seeking donations on behalf of 22 charities without being registered as a paid solicitor.
Since then, the Secretary of State’s office has issued only four other orders, even though it received 84 complaints in that three-year span.
Ryan Germany, Kemp’s general counsel and assistant commissioner of Securities & Charities, said the orders reviewed by the AJC don’t reflect everything the division does.
“I would say that we’ve got more going on now than previously, even if there’s less orders coming from our office,” said Germany, who began overseeing Charities in early 2015. “To us, the important thing is ensuring compliance. We’re not trying to do orders if we don’t have to.”
By comparison, though, during the past three years North Carolina’s Secretary of State investigated and took action against 47 charities and fundraisers that broke or bent the rules. Tennessee assessed civil penalties against 95 organizations totaling $1.3 million.
Florida reported enforcement actions — including fines, suspensions and revocations — against more than 370 charitable organizations this year alone. Since 2013, South Carolina’s Secretary of State filed injunctions against four charities, banned another from soliciting in South Carolina for 15 years and fined a professional fundraiser $1 million.
Georgia’s low level of enforcement may reflect slim funding. Only about 2 percent of the Secretary of State’s annual $29 million budget is earmarked for the division that regulates both charities and securities. The state appropriated more than $2 million for the division in 2008, a figure that has since shrunk to less than $700,000.
“I’m sure that there are other bad actors that we would love to be found and ferreted out,” said Karen Beavor, president and CEO of the Georgia Center for Nonprofits. “We never want any kind of misrepresentation or consumer duping by any entity, for-profit or non-. I’m sure that (the Secretary of State’s office) would like to do that, too. I think that’s probably a function of their staffing and resources to put behind it.”
The team has been fraught with turnover since Kemp took office in 2010. In addition to Germany, three other attorneys on the Securities and Charities team started working there a year ago.
Kemp declined an interview request for this story.
Eyes on ‘bigger issues’
Three of the four orders the Secretary of State has issued since February 2013 are registration-related. The only one filed in 2015 denied a solicitor’s license to a Michigan-based man after a criminal background check turned up a guilty plea to wire fraud conspiracy. The other two orders, from 2014, granted conditional registrations to a Wisconsin soliciting company and a White Plains, NY, charity after they disclosed sanctions by other states on their applications.
The fourth order slapped Atlanta Children’s Shelter for misrepresenting its accreditation credentials during a holiday season fund-raising drive. The shelter corrected its marketing materials.
Georgia also took part, along with the Federal Trade Commission and 49 other states, in cracking down on Cancer Fund of America and its related operations, which the complaint called “sham charities” that misled donors about the services they delivered and falsely inflated revenues in financial filings. Georgia assisted, but did not lead in pressing the litigation.
Germany said Georgia’s charities division spends most of its time working with nonprofits and paid solicitors to make sure they’re complying with state laws. Many investigations end with the organizations coming into compliance, generating no enforcement records.
Such actions aren’t being tracked, though the state has written more than a dozen letters of caution to charities and fundraisers in the past three years telling them to shape up.
The Charities division currently has 53 open cases, seven of them involving possible deception.
“We think it’s more fruitful to focus on bigger issues, in terms of fraud, misrepresentation and making sure that donor funds are used correctly,” Germany said. “The problem is those take a long time to investigate and then a long time to prosecute, if we go that way.”
One open case involves Noah’s Ark Children’s Care Home in Locust Grove, which closed in 2010 yet raised at least $658,000 in contributions from donors in the years that followed, according to an investigation by Channel 2 Action News.
That investigation found that five of the six kids featured on a fundraising website as “children of the ark” were actually the adopted children of the charity’s founder. The sixth child was being adopted by the founder’s daughter.
The Secretary of State’s office launched its own investigation last month after Channel 2 inquired about Noah’s Ark’s records.
The Charities division didn’t take part in the case against former state Rep. Tyrone Brooks, who was sentenced in November to a year in federal prison for tax, wire and mail fraud. The FBI and the U.S. Attorney’s Office handled the case.
Brooks operated a sham charity, Universal Humanities, which prosecutors said raised about $1 million over 15 years from the likes of the Coca-Cola Co., Georgia Power, Georgia Pacific and Northside Hospital.
None of the money went to literacy programs, voter education and registration efforts or initiatives addressing violence in the black community as was promised when he asked for donations. Brooks used the money for home repairs, cable bills, dry cleaning, jewelry, life insurance, his wife’s credit card bills and his son’s Match.com membership, among other things, prosecutors said.
Out of compliance
An AJC spot check of charities that have been the target of past orders raises questions about effectiveness, even in the relatively picayune realm of clothing donation bins.
State law requires language on the front of receptacles telling donors which organization operates them, its address and telephone number, and whether or not it’s registered as a charity with the Secretary of State.
The AJC found two charities whose bins don’t comply, despite orders three years ago.
A Better Way Ministries, in Peachtree City, lacks verbiage on its bins saying that it’s not registered. (As a religious organization that holds public worship services, it doesn’t have to register.) Founder John Barrow said he will have new placards made.
Two of Lawrenceville-based NSPIRE Outreach’s receptacles didn’t disclose the group’s contact info nor the fact that it isn’t registered. “Sometimes those boxes, they may get vandalized, or weather sometimes does some destruction,” founder Gregg Kennard said.
After the AJC inquired about the two groups’ compliance issues, Germany said his office will launch new investigations.
“The government entities that are supposed to be looking over these nonprofits are overwhelmed,” said Sandra Miniutti, CFO and marketing vice president for Charity Navigator, which monitors nonprofits. “They don’t have enough staff and resources, because there’s just too many nonprofits.”
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