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Change In State Law Expands Maryland Charity Oversight

Officials, Advocates Tout Expanded Maryland Charity Oversight

By: Bryan P. Sears, The Daily Record May 12, 2014

State officials who monitor charities in the state say a law passed by the General Assembly earlier this year will make it easier for them to weed out fraudulent organizations.

But while modest fee increases to as many as 3,200 charities will take effect on Oct. 1, many of the more important changes — including computerized databases and hiring of at least one more assistant attorney general to assist with investigations and prosecutions — won’t happen for two to three years.

“It’s really a good time for Maryland to be getting into this,” said Henry Bogdan, policy and advocacy director for Maryland Nonprofits.

The state has lagged behind others in terms of its ability to investigate problem nonprofits and enforce the laws. In many cases, Bogdan said, he has had to refer donors with complaints to the IRS.

“Some of that really is because the attorney general’s office really has lacked the legal authority,” Bogdan said.

But that is about to change.

The House and Senate unanimously approved House Bill 1352 earlier this year. The bill is expected to be signed by Gov. Martin J. O’Malley Thursday.

Under the measure, the Office of the Secretary of State, which handles as many as 9,000 filings annually from charitable organizations, will work closely with the Office of the Maryland Attorney General to identify and investigate problem charitable organizations.

Maryland Nonprofits, a Baltimore-based organization that works to improve the nonprofit sector and individual charities within the state, supported the legislation.

The bill calls for the modernization of Secretary of State’s Charitable Organization Division’s records including electronic filing and tracking. Currently, the office has three people who are responsible for reviewing each filing by hand. Some of those forms can be as long as 50 pages. Supporters also hope the changes will bring with it the ability to pay the filing fees online — an option not currently available.

“This is really a big deal,” said Del. Dan K. Morhaim, D-Baltimore County, the bill’s sponsor. “Maryland residents give $1.5 billion annually. That’s a lot of money. Even if it’s only some small percentage that gets siphoned off illegally, that amounts to hundreds of thousands of dollars.”

The bill will also likely result in more information being available to donors who want to review charities before contributing. In many cases, the information available on the state website is 12-18 months old, Morhaim said.

Deputy Secretary of State Peter Fosselman praised the bill, saying he expects it will allow the state to better identify fraudulent charities faster.

“We’re taking some big steps toward increasing donor confidence while supporting legitimate charities and enforcing the laws on bad ones,” Fosselman said.

Morhaim said he expected the new system to “be better and more efficient than the health benefit exchange rollout.”

Bogdan and Fosselman said the bill also calls for a work study group to review best practices in other states so that the agency can put an efficient system in place.

The database system could cost at least $400,000, according to an early estimate. There will be additional costs to hire a dedicated attorney within the attorney general’s office to work with the Secretary of State. The cost of the program will be offset, at least in part, by increases in fees to some nonprofits and the companies hired to help with solicitations.

Nonprofits collecting more than $500,000 in annual donations will pay $300 in annual filing fees — a $100 increase. Solicitors and fundraising counsel will see their filing fees go up $50 to $250 and $350 per year, respectively.

Those fees have not gone up in at least 20 years, according to Fosselman.

Bogdan said the fee increases are worth it if the new system gives donors confidence that their money is going to the actual charitable cause.

“It’s a modest cost increase for what charities will get back,” Bogdan said. “I haven’t heard one complaint from any charity that has heard of this.”

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