Binoculars / Michael Maher

December 29, 2016; Denver Post

Last year, NPQ released an edition of our print magazine that focused on the changing landscape of nonprofit and philanthropic regulation. In that edition, we noted that regulatory mechanisms varied at the state level: Some had strong, dedicated charity oversight units, and others treated it almost as an afterthought, with oversight responsibilities spread across different agencies. We also suggested that the network of state charity regulators were becoming more connected in their work, pursuing their first lawsuit in common only recently. Therefore, it is no surprise to see some states with more distributed regulatory systems start to try to build central units.

In the face of a massive 200-percent expansion of registered Colorado nonprofits over the past 11 years, and following a model active in 13 other states, Colorado Attorney General Cynthia Coffman says she wants $350,000 to fund a new charity oversight unit and that nonprofit infrastructure groups have given the proposal some support.

As NPQ has previously reported, most states still lack such dedicated units, instead spreading the oversight around to a number of different bodies. This can lead to an uncoordinated approach. Right now, according to Coffman, much of the state’s charity oversight is being performed by attorneys in the consumer fraud unit in her office; as a result, resources are spread too thin to address the issues of the sector properly.

“We have been limping along in this area in the last couple of years,” Coffman told legislators in a presentation to the Joint Budget committee. “But the workload now exceeds our existing resources, and it requires a more conscientious response from the department.”

Coffman called this “some of the worst fraud that people can commit because the resources they are stealing and converting to personal use are resources that aren’t going to the people who need that money.” She also cited her 2013 lawsuit against the faux nonprofit Boobies Rock. The principal in that case, Adam Shryock, was criminally charged a few years later with another charity-related fraud and spent six months in jail.

The budget for the proposed new unit would include two full-time attorneys, an investigator, and office equipment. At least one naysayer expressed concern that the proposed unit would put too “much firepower in place.” Sen. Kevin Lundberg, a Republican from Berthoud, said, during the recent committee hearing, “I’m extremely concerned that we will set up this full-time unit with police powers. With thousands of charitable organizations out there, I think we’re making more trouble than good.”

Nonprofits do not appear to be resisting the shift. Tom Fasano, a spokesperson for the United Way of Weld County, comments, “Oversight of nonprofits is important. We feel that proper charity oversight is something that has been a core value of ours to promote nonprofit excellence.” The Colorado Nonprofit Association also released a statement of support: “The Colorado Nonprofit Association supports enforcement of charity regulations that protect the nonprofit community and charitable donations.”

We anticipate we will be seeing far more of these consolidations over the next year.—Ruth McCambridge