California Bill Promises to Boost Oversight of Online Charitable Giving

News flash: Not everybody professing to be operating from a place of goodness is telling the truth. Some of the people and organizations that say they’re raising money for that cause you’re eager to support are simply lying — or, more often, overstating what they actually do.

And with every disaster — like in Afghanistan, Haiti, New Orleans, and Tahoe — Californians apply thumbs to phones to send money to people and organizations raising money for those in need. Which explains the presence of Assembly Bill 488 on Gov. Gavin Newsom’s desk now, which promises to boost state oversight of charitable fundraising online.

The bill would expand the types of organizations or “platforms” required to register with the attorney general’s Registry of Charitable Trusts. To raise money legally in California, charities of every kind, including those run by a for-profit, commercial enterprise, would have to get on that registry and stay on it, by proving they’re transparently doing what they say they’re doing with your donations.

“It’s really amazing how long it’s gone unregulated,” said Joan Harrington, director of Social Sector Ethics at the Markkula Center for Applied Ethics at the Santa Clara University School of Law. In an earlier life, she was in-house counsel for the London-based nonprofit Save the Children.

She’s speaking hyperbolically, in the sense that there are laws on the books, and the California attorney general’s office has a division dedicated to regulating charities. But the breadth of the field that must be covered is overwhelming, and despite the odd regulatory crackdown, usually following a scandalous news report, Harrington says there isn’t enough oversight from government.

“You know, in most states, it is the attorney general’s office that regulates charities, and they’re very busy — with other things,” Harrington said.

“It’s the Wild West when you look at online charitable giving,” said Assemblymember Jacqui Irwin of Camarillo, who co-authored AB 488 with Attorney General Rob Bonta.

The keyword here is “online.” California law has required charities to register with the attorney general for some time, but over the years, the charity space has expanded to include an ever-growing cast of actors: commercial fundraisers, fundraising counsels, and such. These entities are not necessarily charities themselves, but for-profit entities providing services that also require oversight.

Critics of AB 488, including the public benefit corporation Classy, wrote in public arguments in August that the new safeguard would be unnecessary, given current law.  Other organizations also argued that additional regulation doesn’t do much to deter fraudulent behavior by bad actors who, by definition, aren’t bothering to abide by California law.

But as Bonta wrote in the June press release announcing the bill, “Internet companies have developed methods for individuals to donate to charities through websites and phone applications that serve as ‘charitable fundraising platforms.’ California’s solicitation laws do not specifically reach these online platforms, resulting in instances of deceit and mistreatment of charitable donations that the Attorney General’s Office is not able to address through enforcement of existing charity oversight laws.”

In the meantime, what’s a donor to do?

Harrington prefers opting for an established nonprofit over smaller outfits. “As dysfunctional as nonprofits can sometimes be, large nonprofits … are trying to do it right, and there are lots of things that you have to do in a nonprofit to do it right. And a single person who wants to make a change in Afghanistan who’s never done anything in Afghanistan before isn’t the right person,” Harrington said.

But what to make of recent news headlines exposing ineffective or mismanaged institutional charities? The disappointing performance of the Red Cross in Haiti comes to mind.

Journalists do sometimes vet charities during a crisis, as KQED News did during the Caldor Fire. But that’s not a catch-all.

Especially online, and especially on social media platforms, nearly anyone can upload a distressing photo and use compelling language to persuade you to send cryptocurrency to a foreign bank account. Harrington urges donors to avoid making spur-of-the-moment, emotionally driven donations to people who appear to be newbies on the scene, whatever that scene is.

“I welcome everyone giving. I love giving. I would never want to discourage anybody, but if people ask me for my opinion on where they should give, I say, find someone who has been in Afghanistan. If you can give locally in Afghanistan, do that. But you know, your friend fundraising for Afghanistan who’s never been is not the right way to go,” Harrington said.