Local News

Many nonprofits are beyond regulation in N.C.

Posted December 2, 2008 7:11 p.m. EST
Updated December 3, 2008 8:40 a.m. EST

— With more than 91,000 registered nonprofit groups in North Carolina, state officials say there is little regulation and few requirements for a group to register as one.

The Internal Revenue Service polices nonprofit groups that are tax exempt, and the Office of the State Auditor can review how certain groups are spending state grant money.

Some groups do have to list their charitable contributions with the state, but many, like churches and schools, are exempt.

If a nonprofit isn't getting grants or tax deductions, however, state officials say it can use the label and go without regulation – as was the case for the Marketing and Networking Fellowship Group, a Raleigh nonprofit that advertised earlier this year as a sex club for gay men.

Secretary of State Elaine Marshall says the group did what is required by law – organizers filled out the paperwork and sent it in.

"We at the Secretary of State's Office register, we don't regulate," Marshall said. "If somebody's intent is to scam, the only thing this does is, maybe, give them a nice name that they can select."

Marshall added, though, that civil and criminal law would have caught up with the club eventually.

Janet Hayes, with the state auditor's office, said that over the past two years, the office has improved oversight of how nonprofits spend state grant money, identifying $1.3 million in questionable spending.

For non-profits beyond that scope, she says there is little to no way to tell if a nonprofit is legitimate.

"The only way that something like that could be caught is if someone who is involved with it tells us it's going on or someone being scammed by them tells us what's going on," Hayes said.

Mary Tschirhart, director of North Carolina State University's Institute for Nonprofits, says most nonprofits have good intentions, but that social clubs are the least likely to face scrutiny.

Of the 91,000 nonprofits registered statewide, no one is sure how many are operational. It is up to the group to notify the state if it is no longer operating.

In fact, the Marketing and Networking Fellowship Group remains registered even after it appears to have closed.