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New Jersey Proposes Mandatory Disclosures for Certain Charities

(Aug. 9, 2011) New Jersey's Division of Consumer Affairs has issued a proposal that would require certain charities to disclose information about how their contributions would be spent.

The proposal would apply to organizations that raise over $250,000 annually and provide appeals that name more than one particular program for which funds are solicited. 

These organizations would have to offer donors the opportunity to specify how their money should be spent and which programs in particular they want to support.

In addition, charities would be required to tell donors that if they didn’t specify how their money was to be used, their contributions could be used to cover administrative and fundraising costs.

You can find the proposal here.

AFP has submitted the following comments to the Division of Consumer Affairs. AFP supports proposals and legislation that balance reasonable regulation without overly burdening charitable organizations with unnecessary, and sometimes costly, bureaucracy.

Unfortunately, the current proposal does not strike that balance as currently written, and AFP lists and discusses a number of serious concerns to the Division in its comments. 

AFP urges its New Jersey members to follow up with the Division and their state legislators. You can reach the Division at the following phone numbers:

Consumer Hotline 973-504-6200
Toll free (New Jersey only) 1-800-242-5846
Director’s office 973-504-6534 

You can also provide written comments via the division website here:
http://www.state.nj.us/lps/ca/proposal/charpro_060611.htm

To assist you, AFP has provided the following talking points and comments:

  • I am contacting you as an employee of [state your organization’s name] and as a member of the Association of Fundraising Professionals, also known as AFP.
  • AFP represents 30,000 members in 225 chapters throughout the world, including 458 members and two chapters in New Jersey. The association fosters development and growth of fundraising professionals and promotes high ethical standards in the fundraising profession.
  • Although pre-proposal 2011-001 may sound good on paper, we have some serious concerns about it.
  • First, although donors can always place restrictions on gifts, the pre-proposal goes far beyond the status quo and proactively urges donors to restrict their gifts, which will greatly reduce the ability of charitable organizations to nimbly and flexibly maintain their altruistic missions. A charity could be handcuffed if it continued to receive contributions earmarked for an already-funded program because it could not then divert those funds to programs still needing financial support.
  • By making it clear that money goes to administrative costs if the donor does not make any designation, the draft language of the pre-proposal gives a strong incentive to donors to NOT give any money to administrative costs. This is a short-sighed approach. In fact, it is a misnomer that administrative costs, including fundraising costs, are indicative of a charitable organization’s effectiveness.
  • Some extremely effective and efficient organizations might have higher administrative costs. Similarly, organizations with certain missions (e.g., medical treatment for leprosy) might have higher administrative costs compared to more popular and mainstream charities. Administrative costs are integral to good stewardship of funds and resources and regulatory compliance and are equally necessary in furthering an organization’s charitable mission.
  • The Division also should not underestimate the potential cost of compliance and increased bureaucratic burdens on New Jersey’s charitable organizations under the pre-proposal. Every charitable organization will need to reprint its solicitation materials to provide the requisite disclosures. More importantly, organizations will have to divert resources to handle the increased accounting necessary to ensure that each donor designated gift, no matter how small, is properly tracked and recorded. These activities will drive up administrative and accounting costs.
  • The Division already regulates charitable organizations effectively and ensures strong compliance by enforcing the law and punishing those who commit acts of fraud or abuse. Therefore, the pre-proposal simply adds an unnecessary and redundant layer of bureaucracy for both the Division and the state’s charitable organizations—added bureaucracy that we believe will not enhance the Division’s ability to regulate the sector.
  • Finally, it is possible that the pre-proposal will run afoul of Supreme Court precedent stating that certain government restrictions on charitable solicitations violated free speech.
  • Thank you for the opportunity to comment.

If you have any questions or concerns about this pre-proposal, please contact Jason Lee, AFP's general counsel, at jlee@afpnet.org.



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