Vol. II, No. 3 May 17, 1994
CBBB Would Further Regulate Nonprofit Program
Appeals
It should come as no surprise to Free
Speech Coalition members that the Council of Better Business
Bureaus, Inc. ("CBBB") has recently issued a new regulation
"recommending" that nonprofit organizations conform their
mailing practices to certain standards.
This is the latest in an ever-growing
series of regulatory measures by government and certain
non-government "monitoring" organizations, such as CBBB, to
control what is being said by the nonprofit community,
particularly where there is an appeal for funds. And this is
so despite the fact that the Supreme Court has held several
times that such speech by nonprofits is protected by the
First Amendment.
We have reported in the past about
numerous government efforts -- at both the federal and state
levels -- to overregulate tax-exempt organizations, and we
have noted recent maneuvers by non-government, "watchdog"
groups to join such misguided activity. The latest move by
CBBB is further confirmation of this regulatory web that
keeps spreading.
The regulation, issued by a division of
CBBB through its Philanthropic Advisory Service, or PAS,
provides that charities which assign a portion of their
direct mail expenses to public education or advocacy
programs include a specific explanation in their appeals
that these campaigns are serving both purposes. CBBB claims
that vague appeal references to public education and/or
advocacy efforts without further explanation do not provide
sufficient descriptions for donors.
The American Institute of Certified
Public Accountants ("AICPA") has also recently offered new
"guidelines" for such joint cost campaigns which are also
objectionable, but which at least did not attempt to control
what nonprofit organizations say to their donors. CBBB felt
the need to go even further than the AICPA, on the theory
that the AICPA allocation guidelines do not serve to inform
donors "at the point of appeal."
Charities are being asked to accept
CBBB's "voluntary" recommendation because of "concerns"
raised by the charitable community, monitoring
organizations, government regulators, media and others.
Monitoring organizations such as CBBB, which have to justify
their existence by an unrelenting stream of recommendations,
voluntary actions, and reports on the efficiency of
charities, seem focused on proving that all charities are
abusing the public trust.
CBBB says that its "recommended"
standards are voluntary, but admits that a charity that does
not wish to obtain an unfavorable review from the PAS must
alter its solicitations in the following ways:
1. The charity must include a clear
statement in multi-purpose solicitations that explains that
the charity is carrying out its public education or advocacy
activities in conjunction with fund raising appeals.
According to CBBB, such statements should repeat or closely
resemble the language in the following examples:
(Most/some) of the cost of this appeal is regarded by
Charity XYZ as a public education program rather than as a
fund raising expense.
(Most/some) of the Charity XYZ's public education program
efforts are carried out in its solicitations, such as the
one you are reading.
According to CBBB, the above examples will be minimally
sufficient to satisfy the above educational and/or advocacy
program disclosure recommendation. Alternative wordings
might satisfy this disclosure recommendation if PAS deems
these alternatives would clearly inform appeal recipients
about the nature of the charity's public education and/or
advocacy activities. More detailed disclosures are
encouraged.
2. The charity must include the public
education or advocacy disclosure in a prominent position in
the same (or larger) type size as the main body of the
multi-purpose appeal.
The following are examples of what is
meant by a prominent position:
The first page of the appeal
In a postscript ont he same page as the signature
line.
According to CBBB, the above examples
will be minimally sufficient to satisfy the prominent
position conditions of this recommendation. Other placements
might be acceptable in meeting this guideline if PAS deems
the placement is in a position in the appeal that would draw
the attention of a typical appeal recipient.
Many feel that this is another example of
charities being under attack by a watchdog organization that
has set itself up as the arbiter of what information a
member or donor needs in order to make a decision about
whether or not to support a particular charity. In this
instance, the watchdog agency carries a big stick with which
to encourage the charity: the Combined Federal Campaign
(CFC) relies on the CBBB grading system for inclusion in the
CFC. If CBBB gives the charity an unacceptable rating, the
charity will not be listed on the CFC. This can mean a great
deal of money left on the table that a charity could put to
good use in its programs, and it could spell the demise of
some charities.
CBBB has attempted to justify the
regulation by saying that "[m]ost donors are not
aware that the fund raising appeal they are reading may be
considered part of the charity's education or advocacy
program." Many would disagree, for it is obvious to every
donor receiving nonprofit mail that "some" of the package is
related to fundraising, "some" is related to education, and
"some" is public advocacy. This language the CBBB is asking
a charity to include appears to add nothing to the
information already available to the donor. Many feel that
this regulation is designed to prove that the CBBB, by
virtue of its standing with the CFC, can make its subscriber
charities do the CBBB's bidding.
Many fear that once permission is given
to a watchdog's demand for a censorship role, it may be
virtually impossible to roll back that permission, and that
every other agency "with an axe to grind" will demand
inclusion of its pet phrases in a charity's mailing under
the guise of protecting the consumer. CBBB holds a
tremendous amount of power, due to its status as the CFC's
rating agency, and it is therefore understandable why its
new regulation is being treated as a serious incursion into
the nonprofit's relationship with its donors/members.
There is one positive point to be
garnered from this pronouncement in that the CBBB, at least
tacitly, acknowledges the public education content of direct
mail.
One other note of interest regarding
another crucial front FSC is watching for its membership:
The PAS also states that it believes that the recent
Exposure Draft from the AICPA (SOP 87-2) will not resolve
the financial reporting requirements and that the allocation
of joint costs will continue to be a problem even if the
Exposure Draft is accepted. While FSC would not agree with
the characterization of the joint allocation situation as "a
problem," it would agree that the Exposure Draft does not
provide for a fair presentation of joint costs.
Many FSC members believe that the
disclosure required by the new CBBB regulation would present
a very limited piece of information with no explanation or
background, and could be very misleading to the recipient.
Better data is available in the annual reports, the
financial statements, and the Federal Form 990, which are
all available to a consumer on request.
It is suggested that all charities and
other nonprofits write to the CBBB and strongly urge the
CBBB to rescind this proposed requirement. If you agree that
this latest CBBB ruling is intrusive and misguided, we urge
you to write a letter expressing your views to the CBBB. You
should address your comments to:
Bennet M. Weiner
Vice President, Philanthropic Advisory Service
Council of Better Business Bureaus, Inc.
4200 Wilson Boulevard
Arlington, VA 22203-1804
Please write as soon as possible.
The Free Speech Coalition, Inc.
is a nonpartisan, nonprofit organization which educates,
lobbies, and litigates to defend the rights of advocacy
organizations and their members. FSC needs your support to
continue its fight to protect the rights of citizens to
associate together and exercise their First Amendment right
to petition their government for redress of their
grievances. Contributions to the Free Speech Coalition, Inc.
are not tax-deductible. For information on FSC programs and
membership information, please call 703-356-6912.
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