July 20, 2011

N.J. Plan Would Require Charities to Tell Donors They Can Earmark Money for Programs

New Jersey regulators have proposed a rule that would require charities to tell donors that they can earmark their money for specific programs.

The proposal aims to ensure that donors aren’t being misled by solicitations that highlight programs that may actually get little of the money that is raised.

But it is causing concern at nonprofits in the state, which say that it would be an administrative burden and curtail the ability of charities to decide how best to spend their money.

The proposal, which would apply to charities with at least $250,000 in annual contributions, would require groups to offer pledge or payment forms that allow donors to specify how their money should be spent.

Nonprofits would also have to disclose to donors that their money could be used to pay for administrative and fund-raising costs if they don’t make a choice. It would apply only to telephone or written appeals that mention more than one of the charity’s programs.

“Charities’ fund-raising campaigns present their mission in a way calculated to have the biggest impact,” says the state’s Division of Consumer Affairs, which drafted the rule, in a written notice.

“Sometimes that involves featuring a particular program or programs in the soliciting materials, which may not be funded to the extent that a contributor might expect from the soliciting material. For example, soliciting material may feature both research and consumer education programs, but one may be funded almost to the exclusion of the other.”

The Center for Non-Profit Corporations, an association of New Jersey charities, says a “government-mandated” donor designation, if approved, would have dangerous consequences for nonprofits in the state.

“Although donors always have the option of restricting their gifts, the regulations would go further by effectively encouraging donors to do so, thereby reducing available funds for general operations, overhead, or organizational flexibility to respond to unanticipated community needs,” the organization said in its comments on the proposal.

Linda M. Czipo, the center’s executive director, said her group also objects to “the very peculiar and disturbing way it singles out administrative costs as being bad.”

The consumer-affairs division did not say whether it was responding to any specific problems with charities in New Jersey. Thomas R. Calcagni, the agency’s director, said in an e-mail message that charities are obligated by law to honor a donor’s request to earmark money.

“However, in most cases donors do not exercise this option, even when responding to solicitation materials that name specific programs,” he added.

The agency said it will decide whether to craft a formal proposal after a comment period.