Friday, April 25, 2008

Federal Lawmakers May Require Nonprofits to the Ratio of Fund-Raising Costs to Program Spending on U.S. Postal Service Website

Yesterday, The Chronicle of Philanthropy reported that "[l]awmakers who want to discourage charities from spending most of the money they bring in on fund-raising costs are considering introducing legislation to require nonprofit groups to post information for donors to a Postal Service Web site, including the ratio of their fund-raising costs to program spending."

The House Subcommittee on the Federal Workforce, Postal Service and the District of Columbia, held a hearing on April 24 which focused on the fact that current nonprofit law does not require nonprofits to disclose such information to their donors.  Representative Danny K. Davis, chair of the House Subcommittee, believes that such information, collected in "[a] central database with information on all charities would provide potential donors with the information they would need to make informed decisions on which charities to support."  Many, if not all, nonprofits use the U.S. Postal mail to raise funds, and the U.S. Postal Service regulates the conditions under which nonprofits can make those mailings at reduce postal rates.  As a result, it is a natural extension that the U.S. Postal Service would use its leverage with nonprofits to require nonprofits post the desired information in a central database as a condition of taking advantage of the reduced postal rates.

Earlier postings to the Nonprofit Law Prof Blog discussed hearings and increased pressure for more disclosure being brought to bear on nonprofits by Representative Henry Waxman, chairman of the House Committee on Oversight and Government Reform, as he focused on veteran charities and university endowments.  The Chronicle similarly references the hearings of Representative Waxman in this context, stating that he agreed with Representative Danny K. Davis that a central database, disclosing this kind of information to donors and potential donors is needed.  See Publication 417 for more information about Nonprofit Standard Mailing Rates.

The article further states that,

Mr. Waxman cited the case of Roger Chapin, founder of Help Hospitalized Veterans, a Winchester, Calif., charity that the committee found spent $500,000 on salaries for Mr. Chapin and his wife, and $444,600 for a Northern Virginia condominium used by the couple.

'Donors don’t know where to get the information about these charities,' Mr. Waxman said. 'They don’t know that Mr. Chapin’s organization spent only 25 cents per dollar on programs, with the rest going to fund-raising.'

Mr. Chapin has denied any wrongdoing, and said that he depended on professional companies that charge high fees to solicit donations.

I believe this call for accountability and disclosure by nonprofits is just one more in an increasing environment of corporate and organizational accountability brought about by increasingly limited resources and increasing needs.


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