Principle 27: Accuracy and Truthfulness of Fundraising Materials

Principles for Good Governance and Ethical Practice

Principle 27: Accuracy and Truthfulness of Fundraising Materials

Principle Statement

Solicitation materials and other communications addressed to donors and the public must clearly identify the organization and be accurate and truthful.

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Introduction
Charitable solicitations—whether in print, via the Internet, over the phone, or in person—are
often the only contact a donor has with a charitable organization. Clear and accurate solicitation materials help potential contributors to contact the organization and obtain information necessary to distinguish an organization with a solid history of service to the community from one that may claim a similar name or purpose, but whose fund-raising appeal is misleading.
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  A donor has the right to know the name of anyone soliciting contributions, the name and location of the organization that will receive the contribution, a clear description of its activities, the intended use of the funds to be raised, a contact for obtaining additional information, and whether the individual requesting the contribution is acting as a volunteer, employee of the organization, or hired solicitor. (A Donor Bill of Rights, endorsed by many organizations, is available at (www.nonprofitpanel.org.) Descriptions of program activities and the financial condition of the organization must be current and accurate, and any references to past activities or events should be dated appropriately.
  
  If an organization is not eligible to receive tax-deductible contributions, it must disclose this
  limitation at the time of solicitation. Similarly, a charitable organization that the IRS has recognized as eligible to receive tax-deductible contributions should clearly indicate in its solicitations how donors may obtain proof of that status. The charity may post a copy of its IRS letter of determination on its website or offer to provide a copy of the letter to donors who request it. If the solicitation promises any goods or services to the donor in exchange for contributions, the materials should also clearly indicate the portion of the contribution (that is, the value of any goods or services provided) that is not tax-deductible.
Core Concepts
- Guidelines should be established for all fundraising materials and communication with donors.
- All fundraising materials should be subject to a review process.
- Solicitation materials must reflect and represent the organization truthfully.
Legal and Compliance Issues
- Most states have laws regulating the solicitation of funds within the state for charitable purposes, regardless of where the charity is incorporated.
Legal Background

Overlapping federal, state, and local laws regulate charitable solicitations. States play the leading role, with 38 states and the District of Columbia currently regulating such practices. Most states can also prosecute fraudulent or misleading charitable solicitations under their anti-fraud and consumer protection statutes. Many cities and counties have enacted their own solicitation ordinances. The Federal Trade Commission has jurisdiction over fraudulent solicitations in interstate commerce by for-profit organizations, including those who solicit on behalf of charitable nonprofits, while the Postal Service can prosecute fraudulent or misleading
solicitations conveyed via the U.S. mail.

Over the years, state and local governments have attempted to prevent fraudulent fundraising, as well as curb what they perceive to be a waste of charitable assets, by limiting the amount that could be paid for fundraising (including amounts paid to professional fundraisers) or by requiring point-of-solicitation disclosures about the proportion of the funds that the charity would receive. The U.S. Supreme Court struck down three of these efforts on the grounds that they infringed on charities’ First Amendment free speech rights.¹ While the Court expressed sympathy for state regulators’ desire to protect their citizens from deceptive practices, it noted that existing antifraud statutes were adequate and that there were much less restrictive tools for combating fraudulent solicitations than percentage caps and point of solicitation disclosures, which it found to be excessive burdens on or unlawful compulsion of speech and thus unconstitutional. However, when the Court affirmed these precedents in 2003, it also upheld the Illinois Attorney General’s right to pursue an action for fraud against a professional fundraiser that made representations to donors that a “significant amount” of each dollar donated would be going to the charity, when only 15 percent actually did.²

(From The Principles for Good Governance and Ethical Practice: Reference Edition,
Published in 2007)

¹ See Village of Schaumburg v. Citizens for a Better Environment, 444 U.S. 620 (1980); Secretary of State of Maryland v. Munson, 467 U.S. 947 (1984); and Riley v. National Federation of the Blind of North Carolina, Inc., 487 U.S. 781 (1988).
² Illinois ex rel. Lisa Madigan v. Telemarketing Associates, Inc., 538 US 600 (2003).
Discussion Points
These questions – from the Principles Workbook (PDF) – are intended to prompt discussion about the principle, assess the polices and practices of your organization, and encourage your organization to take steps to identify where improvements should be made.
1. Have we established a process that is practical and adequate for reviewing fundraising materials and communications with donors? Who should be involved in the review process?
2. Some organizations have endorsed “A Donor Bill of Rights.” Have we considered doing this?
3. Have we complied with state laws regarding the solicitation of contributions?
4. Do we address the needs of our donors by including clear, accurate information in our solicitation materials about the following?
Who is soliciting the contribution

What types of contributions the organization will accept

How contributions will be used

Whom to contact for additional information