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.