The Center for Non-Profits has submitted detailed comments in response to draft regulations governing charitable fund raising proposed in December by the New Jersey Division of Consumer Affairs. The proposed regulations were published in the December 7, 1998, New Jersey Register - more than four years following the spring 1994 enactment of New Jersey's "Charitable Registration and Investigation Act" - and carried a public comment period of 30 days. The Division of Consumer Affairs has thus far declined our requests to extend the public comment period.

The "Charitable Registration and Investigation Act," P. L. 1994, c. 16 (N.J.S.A. 45:17A-18 et seq.), establishes a two-tiered annual registration system for New Jersey charities, fund raisers and out-of-state entities soliciting contributions in the state. Most organizations with contributions of less than $25,000 in their most recent fiscal year and whose fund raising is conducted by unpaid persons must file an annual "short form" registration and certain financial information with the Division of Consumer Affairs. Larger organizations and those who paid outside fund raisers or fund raising consultants must file a "long form" registration statement with more detailed information and annual financial reports. The Act requires "fund raising counsel" and "independent paid fund raisers" to register annually with the Division, with additional requirements such as bonding for those outside fund raising firms that will solicit contributions on a charity's behalf or have access or control to a charity's funds. The law also requires that contracts between a charity and a fund raising counsel or independent paid fund raiser be filed with the Division of Consumer Affairs.

The Center was deeply involved in the crafting of the 1994 Act, the first major revision of New Jersey's fund raising laws in over 20 years. The Center won significant amendments to the original bill, stressing the need for a law that would give the State strong tools to prosecute fraud and to protect donors and charities without needlessly burdening legitimate charities. A continued priority for the Center is ensuring that the law is implemented in a manner consistent with that goal and with the intent of the statute.

Center representatives have been in regular contact with Charities Registration officials to convey concerns and recommendations. In 1997, the Center was part of a small group of organizations invited to meet with the Division to discuss a draft of the regulations.

Although the Division's December 1998 proposal incorporates some of the Center's recommended changes, some critical concerns remain, including the following:

Filing/Reporting Requirements for Small Organizations: The result of lengthy negotiations between the legislative sponsor, the Division of Consumer Affairs, the Attorney General's Office and the Center for Non-Profits, the 1994 "Charitable Registration and Investigation Act" attempted to strike a careful balance between ensuring that basic information was available to the public regarding as many charities as possible without hampering legitimate organizations with excessive or needlessly duplicative filing and reporting requirements. There was clear recognition that the IRS Form 990 and attachments provided an extraordinary level of specificity about organizations that file these documents, and that it was impractical to require detailed reports from organizations too small to have to file a Form 990. However, in practice and as proposed by these regulations, the Division's "short" registration form requires a level of detail that far exceeds what was widely regarded as the original intent of the Act. The "short form" effectively mimics the state's reporting form that was used by all registered organizations prior to 1994. The Center continues to believe that the "short form" could be significantly streamlined without compromising the important consumer protection and public information objectives of the Act. (As of this writing, the New Jersey Senate Commerce Committee is preparing to consider legislation that would allow short-form filers to submit an annual verification statement to renew their charitable registration. Click here for more details.)

Requirements of Independent Paid Fund Raisers, Fund Raising Counsel, and Charities that Retain such Consultants: The "Charitable Registration and Investigation Act" contains specific language designed to take into account the vast and critical differences between "independent paid fund raisers" who actually solicit and have access to or control over a charity's funds, and "fund raising counsel," who merely provide consultation and advice regarding fund raising but who do not solicit or handle money. The enabling statute reflects the recognition that these entities should be treated differently under the law in light of their differing functions. In numerous discussions with the Division, the Center and others have stressed the need for the regulations to make the same distinction. Unfortunately, the proposed regulations fail to separate the requirements of fund raising counsel from independent paid fund raisers as required by the statute. The Center believes that certain requirements that are reasonable to impose on fund raisers who solicit and handle funds are excessive and, in some cases, completely inapplicable to charity-counsel arrangements.

Advocates have also pointed out repeatedly that fund raising counsel often perform services that are not related to fund raising, such as board training, management consulting, team building and the like. These functions, in our opinion, extend beyond the Division's mandate and should not be covered by the regulations. Yet the Division's proposal requires that all contracts between charities and fund raising counsel be filed (each with a $30 filing fee), regardless of whether the service being performed actually pertains to fund raising. In previous discussions, the Division pledged to take steps to ensure that the guidelines more clearly excluded non-fundraising services performed by fund raising counsel. The proposed regulations do not reflect any such clarification.

In addition to commenting to the Division of Consumer Affairs, the Center has shared its concerns regarding the proposed regulations and the short comment period with New Jersey Assemblyman Jeffrey Moran (R-9), the primary Assembly sponsor of the "Charitable Registration and Investigation Act." We will update our Web site with the latest information as it becomes available.