Federations say state proposal would undermine charities
New Jersey’s Jewish federations are opposing a proposed state rule that would require charities to advise donors that they can direct their gifts toward specific programs.
The “pre-proposal” by the state’s Division of Consumer Affairs takes aim at organizations that may publicize their support of one type of program, but instead direct funds to another program “to the exclusion of the other.”
Before it becomes an actual regulation, nonprofit organizations in the state have been asked to submit comments on the change so that the DCA can take their opinions into consideration.
The proposed rule “would have devastating results on the capacity of charitable organizations in New Jersey to serve the community in an efficient and cost-effective manner,” said Ruth Cole, president of the State Association of Jewish Federations, in an Aug. 4 press release.
“The proposed rule change that would give all donors the option to designate their gift, though well intentioned, will result in unintended consequences,” she added. “With mandatory designation, individuals will overwhelmingly give their gift to the most popular issue of the day and not necessarily provide funds for feeding hungry seniors or other safety net concerns.”
In asking for public comments on its proposal, a published DCA statement argued that some charity solicitations can mislead prospective contributors.
“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,” said the DCA draft proposal. “For example, soliciting material may feature both research and consumer education programs, but one may be funded almost to the exclusion of the other.”
In a statement e-mailed to NJJN, Thomas R. Calcagni, director of the NJ Division of Consumer Affairs, wrote: “Donors are entitled to earmark their contributions to particular programs within a charity, and charities are obligated by law to honor the donor’s decision.
“However, donors generally do not exercise this option, and may not even know that it’s available to them. We believe that if a charity’s solicitation material features specific programs to attract donations, the charity should advise donors that they have the option to direct their gifts to the program that appeals to them.”
Asked whether any charity’s unethical practices motivated the “pre-proposal,” a spokesperson for Calcagni told NJJN he had “nothing specific to add” to the director’s statement.
Max Kleinman, executive vice president of the United Jewish Communities of MetroWest, took issue with the pre-proposal, arguing that such safeguards are not needed.
“Jewish federations are totally transparent in how funds raised are allocated and follow best practices regarding restrictions a donor places on his or her contributions,” he said in the press release.
“Annually, donors give tens of millions of dollars in unrestricted amounts to UJC and trust that their volunteer peers will allocate their contributions to meet the most critical needs of that time period,” added Kleinman.
Other leaders in the Jewish community are also joining the battle. William Daroff, vice president of public policy for the Jewish Federations of North America, added a comment to the press release. “Unrestricted funds are also the major source of general operating support which charities must use to support overall operations rather than specific projects or programs,” he said.
Melanie Roth Gorelick, director of the Community Relations Committee for MetroWest and for the Jewish Federation of Central New Jersey said the DCA proposal “is an issue of major concern to us.”
A Jewish federation, she said, “raises money through a big pot and then, through a lay-professional process made of people who are very knowledgeable about the needs of a community, disperses that money,” she told NJ Jewish News. “If you have mandatory designation, everybody who gives money to an organization would have to say specifically where they want their money to go. Therefore, money would only go to programs that are popular or have the best promotion, but it wouldn’t necessarily go to where funds are needed most in the community” or to items like overhead or administrative costs.
Representatives of the New Jersey Center for Non-Profits argued before Gov. Chris Christie’s Red Tape Review Commission that the new proposal would require meticulous record-keeping for every gift, an onerous process for the organizations. The burdensome new rules, Jacob Toporek, executive director of the State Association, told the commission, would create “an added layer of bureaucracy that affects the ability of nonprofits to build capacity to meet the growing needs of the communities they serve.”
“Most of the federations do allow donors to direct their gifts to specific programs, but it would seem to me that the rule change mandates that charities do this,” he told NJJN.
Toporek said the new rule could pose problems for federations and other charities with broad-based funding responsibilities. “There could be the passion of the day that rules instead of looking at the big picture,” he said.
After reviewing the pre-proposal, Kenneth Berger, president and CEO of the Glen Rock-based watchdog Charity Navigator, described it as “good news and bad news.”
“I worry about it,” he told NJJN in an Aug. 9 telephone interview. “Most charities that provide direct services are really being hammered right now. Their government funding is suffering because of all the cuts at the same time demand for their services is up.
“The most precious funding charities have is from individual donors, and donor money is typically unrestricted,” Berger said. “That means that the charity can use its judgment to use the money to fill gaps that government doesn’t pay for. The rule will further hamstring a charity’s ability to survive”
But, he added, the “good news is we know there are some really bad charities that don’t deserve a penny. Efforts to address that are a good thing, but typically, government uses a blunt instrument where a laser is required, and good as well as bad charities are going to suffer.”