May 1, 2008 | Read Time: 2 minutes
A key senator wants to give the Federal Trade Commission the power to regulate nonprofit organizations — including penalizing charities that say in their fund-raising appeals they are raising money for a particular cause but devote very little of it to that purpose.
The effort by Sen. Byron L. Dorgan, a North Dakota Democrat, is the first stab at putting the brakes on nonprofit organizations that spend a very low percentage of the money they raise on their charitable missions.
Recent House hearings found that several groups that help veterans of the Iraq and Afghanistan conflicts spend most of their donations on fund-raising expenses or salaries rather than veterans and their families.
A provision on the regulation of nonprofit groups was included in legislation to extend the Federal Trade Commission bill (S. 2831) that is being considered by the Interstate Commerce, Trade and Tourism Subcommittee, which Senator Dorgan chairs.
The provision’s impact goes beyond fund raising. It directs the Federal Trade Commission to protect consumers from “unfair and deceptive” practices by charities in the same way that it regulates such practices by businesses, says Justin Kitsch, Senator Dorgan’s communications director. Federal Trade Commission officials said in a hearing on the bill that the provision would enable them to challenge price-fixing or other anticompetitive practices by nonprofit hospitals, for example.
Anthony Conway, executive director of the Alliance of Nonprofit Mailers, says he thinks the provision is unnecessary. “There’s already plenty of oversight and regulatory-body scrutiny of nonprofits,” he says. “I don’t think adding another layer of oversight is needed, and I’m not sure it would be beneficial.”
Veterans Charities
In December, the members of the House Committee on Oversight and Government Reform criticized the American Veterans Coalition, in Gig Harbor, Wash., for spending more than 78 percent of its donations on fund-raising expenses, and the Disabled Veterans Association, in Parma Heights, Ohio, for spending 90 percent of gifts on such costs.
In a follow-up hearing, lawmakers focused on Help Hospitalized Veterans, a Winchester, Calif., organization founded by Roger Chapin, which among other things spent $500,000 on salaries for Mr. Chapin and his wife, and $444,600 for a Northern Virginia condominium used by the couple.
The charities and their officials denied any wrongdoing, and said they depended on professional companies that charge high fees to solicit charitable donations for them.
Lawmakers expressed frustration at the hearings that no laws exist to prevent charities from spending the vast majority of their donations on fund-raising activities, or to require them to reveal that fact to donors.
