Prepared by
The National Association of Attorneys General Committee on Trusts and Solicitations
Joseph I. Lieberman, Chairman

The National Association of State Charity Officials
Ed J. Edgerton, President

The Private Sector Advisory Group
John J. Schwartz, Chairman


Private Sector Advisory Group To The Model Solicitations Law Project of the National Association of
Attorneys General (NAAG) and National Association of State Charity Officials (NASCO)

A Summing Up

October 20, 1986

In December 1986 NAAG is expected, for the first time, to recommend to its members adoption of a model act concerning solicitation of funds for charitable purposes.

This model act is the outcome of a two-and-a-half year project conducted by NAAG, with representa-tives of NASCO. It is also the outcome of more than two years of work by representatives of charitable organizations, the fund-raising profession, and the legal and accounting professions, plus donor representa-tives, who together comprised the Private Sector Advisory Group to the NAAG/NASCO project.

Throughout the period, the Advisory Group conveyed its suggestions, concerns, recommendations, and reactions to the regulators. The model act that NAAG will consider in December is for different from what it might have been without this input.

Chair of the NAAG Charitable Trust and Solicitation Committee, under whose auspices the model law project was conducted, is Joseph I. Lieberman, attorney general of the State of Connecticut The regulator's Task Forces on Fund Raisers and on Charities, which worked on the project, were headed respectively by David Ormstedt, assistant attorney general of Connecticut, and Kevin Suffern, director, Division of Public Charities, Commonwealth of Massachusetts.

At the invitation of Attorney General Lieberman, John J. Schwartz, president of the American Associ-ation of Fund-Raising Counsel, undertook to chair a Private Sector Advisory Group to the NAAG/NASCO project. Mr. Schwartz invited James Greenfield, director, fund development, The Cleveland Clinic Founda-tion, to lead the Advisory Group's Task Force on Fund Raisers, and Mrs. Marion Fremont-Smith, lawyer and Board member of INDEPENDENT SECTOR, to lead the Group's Task Force on Charities. Both accepted and served throughout the entire project period.

The Advisory Group sought to be as widely representative as possible. When additional private-sector concerns were brought to the Group's attention, spokespersons for those concerns were invited to serve on the Group. Subcommittees of the Task Forces were free to invite additional persons to meet with them, and several did, in order to make sure that the fullest possible spectrum of private sector concerns was presented.

At its final meeting on October 7, 1986 the Private Sector Advisory Group expressed its support for the model act, with certain very specific reservations.

The Advisory Group was pleased that two-thirds of the main provisions of the very first drafts (excluding technical sections related to enforcement and implementation of the act) were virtually identical with the provisions of model laws developed by the American Association of Fund-Raising Counsel and the National Health Council, and with formal recommendations made by the Advisory Group in advance of the first NAAG/NASCO draft. These provisions are still in the final draft. Further, NAAG/NASCO accepted 59 additional recommended changes that are included in the final draft.

The draft clearly identifies the role of the professional fund-raising manager. In this connection, the Group recommended a basic concept which has been incorporated in the model act: that a distinction should be made between fund raisers who have custody of funds and those who do not. Fund raisers who do have custody of some or all the funds raised are subject to more rigorous record-keeping and reporting requirements than "Fund Raising Counsel," who, by definition, do not solicit contributions and do not employ any compensated person to solicit contributions.

Two other provisions that could be helpful to both charities and fund raisers are (a) the requirement that contracts between charities and fund raisers be in writing and be filed with the state, and (b) the requirement that fund raisers make certain reports to charities. In some cases this will mean that charities and fund raisers will have a more businesslike relationship.

On the other hand, the Advisory Group's resolution supporting the proposed model act contains one strong objection and five concerns regarding certain sections of the act.

The objection is to Section 6, Subsection (e)(1)(B) of the proposed law, which requires point-of-solicitation disclosure by paid solicitors of summary financial information in the form of a single percentage figure. Similar provisions in the current North Carolina and Maine laws were recently held to be unconstitutional by courts in those states, These decisions are being appealed, In spite of the prospect of litigation, NAAG/NASCO has so far felt the subsection should be retained in the model act.

The concerns are as follows:

After noting the objection and the five concerns, the resolution goes on to recommend that, with the above qualifications, NAAG and NASCO take all appropriate actions to encourage their members to introduce the proposed model act in their respective states. Further, the resolution recommends that all interested private sector organizations join together to support the model act at the state level, taking into consideration the stated qualifications, and to inform state legislators and regulators about the charitable community in general and about the realities of charitable accountability in particular.

Pursuant to this lost recommendation, members of the Private Sector Advisory Group, acting as individuals, agreed to form a national organization on charitable accountability, with Edward Van Ness as chair. Anyone interested in joining or learning more about this organization is invited to get in touch with John J. Schwartz, at the American Association of Fund-Raising Counsel, 25 West 43 Street, New York, NY 10036, or Edward Van Ness, National Health Council, 622 Third Avenue, New York, NY 10017-6765.

The private sector and the state regulators have come a long way in improving their understanding of each other's needs and problems. This process, carried on for more than two and a half years by the Private Sector Advisory Group with NAAG/NASCO, now moves to the states.

If the model law draft is accepted by NAAG in December 1986, it will, in due course, be introduced in most if not all states. Representatives of the private sector in each state should try to be sure they are made aware that the proposed act has been introduced into the legislature, They can be alert to opportunities to testify at hearings on the bill, and they should be sure they know of any changes made or proposed at the state level.

When private sector representatives testify at hearing on the model law, they will be building, at least in part, on a foundation laid during more than 30 months by the Advisory Group. This foundation, however, is only a beginning. The enduring structure of better understanding of the not-for-profit private sector by legislators, regulators, and the public remains to be built. There is no better place to start than in the several states. The Private Sector Advisory Group hopes it leaves behind some materials the builders can use.

John J. Schwartz


Passed October 7, 1986

By The Private Sector Advisor Group to The NAAG/NASCO Model Solicitations Law Project

WHEREAS, there is a need for uniform, fair, and effective state legislation regarding charitable solicitations; and

WHEREAS, the NAAG/NASCO Model Solicitations Law Project Committee and the Private Sector Advisory Group have worked over the last two and one half years to develop a model charitable solicitations law to meet this need; and

WHEREAS, the Private Sector Advisory Group has reviewed the August 26, 1986 draft of model legislation as revised by the NAAG/NASCO Model Solicitations Law Project Committee at its meeting in San Antonio, Texas on September 23, 1986;

NOW, THEREFORE, BE IT RESOLVED, that the Private Sector Advisory Group to the NAAG/NASCO Model Solicitations Law Project:

Annotations that were not part of the original Model Act are indicated in square brackets. In particular, some provisions of the Model Act have been ruled unconstitutional by the U.S. Supreme Court.



Section 1. Definitions

Section 2. Annual Registration Requirement for Charitable Organizations

Section 3. Annual Financial Report; Audit Requirement

Section 4. Exemptions

Section 5. Requirements for Fund Raising Counsel

Section 6. Registration, Contract and Disclosure Requirements for Paid Solicitors

Section 7. Charitable Sales Promotions

Section 8. Point-of-Solicitation Disclosure Requirements for Charities

Section 9. Agreements, Registration Forms, Reports, and Other Documents to be Public Records

Section 10. Fiscal Records; Inspection; Retention

Section 11. Exchange of Information with other States

Section 12. Rules and Regulations

Section 13. Examination of Books, Records and Witnesses

Section 14. Penalty for Non-Compliance

Section 15. Substitute Service upon Secretary of State

Section 16. Deceptive Actions or Practices and Failing to Comply with the Requirements of this Statute Declared Unlawful

Section 17. Suspension and Revocation of Registration; Penalties; Enforcement

Section 18. Charitable Organizations Deemed Fiduciaries

Section 19. Severability


*Subject to adoption by the Association at its semi-annual meeting, December 5-9, 1986.

**Blank lines are to be filled in with the name of the administering agency unless the context otherwise requires.

Posted online at the:
Online Compendium of Federal and State Regulations for U.S. Nonprofit Organizations
Annotated by Eric Mercer <
Page last updated 14Dec98