Introduction

Both the public and soliciting organizations will benefit from voluntary disclosure of an organization's activities, finances, fund raising practices, and governance - information that donors and prospective donors will reasonably wish to consider.

These standards apply to publicly soliciting organizations that are tax exempt under section 501(c)(3) of the Internal Revenue Code, and to other organizations conducting charitable solicitations.

While the Council of Better Business Bureaus and its member Better Business Bureaus generally do not report on schools, colleges, or churches soliciting within their congregations, they encourage all soliciting organizations to adhere to these standards. These standards were developed with professional and technical assistance from representatives of soliciting organizations, professional fund raising firms and associations, the accounting profession, corporate contributions officers, regulatory agencies, and the Better Business Bureau system. The Council of Better Business Bureaus is solely responsible for the contents of these standards.

For The Purpose of These Standards:

2. "Soliciting organizations" (or "organizations") is any corporation, trust, group, partnership or individual engaged in a charitable solicitation; a "solicitor" is anyone engaged in a charitable solicitation.

3. The "public" includes individuals, groups, associations, corporations, foundations, institutions, and/or government agencies.

4. "Fund raising" includes a charitable solicitation; the activities, representations and materials which are an integral part of the planning, creation, production and communication of the solicitation; and the collection of the money, property, or other thing of value requested. Fund raising includes but is not limited to donor acquisition and renewal, development, fund or resource development, member or membership development, and contract or grant procurement.

Public Accountability

The annual report, an annually-updated written account, shall present the organization's purposes; description of overall programs, activities and accomplishments; eligibility to receive deductible contributions; information about the governing body and structure; and information about financial activities and financial position.

A2. Soliciting organizations shall provide on request complete annual financial statements.

The financial statements shall present the overall financial activities and financial position of the organization, shall be prepared in accordance with generally accepted accounting principles and reporting practices, and shall include the auditor's or treasurer's report, notes and any supplementary schedules. When total annual income exceeds $100,000, the financial statements shall be audited in accordance with generally accepted auditing standards.

A3. Soliciting organizations' financial statements shall present adequate information to serve as a basis for informed decisions.

Information needed as a basis for informed decisions generally includes but is not limited to: a) significant categories of contributions and other income; b) expenses reported in categories corresponding to the descriptions of major programs and activities contained in the annual report, solicitations, and other informational materials; c) a detailed schedule of expenses by natural classification (e.g., salaries, employee benefits, occupancy, postage, etc.), presenting the natural expenses incurred for each major program and supporting activity; d) accurate presentation of all fund raising and administrative costs; and e) when a significant activity combines fund raising and one or more other purposes (e.g., door-to-door canvassing combining fund raising and religious ministry, or a direct mail campaign combining fund raising and public education), the financial statements shall specify the total cost of the multi-purpose activity and the basis for allocating its costs.

A4. Organizations receiving a substantial portion of their income through the fund raising activities of controlled or affiliated entities shall provide on request an accounting of all income received by and fund raising costs incurred by such entities.

Such entities include committees, branches or chapters which are controlled by or affiliated with the benefiting organization and for which a primary activity is raising funds to support the programs of the benefiting organization.

Use of Funds

B2. A reasonable percentage of public contributions shall be applied to the programs and activities described in solicitations, in accordance with donor expectations.

B3. Fund raising costs shall be reasonable.

B4. Total fund raising and administrative costs shall be reasonable.

Reasonable use of funds requires that a) at least 50% of total income from all sources be spent on programs and activities directly related to the organization's purposes; b) at least 50% of public contributions be spent on the programs and activities described in solicitations, in accordance with donor expectations; c) fund raising costs not exceed 35% of related contributions; and d) total fund raising and administrative costs not exceed 50% of total income.

An organization which does not meet one or more of these percentages limitations may provide evidence to demonstrate that its use of funds is reasonable. The higher fund raising and administrative costs of a newly created organization, donor restrictions on the use of funds, exceptional bequests, a stigma associated with a cause, and environment or political events beyond an organization's control are among the factors which may result in costs that are reasonable although they do not meet these percentage limitations.

B5. Soliciting organizations shall substantiate on request their application of funds, in accordance with donor expectations, to the programs and activities described in solicitations.

B6. Soliciting organizations shall establish and exercise adequate controls over disbursements.

Solicitations and Informational Materials

C2. Soliciting organizations shall substantiate on request that solicitations and informational materials, distributed by any means, are accurate, truthful and not misleading, in whole and in part.

C3. Solicitations shall include a clear description of the programs and activities for which funds are requested.

Solicitations which describe an issue, problem, need or event, but which do not clearly describe the programs or activities for which funds are requested will not meet this standard. Solicitations in which time or space restrictions apply shall identify a source from which written information is available.

C4. Direct contact solicitations, including personal and telephone appeals, shall identify a) the solicitor and his/her relationship to the benefiting organization, b) the benefiting organization or cause and c) the programs and activities for which funds are requested.

C5. Solicitations in conjunction with the sale of goods, services or admissions shall identify at the point of solicitation a) the benefiting organization, b) a source from which written information is available and c) the actual or anticipated portion of the sales or admission price to benefit the charitable organization or cause.

Fund Raising Practices

D2. Soliciting organizations shall establish and exercise adequate controls over contributions.

D3. Soliciting organizations shall honor donor requests for confidentiality and shall not publicize the identity of donors without prior written permission.

Donor requests for confidentiality include but are not limited to requests that one's name not be used, exchanged, rented or sold.

D4. Fund raising shall be conducted without excessive pressure.

Excessive pressure in fund raising includes, but is not limited to, solicitations in the guise of invoices; harassment; intimidation or coercion, such as threats of public disclosure or economic retaliation; failure to inform recipients of unordered items that they are under no obligation to pay for or return; and strongly emotional appeals which distort the organization's activities or beneficiaries.

Governance

Soliciting organizations shall have and operate in accordance with governing instruments (charter, articles of incorporation, bylaws, etc.) which set forth the organization's basic goals and purposes, and which define the organizational structure. The governing instruments shall define the body having final responsibility for and authority over the organization's policies and programs (including authority to amend the governing instruments), as well as any subordinate bodies to which specific responsibilities may be delegated.

An organization's governing structure shall be inadequate if any policy-making decisions of the governing body (board) or committee of board members having interim policy-making authority (executive committee) are made by fewer than three persons.

An active governing body (board) exercises responsibility in establishing policies, retaining qualified executive leadership, and overseeing that leadership.

An active board meets formally at least three times annually, with meetings evenly spaced over the course of the year, and with a majority of the members in attendance (in person or by proxy) on average.

Because the public reasonably expects board members to participate personally in policy decisions, the governing body is not active, and a roster of board members may be misleading, if a majority of the board members attend no formal board meetings in person over the course of a year.

If the full board meets only once annually, there shall be at least two additional, evenly spaced meetings during the year of an executive committee of board members having interim policy-making authority, with a majority of its members present in person, on average.

Organizations whose directly and/or indirectly compensated board members constitute more than one-fifth (20%) of the total voting membership of the board or of the executive committee will not meet this standard. (The ordained clergy of a publicly soliciting church's policy-making governing body are excepted from this 20% limitation, although they may be salaried by or receive support or sustenance from the church.)

Organizations engaged in transactions in which board members have material conflicting interests resulting from any relationship or business affiliation will not meet this standard.