Mail Proposal Called Blessing, Threat for Nonprofits

A proposed change in the nonprofit mail rule is either a potential fundraising boon for nonprofits or a disaster.

The proposed rule, filed this week by the U.S. Postal Service in the Federal Register, would allow nonprofits soliciting monetary donations — especially smaller ones that can't afford to implement fundraising efforts in-house — to use professional fundraisers but still mail at the substantially lower nonprofit rate.

The current rule says that any mail piece sent at the nonprofit rate must be owned and controlled by the nonprofit, though it can contract with a for-profit fundraiser if the nonprofit remains the principal agent.

“The postal service has issued this rule because existing regulations prevent charities from financing their direct mail campaigns with the assistance of professional fundraisers,” said Brian Hook, an attorney with Washington law firm Hogan & Hartson, which represents a commercial mailer that has worked with U.S.-based Catholic charities.

“The new rule changes that, and would permit charities to solicit donations at the lowest possible cost,” he said. “Charities will now be able to raise money without any risk to their bottom line.”

Kelly Browning, executive vice president at the American Institute for Cancer Research, said the proposed rule is a good solution.

“As a nonprofit manager, one of my jobs is to make the best deal I possibly can for my organization and to reduce my organization's risk as much as possible,” he said. “In the current environment, the postal service's rule says that if I do that, in some cases, it doesn't qualify for nonprofit [rates].

“We think that's wrong. We think that as a nonprofit, we should be able to make the best deal as we possibly can for our charity with our members, and that whatever deal we make shouldn't restrict our use of the nonprofit permit.”

But other mailers expressed concern that the proposal could lead to abuses by for-profit fundraising agencies.

“Without regulatory oversight, small and unsophisticated nonprofit organizations can fall prey to one-sided and abusive arrangements of this kind,” said Neal Denton, executive director of the Alliance of Nonprofit Mailers. “Many of these questionable contracts give the professional fundraiser exclusive rights to raise money for the nonprofit.”

Indeed, the USPS notice said nonprofits have noted that some fundraisers might impose financial terms that would take advantage of unsophisticated nonprofits. The potential for fraud raises serious issues, the postal service said, but such issues “appear primarily to raise consumer protection, rather than postal, concerns. … These social policy concerns are best addressed elsewhere, such as through federal legislation or the state officials who regulate the relationship between professional fundraisers and nonprofit organizations.”

Max L. Hart, director of fundraising at Disabled American Veterans, Cold Spring, KY, said the filing could open the door for abuse.

“[If passed] there would be fundraisers who would control small charities,” he said.

Browning, however, said abuses already exist, “but it is limited and it is something that can be dealt with.” If someone is abusing the charity-vendor relationship, he said, then that usually falls under the purview of the Internal Revenue Service, not the USPS.

Hart said that though he is glad the USPS took the action, “I think the postal service needs some guidance, and I believe the legislative approach may be the right way to go.” Bills addressing this issue were introduced last session in both houses of Congress, and a revised version of the bill has been proposed in the Senate.

Some small and midsized mailers think established nonprofits — which mostly do their mailings in-house — reportedly oppose the rule change for competitive reasons.

“Large mailers are concerned that they are vying with everybody else for the charitable dollar,” said Browning, whose organization is a large mailer but a midsized organization. “The smaller organizations should also have the right to make a good deal for themselves and raise money for themselves.”

Hart, whose organization is both a large mailer and a large organization, does not think this way.

“On this particular issue, I don't have concerns on the competitive aspects and that it could increase our competition,” he said. “What I am most concerned about is that it could open the door to unethical fundraisers — people who bankroll small organizations and startups and in return have total control of those nonprofits' list and their packages and their livelihoods.”

Written comments must be received on or before June 5 and should be mailed to: Manager, Mailing Standards, U.S. Postal Service, 1735 N. Lynn St., Room 3025, Arlington, VA 22209-6038. The USPS hasn't set a specific deadline for the ruling to take effect. Officials said they will look at the comments received and take the appropriate steps.

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