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STATE FUNDRAISING REGULATIONtheir own contracts and tend to do so impetuously. It can be argued that theselaws are forms of overreaching, in terms of scope and detail, on the part of government,and that charitable organizations ought to be mature enough to formulatetheir own contracts.§ 24.11 DISCLOSURE REQUIREMENTSMany of the states that were forced to abandon or forgo the use of the percentagemechanism as a basis for preventing fundraising for charity (see above) utilizethe percentage approach in a disclosure setting. Several states, for example,require charitable organizations to make an annual reporting, either to update aregistration or as part of a separate report, to the authorities as to their fundraisingactivities in the prior year, including a statement of their fundraisingexpenses. Some states require a disclosure of a charity’s fundraising costs, statedas a percentage, to donors at the time of the solicitation—although this requirementarguably is of dubious constitutionality. In a few states, solicitation literatureused by a charitable organization must include a statement that, uponrequest, financial and other information about the soliciting charity may beobtained directly from the state.Some states require a statement as to any percentage compensation in thecontract between the charitable organization and the professional fundraiserand/or the professional solicitor. A few states require the compensation of apaid solicitor to be stated in the contract as a percentage of gross revenue;another state has a similar provision with respect to a professional fundraiser.One state wants a charitable organization’s fundraising cost percentage to bestated in its registration statement.An example of this type of law is a statute that imposed on the individualwho raises funds for a charitable organization the responsibility to “deal with”the contributions in an “appropriate fiduciary manner.” Thus, an individual inthese circumstances owes a fiduciary duty to the public. These persons are subjectto a surcharge for any funds wasted or not accounted for. A presumptionexists in this law that funds not adequately documented and disclosed byrecords were not properly spent.By direction of this law, all solicitations must “fully and accurately” identifythe purposes of the charitable organization to prospective donors. Use of funds,to an extent of more than 50 percent, for “public education” must be disclosedunder this law. Every contract with a professional fundraiser must be approvedby the charitable organization’s governing board. Some of the provisions of thislaw probably are unconstitutional, such as the requirement that professionalfundraisers or solicitors must disclose to those being solicited the percentage oftheir compensation in relation to gifts received.Another example is some of the provisions of another state’s law, whichmakes an “unlawful practice” the failure of a person soliciting funds to “truthfully”recite, upon request, the percentage of funds raised to be paid to the solicitor.This state, like many other states, is using the concept of prohibited acts(see above) to impose a sort of code of ethics on all who seek to raise funds forcharity. 636