The Tampa Bay Times recently ran a series on what it and The Center for Investigative Reporting describe as the nation’s 50 worst charities. These include nonprofits whose fundraisers earn up to 98% of every dollar earned and whose insiders make millions of dollars per year. The articles also admonish charity regulators for not doing enough to combat such practices.
Aside from the shocking statistics, the articles provide a great lesson for all charities. Many states, such as California, have clear requirements applicable to all charitable fundraiser contracts. Yet, these are often ignored. If your organization is considering engaging a for-profit fundraiser, make sure your board understands the terms and conditions of the fundraiser’s agreement before signing off.
While horror stories described by the articles – such as that of Florida-based Project Cure, which raised more than $65 million but still owes millions of dollars to its fundraiser – seem unlikely, it is actually not that far-fetched. If your organization doesn’t understand the terms of its fundraising agreement, it may end up turning over a huge percentage of its hard earned money. Many states require that donors be told the percentage of their donation that will actually go to the charity. This rule is often ignored. Indeed, if donors were aware how little of their donations actually go to the charity, most would stop giving.
Don’t subject your charity to the embarrassment of having to disclose that it receives dimes-on-the-dollar from funds raised on its behalf. And don’t expose yourself, as a director or officer, to penalties for allowing unethical, illegal and unscrupulous fundraising practices at your nonprofit.