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July 07, 2008

For-Profit Fund Raisers Kept 54 Cents of Every Dollar Raised, Calif. Study Shows

For-profit fund-raising businesses kept nearly 54 cents of every dollar raised, according to an analysis of more than 5,800 campaigns on behalf of charities that were registered with the state attorney general from 1997 to 2006, reports The Los Angeles Times.

According to the newspaper, records filed with the California attorney general’s office show that telemarketers, direct-mail businesses, and other consultants reported raising $2.6-billion. They kept nearly $1.4-billion. Many of the organizations are based in states outside California and raise money across the country.

Although commercial fund raisers in California are required to file fund-raising reports with the state, many do not, but they are rarely caught because the state lacks the staff to enforce the law, the newspaper said.

With more than 300 fund raisers registered in California, the number of campaigns and the amount of money raised by for-profit firms has risen by about two-thirds since 2000, the newspaper found.

The newspaper also provided access to a searchable database it compiled to show the amounts that charities registered in California received.

To see results of a national study conducted by The Chronicle, read this special report from our archive.

(Free registration is required to view the Times article and database, and a paid subscription or short-term pass is required to view the Chronicle article.)

Monday July 7, 2008 | Permalink

Comments

1. As a legal executive with a direct marketing agency, every time I see state regulators report that fundraisers “keep” 94 cents of every dollar, or as LA Times reports, 54 cents in California, I ask, “how can I get a job at one of those fundraisers?”

   Obviously, those data are not merely wrong, but are indicative of the failure by, if not inability of, states to present accurate information to the general public about charitable fundraising.

   Too often, state charitable solicitation offices misrepresent facts or omit material facts about fundraising data. And by forcing reporting charities to place square pegs in round holes in their annual fundraising reports to the states — with no opportunity for charities to explain their data — state regulators in fact create misinformation.

   Does the state data reported by the LA Times:

   (1) show what is paid toward postage, lists, printing, backend and other costs of fundraising, which are costs that nonprofits pay even if they do the fundraising in-house, and are very different from the “fees” or paid to (“kept” is the term used in the story) the fundraisers? (And even with those fees, are the fundraisers “profiting” or losing money?)

   (2) accurately show the “fees” paid to fundraisers actually is far less than the percentages represented as “kept” by the fundraiser under the California AG database (an industry standard fee in direct mail is 17.65% of the costs of the mailing)?

   (3) distinguish direct mail from telemarketing, etc., and prospecting from housefile fundraising?

   (3) distinguish public policy groups (such as Citizens Against Government Waste), whose fundraising communications are also a primary means by which they inform the public about issues, which IS their tax-exempt mission?

   (4) identify nonprofits that rely entirely on low-dollar citizen contributions (and thus fundraising costs are higher as a proportion) compared to those that receive vast amounts of financing from unrelated business income, dividends from stock holdings, the government (i.e, taxpayers who may not know they are financing certain nonprofits), foundations, corporations or other wealthy benefactors and sources (thus reducing their ratios for costs of fundraising)?

   States too often misrepresent data about fundraising, or provide insufficient data, which contributes to the public’s perception. If that taints the public’s perception of the entire nonprofit community, then nonprofits should point the finger at the source of that misinformation.

   But because state charitable solicitation offices control the licenses of who can fundraise and who can’t, nonprofits are often intimidated about speaking out when the states are in the wrong.

   — Mark Fitzgibbons    Jul 7, 04:22 PM    #

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