  |
|
|
|
 Where, Oh Where, Did My Money Go? | |||||||||||||||||||||||||||||||||||||||||||||
|
December 2002 Cover Story
Where, Oh Where, Did My Money Go? by Helen Brandt When Helen Brandt is not writing investigative articles, she pursues non-human subjects with her 70s camera. She also propagates shade plants for small gardens and decks, including twinflower, rare epimedium species, and hybrid streptocarpus. Americans are a generous people, giving over $159 billion to charities in a typical year according to estimates reported by the Urban Institute. Washington state residents filing an itemized return averaged $1,012 in charitable deductions for the year 2000. Americans also have an entrepreneurial spirit as shown by the hundreds of for-profit professional fundraising businesses that are registered in states from coast to coast. These businesses assist charities in the work of fundraising. In Washington state there are 91 registered solicitors. Chances are, if you have a telephone, you have talked with one of their employees. When donating during a fundraising campaign, many people may be unaware of the financial arrangements existing between the fundraising company and the charitable organization. Donors assume, often incorrectly, that 100 percent of the money they donate goes directly to their selected charity. Across the country, there are a dozen companies that conduct many of the fundraising campaigns on behalf of national conservation and environmental organizations. They are listed in Table 1 on page 6 (Fund-raising Companies). Washington State Services
The Washington Secretary of State Web site provides complete financial information on charities and lists which companies they have hired to conduct their fundraising campaigns. For example, in the past The National Audubon Society contracted with four companies, Harris O’Malley Marketing, Inc., InfoCision Management Corporation, Public Interest Communications, and The Share Group, Inc. to conduct fundraising campaigns. The information on the Washington Web site regarding professional solicitors is less useful than the information on charities. A fundraising company may have several charity clients. The Web site presents for each fundraising company a single percentage representing the portion the charity clients receive. It’s based on the total funds raised by the company during the year, relative to the total amount retained by all its charity clients. This can obscure the fact that an individual charity may be receiving significantly less than that composite percentage. As a hypothetical example, let’s say a company raised $100,000 for charity A and gave $90,000 (90 percent) to the charity. The same company raised $10,000 for charity B and gave $1,000 (10 percent) to the charity. The average percentage that the company gave to the two charities was 83 percent. This is the percentage that would be reported on the Washington state Web site. However, if you were unlucky enough to give to charity B, only 10 percent of your money actually went to the charity you were trying to help. As a real world example, consider the 2000-2001 data available at the North Carolina Secretary of State Web site. Public Interest Communications, a professional fundraising company based in Falls Church, Virginia, conducted seven fundraising campaigns. The total amount raised was $3,283,662.94. Of that total, $1,090,437.31 (33 percent) went to the seven charities. However, in one instance 13.54 percent of the money donated went to the charity ($165,955.37 out of a total of $1,225,762.91 donated to Defenders of Wildlife). In another instance, 67.66 percent of the money donated went to the charity ($259,270.86 out of a total of $383,224 donated to National Wildlife Federation). Giving only a combined percentage (33 percent), as is done at the Washington state Web site, can obscure the fact that the charity to which you are donating may be receiving significantly less than that combined percentage. Disclosure Requirements
How can you find out how much of your donation will actually reach the charity? You could call the Washington Secretary of State office at 1-800-332-4483 and ask for the information. Washington law requires commercial fundraisers to register with the state. And they must clearly disclose, when soliciting your donation, the name of the entity for which they are an employee or agent and the name of the charitable organization for which they are fundraising. Some states, for example, North Carolina, require fundraisers to disclose financial information if requested. Solicitors in Ohio must disclose the percentage the charity receives if they are asked. But even in states where disclosure is not required, as for example in Washington state, anti-fraud laws prohibit professional fundraisers from obtaining money on false pretenses or by making false statements. This point was made in an opinion written by the U.S. Supreme Court when ruling on a North Carolina law regarding professional fundraising. If you ask the solicitor what percentage of the total amount raised will be retained by the charity, you may receive an answer or you may be referred to the Washington state 1-800 number. The Washington Secretary of State has on file a copy of the contract between the commercial fundraiser and the charity. The contract specifies the method of computing the amount the charity receives and the amount of compensation the fundraiser receives. At the end of each year the commercial fundraiser files a report that summarizes the percentage relationship between the total amount of money raised, and the amount disbursed to the charity. A convenient way to find information about a fundraising company is to go to one of the Web sites listed above in Table 2. These provide some of the most up-to-date and complete information on the Internet. A list of environmental and conservation charities with their professional solicitors is given in Table 3 How to Find Information
By using the state data bases listed, you can look up your favorite charity and find out whom they have hired to conduct fundraising campaigns. You can also determine what percentage has been going to the charity and what percentage has been retained by the fundraiser. On some databases, total dollar amounts raised, dollar amounts retained by the company, and the dollar amounts received by the sponsoring charity are listed. The California database also includes detailed financial breakdowns on the campaign expenditures and solicitors’ fees. Following are examples of the types of information that are available. For information on amounts of money raised during 2000-2001 campaigns you might visit Ohio’s Web site. Three professional fundraising companies conducted campaigns for the National Wildlife Federation (NWF).
For more current activity, one might go to the Kentucky Web site and look up the World Wildlife Fund. Three companies registered to conduct fundraising campaigns in 2002. Percents are based on the total dollar amount of the donations raised by the company. The data were supplied to Kentucky by the companies.
In some instances, information filed with a state suggests that no money donated during a campaign has reached a particular charity. This might occur because the total money raised did not exceed the cost of conducting the campaign. For examples of this, read “A Detailed Summary of 2000-2001 Solicitor Activities in North Carolina” at the North Carolina Web site. Look at the data for the Environmental Defense (Facter Direct), Defenders of Wildlife (Harris O’Malley), and Earthjustice Legal Defense Fund (Telefund). In one exceptional instance, after a one-year campaign the charity apparently ended up owing money to the professional soliciting company. See the Ohio Web site’s 2001 information for the National Environmental Policy and Law Center. In May 2001, the Ohio Attorney General filed an Assurance of Discontinuance against a professional soliciting company for violations of Ohio law. It included failure to timely file campaign financial reports and pay six charitable organizations the percentage guaranteed by the company’s contracts. The amount recovered for the charities totaled $40,000 and included an Assurance of Discontinuance. (See Ohio Web site, “2001 Charitable Fund Raising in Ohio by Professional Solicitors,” “Enforcement Actions against Professional Solicitors in 2001.”) Legal Challenges
Many states gather information from professional solicitors but do not make it available to the public. And some states have the information but make the citizen pay to access the database (e.g., Texas) or require the citizen to come to an office in the state capitol to view it (e.g., Massachusetts). Nebraska used to provide information about professional fundraisers registered in their state. But a 1996 Nebraska Supreme Court decision ended the registration requirement. So Nebraskans cannot find out from their state any information about professional solicitation campaigns. American Charities for Reasonable Fundraising Regulation (ACRFR) has made efforts to overturn registration and disclosure laws. It is a 501(c)3 nonprofit organization. Among the accomplishments listed on its 1998 Form 990 filed with the Internal Revenue Service are the education of government regulators, negotiation with regard to proposed regulations, and, when necessary, litigation to eliminate excessive, unreasonable and egregious regulation. Members of the ACRFR board of directors have included persons associated with the National Taxpayers Union, Trade Bank International, Americans Back in Charge, the Council for Government Reform, Creative Direct Marketing International, the Association of Direct Response Fundraising Counsel and the Direct Marketing Association - Nonprofit Federation. According to information listed on the Form 990’s (EIN 22-3096395) displayed at the National Center for Charitable Statistics (http://nccs.urban.org) the organization reported spending $89,176 on legal fees in 1998. It ended the year with a reported $10,460 in total net assets. The following year, 1999, the organization reported beginning the year with $0.00 net assets. A 1998 flyer posted on the Muridae Web site (http://www.muridae.com) suggests that ACRFR hoped to establish that the act of mailing a charity’s letter to a prospective donor is an insufficient connection or nexus to give a county or state jurisdiction over a charity. If and when such a case were won, it would eliminate regulation by local jurisdictions. In Connecticut, American Charities for Reasonable Fundraising Regulation moved in 1998 for an injunction to enjoin Connecticut from using two statutes to regulate fundraising. They argued that the statutes are unconstitutionally vague and “chill” the plaintiffs’ First Amendment rights. The court ruled that ACRFR lacked standing to bring suit. The case was dismissed in 2000. In Pinellas County (St. Petersburg), Florida, ACRFR argued in 1998 that the county ordinance regulating solicitations constituted an overbroad, unreasonable restriction of free-speech activity and free trade commerce. The county requires paid solicitors to register with the county before performing services for their clients, who are charities soliciting within Pinellas County. The district court rejected those arguments. American Charities appealed the decision to the Eleventh Circuit Court of Appeals. In August 2000 the district court’s judgment was affirmed in part and remanded in part back to the district court. (To read more see: http://www.law. emory.edu/11circuit/aug2000/99-10945.opn.html.) Regional and Local Charities
Many regional conservation and environmental organizations do not hire professional soliciting companies, but instead conduct their own fundraising. You can find many of them listed on the Washington Secretary of State Web site. Some familiar organizations might not be listed because registration is only required for those groups raising over $25,000 in a year. These regional groups may be the best bet for your donation dollar. They use most of your donation for program services. A small percentage of your donation (5-20 percent) is used for necessary administrative and overhead expenses. The following is a sample list of local organizations along with the percent of their income devoted to program services: Environmental Fund of Washington 94%
Northwest Ecosystem Alliance 84%
People for Puget Sound 87%
RE Sources 95%
Sardis Wildlife Center 100%
Washington Foundation for Environment 92%
Washington Toxics Coalition 79%
Inbound Services
When you donate directly to a charity, rather than through a professional solicitor, all of your money reaches the charity. Sometimes, though, it could be difficult to determine whether you are dealing directly with the charity. For example, you could call a national environmental organization and use a toll-free 1-800 number they list. You might suppose that the person you are talking with is an employee of the environmental organization. In fact, the person may be an employee of a professional soliciting business which has contracted with the organization to provide inbound services. The Share Group, InfoCision, and Public Interest Communications are examples of companies that provide inbound services to nonprofit organizations. The company can provide database management, scripts, and operators who are informed and share the callers’ understanding of the issues. The employees may be trained to answer questions about the charity, clarify donation instructions, and handle credit card pledges. They may encourage you to donate, increase your donation, and/or commit to an extended giving arrangement such as, for example, $50 each month for one year. What might not be evident to you, however, is the percentage of your donation that will be retained by the fundraising company. The employee with whom you are speaking might not know the answer to that question, and public access to the information may be difficult to obtain. So where did your donation money go? When you are solicited for a donation, the most important question to ask is, “What percentage of my donation will the charity actually receive if I decide to give?” The Better Business Bureau has concluded that it is unreasonable for a charity to receive less than 65 cents of every donated dollar raised from the public. (See Ohio, 2001 Report.) Never agree to donate over the phone. Ask for written information and read it carefully. The best approach is to check it out and do not hesitate to ask questions before donating. Then you won’t be left wondering what happened to your hard-earned dollars. Note: Data was obtained from Web sites September-November, 2002. Table 1: Fundraising Companies
Table 2: State Information Sources on Professional Solicitation Campaigns
Further Reading
•Connecticut Attorney General. “Connecticut Organizations Received $3.9 Million of $11.3 Million Solicited by Professional Telemarketers in 200l.” PDF File, http://www.cslib.org/attygenl/mainlinks/tabindex8.htm. •GuideStar: The National Database of Nonprofit Organizations. http://www.guidestar. org. •David Migoya. “State’s attempts to protect donors have failed in court.” Denver Post, http://63.147.65.175/charity/charity0211b.htm. •New York Attorney General. “Spitzer Calls for Reforms in Charitable Fundraising.” http://www.oag.state.ny.us/press/2001/dec/dec19a_01.html. •Pinellas County, Florida, Eleventh Circuit Opinion. http://www.law.emory.edu/11circuit/aug2000/99-10945.opn.html. •The Urban Institute, National Center for Charitable Statistics, “Profiles of Individual Charitable Contributions by State, 2000.” http://nccs.urban.org. |