You look around your cushy pad and feel guilty about how good you have it--or you just got paid and are feeling kind of flush. Whatever the reason, you cough up some dough, maybe $50 or $100 bucks. Feeling virtuous, you return to your evening's intellectual pursuits.
Chances are you just spoke to a for-profit fundraiser, and if you knew how much of your money actually made it to the group in question--less than half, in most cases--you'd probably feel like a fool. In 2001, there were 82 commercial fundraisers operating in the state of Washington, and they raised a total of almost $334 million for charities, though only $164 million of that made it to the charity clients, according to the Washington State Attorney General's annual report on commercial fundraisers, released last November. The other $170 million--51 percent of the money raised--went to the profit-driven enterprises that raised it. Even worse, more than 20 percent of those 82 companies returned less than 15 percent of the money they raised to their clients. Best of all, though (from the industry's perspective), most of the well-meaning saps who donated never had a clue about the fundraisers' hefty cut.
You'd probably feel even more stupid after you discovered that your name was now on some sort of universal suckers list, and that everyone and their mother would now be hitting you up for money for their ostensibly worthy cause.
Welcome to the decidedly unglamorous and semi-secret world of commercial charity fundraising. It is an entire industry that essentially consists of private companies that contract with charities to raise money in their names. The fundraising companies usually don't inform the public who they are, and they often receive a big percentage of the money raised. It's a skeezy and largely unregulated industry, according to a mounting number of critics; on the other hand, many smaller charities argue that such outfits provide an indispensable service that helps them stay afloat.
Tabatha Johnson, spokesperson for the charities division of the attorney general's office, says her office tries "to stay neutral" about the industry while providing maximum information to consumers through the annual reporting requirements (and by placing the resulting reports on their website). Still, when Washington's secretary of state, Sam Reed, presented the attorney general's report at a November 19 press conference, he made a point of unfurling a lengthy list of 330 separate charities that had contacted one 90-year-old Olympia woman over the course of a single year, according to a Seattle Times story on the event.
Stories like that don't surprise Daniel Borochoff, head of the American Institute of Philanthropy, a charity watchdog group based in Chicago. He says such fundraisers often sell lists of donors to other fundraisers, resulting in a deluge of calls to people who have donated. "The number-one reason we give is because we're asked," Borochoff says, adding that the commercial fundraising industry "doesn't pass the smell test." In his view, "if the people calling were honest about where the money was going, people wouldn't donate." As a general rule of thumb, charities using such fundraisers should receive at least 65 percent of the total amount raised, though he says some start-ups or less popular charities may need to spend more.
Only 16 of the 82 fundraisers in Washington State meet that standard, according to the attorney general's report.
Some of the most dubious companies are those that raise money for police and firefighters' groups, Borochoff claims. Chris Jarvis, spokesperson for the state attorney general, says the office has been "keeping an eye on a few fundraisers in the wake of 9/11" that seemed to be trying to take advantage of the post-attack outpouring of support for such groups, but declined to name the companies. Still, he conceded, the office had brought no enforcement actions against commercial fundraisers in the last year.
That's not surprising. Commercial fundraising is perfectly legal, and a series of U.S. Supreme Court decisions in the 1980s has prevented regulators from setting standards requiring a certain percentage of raised funds to go to the actual charities, Johnson explains. This could change, however. The Supreme Court has accepted, but not yet heard, a new case from Illinois where regulators moved against a charity that regularly allowed fundraisers to keep more than 85 percent of the money raised, Borochoff says.
If anything, the attorney general's report overstates the amount of money telephone solicitors return to charities. Many of the best-performing fundraisers in the report don't actually solicit money, but instead provide technical fundraising support to clients. For instance, Tacoma-based Donation Depot--which returned 92 percent of revenues to charity clients--only provides a seamless system whereby clients can accept contributions over the web, according to CEO Brandon Fix; several of the other top performers on the list, Fix says, are similar concerns.
Still, both regulators and watchdogs stress that many charities do not use commercial fundraisers, instead raising money through volunteer-run phone banks and the like. For those inclined to give, the best way to be sure is to ask detailed questions about the charities involved and the uses for the money raised. And, Borochoff cautions, donors should stick to donating to groups they know well, or community-based groups whose charitable efforts are easy to check out.