Monday, January 21, 2008

One Size Does Not Fit All - Some Charities Say They Have to Pay a Lot for Fund-raising

On the heels of the recent scandal involving Roger Chapin's (Help Hospitalized Veterans) alleged defrauding of a veterans charity by using its funds for non-charitable purposes (previously blogged), the AJC reported on January 20, 2008, about similar allegations against a professional charity fund-raiser.  After noting that a professional fund-raiser received as much as 88% of funds it raised for a charity, the article notes how some small charities - despite state law assertions to the contrary - often need professional fund-raisers in order to get donations:

The head of the Committee for Missing Children, David Thelen, said the dollar figures do not give a whole picture and that small charities have no other way of raising money.

Hiring the fund-raisers saves Thelen the cost of in-house fund-raising, he said.

"I contract with them [to keep] 88 percent, and I keep 12," he said. "Ask Coca-Cola if they would like to have 12 percent at the end of the year, guaranteed."

Although this is not a universal view, this is a view of many small charities that have trouble attracting donations.  This view counters the idea that charities should be "efficient" at accomplishing their mission.  According to Daniel Borochoff of the American Institute for Philanthropy (quoting from the same AJC article) "We give [Thelen's group] an F grade for 11 percent of the money going to their programs.. .  How many people would send them money if they knew only 11 cents of every dollar was going to programs that actually help children?"

The U.S. Supreme Court has yet to address this issue.  But the Seventh Circuit, in United Cancer Council v. Commissioner, 165 F.3d 1173 (1999), considered the issue of when high fees for professional fund-raising crosses the line from helping charities that need the funds to violating the federal laws against private inurement.  In that case, the Seventh Circuit held in favor of the charity because the facts did not show that the fund-raiser "seized control" of the charity.  In United Cancer Council, 90% of the funds raised by the charity went to the professional fund-raiser.

For the entire Atlanta Journal Constitution article, see "Pros get bulk of gifts to charity: 88 percent of donations raised for the Committee for Missing Children in Lawrenceville goes to telemarketers" in the January 20, 2008, issue.


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