Professional Fundraisers Aren't So Bad Anymore

Remember back in the day when United Cancer Council's professional fundraiser collected about $28 million from donors but paid only about $2 million to the charity?  No kidding, the professional fundraiser kept about 93% of the donations to cover expenses and fees.  Obviously, the fundraising tail was wagging the charitable dog.  The New York Charities Bureau's 2024 charitable fundraising report documents the increasing efficiency and legitimacy of professional fundraisers since the bad old days.  

This trend lines up with an overall improvement over the past five years in the percentage of funds that charities retained from campaigns. Several factors may contribute to this shift:

• Some charities have gotten better contractual terms from fundraisers than in previous years.
• There has been a decline in certain fundraising methods, such as telemarketing.
• There has been a steady decline in the number of contracts that give professional fundraisers more than 80 percent of the funds raised. In 2023, there were 124 campaigns with such splits, down from 133 the previous year.

Telemarketing as a fundraising method is declining but it is still more often associated with fundraising abuse than any other method, according to the report: 

Telemarketing can be effective for furthering a charity’s message. Many campaigns target seniors who may be moved by touching appeals for “feel-good” causes. Stories of homeless veterans, children with cancer, and the like can resonate with donors. But be aware that such stories are also favorite tactics of fraud artists. And even a legitimate telemarketing campaign may not deliver all of your donation to a charity. So, use your judgment (see our guidance for handling a telemarketing solicitation on page 15). While most telemarketing campaigns raise and deliver funds to genuine charities, some fundraisers use misleading tactics to dupe people into contributing and their donations never go to support the services described.

Telemarketing has declined overall. Due in part to state enforcement and education efforts to increase public awareness of telemarketing scams, the number of charitable telemarketing campaigns in New York has steadily declined. In 2021, there were 401 campaigns that used telemarketing in New York. That number dropped to 332 in 2022 and to 306 in 2023. In addition, more of the funds raised by telemarketers are going to charities. The number of campaigns in which the telemarketer retained more than 50 percent of the collected dollars dropped from 129 in 2022 to 120 in 2023. Telemarketers tap charities’ pitch for PACs. At the same time, some political action committees (PACs) have begun tapping professional fundraisers who use a similar type of heart-string appeal in their telemarketing campaigns to raise funds. Campaigns for these not-for-profit organizations may make them sound like charities, but they are not.  PACs are not usually subject to the oversight of charity regulators (although some regulators view any organization that claims to be charitable to be subject to oversight). 

PACs are tax-exempt organizations formed under another section of the Internal Revenue Code than charitable organizations.55 Contributions to a PAC are not tax deductible. Ask questions if you receive a call from an organization that you suspect may be a PAC before you support them.56 In some instances much of the funds raised may not even go to lobbying elected officials but may be retained by the professional fundraiser conducting the campaign as a fee. (see Tips to tell a charity from a PAC, page 16.)

Such was the case with a group of PACs that hired Richard Zeitlin, who owned a telemarketing call center. The PACs that contracted with Zeitlin had charitable-sounding names like Children’s Leukemia Support Network, Standing by Veterans, and Americans for the Cure of Breast Cancer.  Zeitlin recently pleaded guilty in the Southern District of New York to a scheme to defraud donors.58 His company typically took more than 90 percent of the funds raised in campaigns that appeared to be on behalf of breast cancer patients, veterans, and law enforcement officers. Many of the scripts Zeitlin’s callers used stated or implied that the organizations were providing specific assistance to those in need. In fact, none of the organizations were charitable and they did not provide any services.

Fifty eight percent of telemarketing fundraiser campaigns retained more than 50% of donations. Nearly 20% kept more than 100%, meaning the charity ended up losing money. The Report notes that 46% of all fundraising campaigns (not just those involving telemarketing), retained more than 50% of the donations collected.

darryll k. jones