RAISING FUNDS? What You Should Know
About Hiring a Professional
If your nonprofit organization is planning a fund-raising campaign,
you may be considering hiring a professional to do the work.
Professional fund-raisers conduct campaigns for a fee; often, it's a
percentage of the money they collect.
Because the fund-raiser will be representing your organization to
potential donors, it's important to investigate every firm you're
considering hiring. Inappropriate behavior by a fund-raiser can result
in negative publicity for your organization, fewer or smaller
donations, and possible legal action involving you and the firm in the
case of legal violations.
Choosing a Fund-Raiser
A little research will help ensure that you're working with a
reputable fund-raiser. Contact other nonprofit groups in your area for
information and referrals - especially colleges, hospitals and
cultural organizations. You also may want to contact your local
community fund or an association of professional fund-raisers in your
community.
Once you've compiled a list of potential fund-raisers, call them for
background information. Get written information about each, including
a blank contract. Then, schedule interviews and ask how they would
conduct your campaign:
- Would they solicit by phone, mail,
door-to-door, or use a combination of approaches?
- Would they solicit money only - or
would they sell products or tickets to events?
- What portion of the donation would
come to your organization - and what portion will the fund-raiser
take? Stay away from companies that promise something for nothing or
"easy money" for your organization.
- Would subcontractors be used for any
part of the campaign?
- How would the fund-raiser make sure
its telephone solicitors follow approved scripts?
When you're interviewing, be clear that
while the fund-raiser would conduct the campaign, you would maintain
overall control and expect the company to provide periodic financial
reports. Ask to see financial data from other campaigns to get a
picture of their successes.
Ask what procedures are in place to make sure that the telemarketer
complies with the Federal Trade Commission's (FTC) Telemarketing Sales
Rule. The Rule applies to telemarketers hired to conduct inter-state
solicitations of charitable contributions by phone. Fund-raisers and
any subcontractors must comply with the following requirements:
- telemarketing calls can be made only
between the hours of 8 a.m. and 9 p.m.;
- telemarketers must promptly identify
the charitable organization they represent and disclose that the
purpose of the call is to ask for a contribution;
- telemarketers must not make
misleading statements during their pitch to induce a donation; and
- if a person asks to be placed on a
"do not call" list, the telemarketer must honor the request. Any
further calls to that person may subject the telemarketer to a fine
of up to $11,000.
Many states also have regulations
regarding charitable solicitations. Ask whether the telemarketer
understands these requirements and how they plan to follow them.
Include a statement about adhering to state regulations and federal
law in your written contract. In addition, make sure that the
materials used by the fund-raiser comply with any state "do not call"
law. Some states require paid fund-raisers to identify themselves as
such and to name the charity for which they are soliciting, even if
the call is in-state. Also, ask whether the company is licensed or
bonded - a requirement in many states. To learn about the law in the
states where the telemarketer will be calling, contact the state's
charity regulator. Links to state charity regulators can be found at
the National Association of State Charity Officials Web site -
www.nasconet.org.
Ask for references and contact them about their experiences with the
company, and whether they have suggestions based on their experience.
Check out the company with state and local consumer protection
officials, charities regulators and the Better Business Bureau. These
organizations can tell you whether they have received consumer
complaints about the company. But be wary: the absence of complaints
doesn't necessarily mean the company is legitimate. Unscrupulous
companies may settle complaints, change their names or move to avoid
detection.
Finally, get bids. A reasonable bid is determined by considering many
factors: the time and type of labor involved, the nature and duration
of the relationship between fund-raiser and client, and the ability
and experience of the fund-raising firm. Further, some state laws
require nonprofit managers to get competitive bids.
The Fund-Raising Contract
Once you've selected a professional fund-raiser, describe the details
of the campaign in the written contract to protect you as well as the
fund-raiser. Keep in mind that donors ordinarily expect that most of
their contribution will go toward programs and services. The contract
should:
- explain the services to be provided
and the financial responsibilities of each party;
- authorize or prohibit the use of
subcontractors;
- identify the compensation to be paid
- a flat fee and/or a percentage of the money collected. Remember
that some watchdog organizations have standards that limit overall
fund-raising costs;
- require that the fund-raiser use
only material reviewed and approved by your organization when
contacting the public, especially telemarketing scripts and printed
materials mailed to donors. Descriptions of your organization and
representations about the tax benefits of a donation must be
accurate: make sure any description as to how the money will be used
is consistent with the organization's current plans and objectives;
- specify the contract period,
including the closing and settlement dates;
- require the fund-raiser to agree to
comply with the FTC's Telemarketing Sales Rule and applicable state
laws;
- outline cancellation criteria for
both parties;
- require the fund-raiser to provide
detailed reporting of results throughout the campaign and at its
end. All donor checks should be made out to your organization, not
the solicitor. Do not allow the solicitor to endorse checks. Review
sales and other financial records on a regular basis, perhaps
weekly;
- specify ownership of donor lists.
Typically, lists belong to the nonprofit. If you retain ownership
and decide to offer your lists for rental or exchange, consider the
privacy of your donors. You may want to offer donors the opportunity
to opt-out of lists you furnish to outside mailers and phone
solicitors. If the telemarketer owns the lists, you may wish to
retain the right to obtain certain donor information in order to
provide tax information to donors and reports to regulators.
The Campaign
Even though you've hired a professional fund-raiser to conduct a
campaign, you're responsible for the actions taken on your behalf.
Therefore, regular contact with the firm throughout the campaign is a
must. Here are some additional tips for quality control:
- If you're conducting a telemarketing
campaign, insist that the fund-raiser institute a system for
training and monitoring its operators to make sure they're following
the authorized script. One method is to call back donors at random
to verify the conversation. Provide the telemarketer with answers
for commonly asked questions.
- Make sure that the fund-raiser has a
system in place to honor "do not call" requests.
- Closely track complaints from the
public. If a pattern develops, review the area that's causing
confusion or concern and discuss ways to resolve the issue with the
fund-raiser.
- Keep tabs on the flow of money
during the campaign. Make sure you get copies of original invoices
as received, paid receipts as paid, bank statements, checks and
deposit slips. Monitor all expenses to be sure they are reasonable
and ordinary. Immediately question any expenses that appear
excessive or lack documentation.
For More Information and to Report
Fraud
Several private nonprofit organizations promote standards in
philanthropy to evaluate the performance of public-service groups.
These standards include guides about the use of professional
fund-raisers. For more information, contact:
BBB Wise Giving Alliance
4200 Wilson Boulevard, Suite 800
Arlington, VA 22203
(703) 276-0100
www.give.org
American Institute of Philanthropy
3450 Lake Shore Dr., Suite 2802 E
Chicago, IL 60657
(773) 529-2300
www.charitywatch.org
If you believe an organization may not be operating for charitable
purposes, is making misleading solicitations, or is ignoring requests
to be placed on a "do not call" list, contact your state Attorney
General, your local consumer protection office or the Federal Trade
Commission.
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop and
avoid them. To file a
complaint or to get free information
on consumer issues, visit
www.ftc.gov or
call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The
FTC enters Internet, telemarketing, identity theft and other fraud-related
complaints into
Consumer Sentinel, a
secure, online database available to hundreds of civil and criminal law
enforcement agencies in the U.S. and abroad.
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FEDERAL TRADE COMMISSION |
FOR THE CONSUMER |
1-877-FTC-HELP |
www.ftc.gov |
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May 2003 |