In a cheerful turn of events, charity middlemen — those for-profit folks who try to coax you into monthly donations outside the grocery store, appeal to your better nature by phone at dinner and seem acutely active this time of year — are pocketing far less of your donations than they did a decade ago.
While commercial fundraisers in California pocketed 56 cents of every dollar they raised for charities in 2008, they kept only 20 cents of every dollar they raised in 2018, according to figures from California’s attorney general.
And it’s not just a West Coast phenomenon. In New York state, middlemen who just a few years ago turned over 37.9 cents on the dollar forwarded 73 cents to charities last year, according to figures from New York’s attorney general.
Why? That’s a bit unclear, but it could be chalked up to a greater use of online technology for fundraising, more muscular state enforcement and a savvier giving public — thanks, perhaps, to stories like these.
“Whatever — and I’d like to know the whatever, but until then — it’s good to see a positive trend,” said Doug White, former director of Columbia University’s masters in nonprofit management program and author of “Wounded Charity” and other books.
‘Bottom-feeders’
White has called the telemarketers who do much of this work “bottom-feeders.” But blame doesn’t lie with the telemarketers, he said: Blame lies with the nonprofits that use them.
It appears nonprofits are getting that message.
“Some charities have improved their oversight of these companies and have sought better terms from professional fundraisers,” said the New York State attorney general’s most recent report on commercial fundraisers. “Other factors include (state) enforcement efforts, including its Operation Bottomfeeder, which target fraudulent fundraisers.”
These enforcement actions, in New York and other states, have served as a deterrent, the report said. “Since 2016, data indicate charities are receiving a larger percentage of donations raised by professional fundraisers,” it said.
California’s attorney general was unwilling to speculate on the why question, but also noted stepped-up enforcement.
Last year, the AG issued 59 delinquency letters to commercial fundraisers who failed to file financial reports from 2014 to 2017. That prompted the filing of 184 belated reports, which changed the totals raised over those years by tens of millions of dollars.
In 2018, commercial fundraisers hauled in close to a billion dollars — $810.4 million — in the name of charities in California, and gave $652.2 million to those charities, or 80 percent of the haul.
While that’s a vast improvement over 2008 — when charities got just $156.4 million of the $355.8 million raised — it still means that middlemen pocketed more than $158 million that donors assumed went to the nonprofits.
Who’s that knockin’ at the door?
Commercial fundraisers solicit donations via direct mail, online through websites, by door-to-door solicitation, and through telemarketing, auctions, entertainment events and the sale of used personal property, the AG said.
They’re paid either a flat fee for their work or a percentage of donations collected in the charity’s name.
By law, they must register with the Attorney General’s Registry of Charitable Trusts, file a “notice of intent” before asking anyone for money, and then file a report after each campaign detailing total revenue raised, expenses incurred and net amount forwarded to the charity.
Larry Zucker is the founder and CEO of The Gavel Group in Lake Forest, which runs charity auctions that have long returned more than 70% of proceeds to charities. He scrutinized the attorney general’s numbers and noted an interesting trend: Total revenue is going up, while the number of telemarketing campaigns is going down.
That likely accounts for some of the rise in money making its way to charities, he said. And the dominance of relatively new online players likely explains the rest.
Online players
A big boost in the online fundraising universe is Network For Good. Charities used its donation and peer fundraising software to raise $485.4 million last year — and more than 98% of it went to the charities.
Newer online players like Omaze are also luring nonprofits away from telemarketers, Zucker said.
Omaze — which “democratizes traditional auction-giving by offering everyone the chance to have a once-in-a-lifetime experience” — allows donors from anywhere to buy a chance to have lunch with Paul McCartney, or walk on the red carpet at a movie premiere, and the like.
There were eight Omaze campaigns in California last year, including for Planned Parenthood Los Angeles, United States Fund for UNICEF, Cities in Schools in Los Angeles, Starlight Children’s Foundation in Culver City and Surgical Eye Expeditions in Goleta. Those campaigns raised $43.2 million and returned an average of 58.7% of it to the charities.
That’s a lot less than the new average, but a lot more than the 5 or 10% returned by many telemarketers, he noted.
Omaze says it vastly expands the fundraising universe for nonprofits, and thus the amount of money that can be raised. While a local gala might return 90% of proceeds to charity, 90% of $100,000 is a lot less than 60% of $500,000, Omaze contends.
“We exist to empower nonprofits to do their world-changing work,” Omaze said on its website.
Rick Cohen, chief operating officer for the National Council of Nonprofits in Washington, D.C., said there are a couple of things in play here. “There’s more competition out there, and a lot more options for doing it yourself,” he said.
Since small and midsize charities usually don’t have the money to keep fundraisers on staff, they turn to commercial fundraisers, he said. Even if they get just 20% of the total — well, that’s better than zero percent.
“But with more information out there, if a commercial fundraiser offers them only 20%, they can say, ‘Hey, you’re way out of line with the market, give us a fair portion or we’ll go with someone else who will,’ ” Cohen said. “Having that info out there is a benefit to nonprofits and the people who donate to them.”
And there’s social media. The ALS Foundation’s Ice Bucket Challenge in 2014 was a video sensation, raising more than $100 million for the organization battling Lou Gehrig’s disease. “Not every organization can do an ice bucket challenge, but social media has made it easier to do some of the heavy lifting,” Cohen said.
‘Worst performers’
There is also an official list of shame.
California has called out the 10 worst commercial fundraisers, based on the crumbs — or worse — that they forwarded to the charities they worked for.
Some charities paid far more money than was raised, or received less than 3% of the total funds donated, the attorney general’s report said.
The “worst performers” list includes Public Outreach Fundraising, New Canvassing Experience, APPCO Group US and Grassroots Campaigns — companies that raised millions, then charged the charities that and more for their work, leaving charities in negative territory.
Fundraisers such as Public Outreach and Grassroots Campaigns defend these drives, saying they’re expensive because they’re vastly different from traditional telemarketing campaigns. They do “face-to-face” fundraising, which concentrates on signing up regular donors who pay $10 or $20 or $30 a month via automatic debit transactions. These campaigns cost a lot upfront and look terrible on the AG’s annual report, but pay off big in the long run, usually returning two to three times the charity’s initial investment over a five-year period, Grassroots and Public Outreach have said.
Regular, sustainable donations — typically monthly — supply nonprofits with “a reliable stream of financial support that allows them to plan for the long term,” said a statement from the Professional Face-to-face Fundraising Association.
The AG urges caution.
“Charities should consider the prudence of hiring fundraisers that continuously fail to perform over the years,” the report said. “Likewise, donors and grant makers may want to exercise caution in supporting charities that hire fundraisers with poor track records. … It is important to note that most of the charities registered with the Attorney General’s Registry of Charitable Trusts do not use professional fundraisers to raise funds.”
Consumers pitched by a fundraiser would do well to ask some simple questions: Which commercial fundraiser do you work for? How much of my money will actually make it on to the charity?
Experts urge the tenderhearted to also resist pressure, check out a charity’s finances on rating sites like Charity Navigator, and give to the charity directly by check or online, cutting out the middleman. A direct donation is the cheapest way to give, and will ensure that most of your money goes to the charity that moves you and not into someone else’s pocket.
