Third-Party Fund-Raisers under Scrutiny

Canadian charities have come under uncomfortable scrutiny lately wholesale mlb jerseys on several fronts. Federal Liberal MP John Bryden’s report, Canada’s Charities: A Need ???????????????????????????(Krill for Reform, and Walter Stewart’s book, The Charity Game, call for more rigorous checks on charitable fund-raising and spending.

In the line of fire is the use of ”third-party fund-raisers” by many charitable institutions. Third-party fund-raisers are persons or companies hired under contract by charities to increase donations from the public. The cost-effectiveness of this practice has been questioned not only by Bryden and Stewart, but also by media and the public.

The reduction of government funding of charities is a two-edged sword. Not only are charities forced to offset those cuts by raising money from the business community and the public, they also have to expand their services to aid in areas previously the domain of government. On top of this, they face rising ”donor fatigue.”
Charities that do not use third-party fund-raisers are alarmed by some of the methods used to bring in donations, because they reflect negatively on charities in general. ”The fallout for charities can be difficult to manage,” says Nancy Palmer, manager of planned giving at Calgary’s Foothills Hospital Foundation. ”The public doesn’t necessarily distinguish between charities.”

Palmer, who confirms that there have been cases where third-party fund-raising costs have exceeded the take, says that charities wholesale nfl jerseys risk bargaining away their reputations if, for example, they hire a telemarketer who uses unethical practices to raise funds.

Of particular concern, she says, are commission-based cheap nfl jerseys arrangements where the fundraising agent, purportedly on behalf of a charity, uses strong-arm tactics to solicit money. Because it is in the charity’s interest to establish a longstanding relationship with a donor, practices such as these may result in one-time giving and a negative feeling about the charity.

Kids’ Help Line in Toronto stopped using a for-profit fundraiser when donors complained that its approaches were aggressive and intrusive. It was also expensive. CBC’s Marketplace reported the charity’s telemarketing and direct mail campaigns in 1993 raised $2 million at a cost Generalversammlung of $1.6 million.

Charities can be naive in their dealings with third-party fund-raisers who tell them their services won’t cost a dime. ”There is no such thing as something for nothing,” Palmer says.

At greatest risk is control of the donor list. ”It is one of the most important assets of a charity,” Palmer says, ”yet even board members are prepared to bargain this away in hopes of raising money for free.”

The Canadian Centre for Philanthropy recently published a report titled Charitable Fund-raising in Canada. Its survey of more than 1,500 non-religious charities showed that one-third of the charities that used a commission-based consultant shared ownership of their donor list.

The report says the practice of sharing ownership of a donor list is defensible if charities receive adequate compensation. ”However, even if adequate compensation is received for sharing ownership of a donor list, charities still face the challenge of justifying this practice to donors,” the report’s author, Michael Hall writes.
In his book, Stewart says there are about 2,500 lists used by direct marketers in Canada. Some have up to five million names.

Hall’s report shows that charities do not always retain control of monies raised by outside fund-raisers. This is particularly true of commission-based arrangements where funds were deposited directly into the fund-raiser’s bank account in one out of six cases. A further 10% of charities established joint bank accounts with their consultants.

The Centre of Philanthropy’s study reveals startling differences in the percentage of funds retained by charities that hired commission-based versus flat-fee consultants. ”The median cost ratio is 26% for campaigns employing flat-fee consultants and 59% for percentage-based consultants,” it reports. Amazingly, 5% of charities that responded to the Centre’s questionnaire reported a cost ratio of 120% or more than the funds raised.

Disturbingly, more than 40% of the charities surveyed did not even seek a second bid from another fund-raiser.

John Bryden’s one-man report is highly critical of high-cost fund-raising campaigns. ”The amount of donor dollars available from the Canadian public is finite,” the member for Hamilton-Wentworth writes. ”If some charities pay excessively high costs to get them, there is less for other charities equally in need.”
Bryden’s report, based on his study of T3010 forms prepared by charities for Revenue Canada, suggests that doubtful fund-raising practices may be widespread. Examples include the payment of $84,194 by Goals for Youth of North York to an outside fund-raiser to raise revenue of Can $102,857 in 1993. The Victorian Order of Nurses spent $132,385 to raise $168,799 in 1994, he says.

Bryden claims present regulations allow charities to hide behind a cloud of secrecy. ”Because of our lack Dia of ability to see behind the numbers,” he told The Is Financial Post, ”organized crime has to be involved unless it is asleep at the switch.”

New financial reporting requirements, such as the use of a chartered accountant by all charities to complete Revenue Canada returns, and better policing, should be part of federal reforms, Bryden says. The operations of charities should be regulated by the provinces, he recommends. Only a few do this now.

Alberta was one of the few provinces to implement legislation regulating fund-raising in its Public Contributions Act of 1951. Manitoba and Prince Edward Island also require registration for fund-raising campaigns. In Alberta, however, the Recycling legislation was successfully challenged by Epilepsy Canada. The Alberta Court of Appeal declared the act unconstitutional on grounds that sections violated freedom of expression guaranteed in the Charter of Rights and Freedom.

The Alberta legislation enacted last year requires charitable organizations that raise more than $10,000 Resident in public contributions to register with the government. It also requires the registration of professional fund-raisers who must provide security. Fund-raising agreements must be in writing, specifying estimations of contributions and expenses, methods to be used, and remuneration of the fund-raiser.

A work group of charitable organizations expects its recommendations to be incorporated in the Alberta act soon. It proposes raising the limit for registrants to $25,000 and adding a provision that charitable organizations retain ownership of their donor lists.