Donating to charitable causes is as American as the red, white and blue, and apple pie. Worthy causes tug at our heartstrings and we react by sending checks to help.
While laws make scams illegal, professional fundraisers still take 62 cents of every dollar we donate.
Michigan Attorney General Bill Schuette has announced the publication of Michigan's second annual Professional Fundraising Charitable Solicitation Report, which helps consumers know how to be smart donors.
This year's report found that charities received only 38 cents for every dollar raised by professional fundraisers licensed in Michigan, up three percent from last year.
"Michigan citizens who give to their favorite causes deserve to know how much of their donation actually makes it to their intended charity and with our new report they can give wisely," said Schuette. "While I'm pleased we've seen a three percent improvement since last year, it's not enough. I will continue promoting this transparency in hopes consumers and charities will be able to do more to help their intended causes."
Professionals versus Charities
Under Michigan law, a professional fundraiser is defined as a person or organization that solicits contributions on behalf of a charity in exchange for compensation. This is different from a charity that hires its own staff member for development and other fund-raising activities.
Michigan law requires professional fundraisers to submit the results of their campaigns to the Attorney General. The data includes the type of appeal conducted (mail, telephone, etc.), gross receipts raised, the amount paid to the fundraiser, and the final amount and percentage that went to the charity. Any professional fundraiser licensed in Michigan is required to report these results, so the report includes data from charities across the country.
Although hiring professional fundraisers and fundraising counsel may benefit certain charities, some professional fundraisers leave little of the donations for the intended charity. According to data aggregated in the Attorney General's Report, on average, professional fundraisers pocket 62 percent of funds raised.
Fundraising Best Practices
According to the Better Business Bureau's Standards for Charity Accountability, charities should "spend no more than 35 percent of related contributions on fund raising. Related contributions include donations, legacies, and other gifts received as a result of fund raising efforts."
Schuette noted that states are limited in their ability to pass laws to regulate professional fundraisers' solicited contributions. In several cases in the 1980s, the U.S. Supreme Court ruled unconstitutional state laws requiring that a minimum percentage of each donation go to charity. As a result, states are limited to passing laws that prohibit fraudulent fund-raising practices and require reporting from charities and their professional fundraisers.
Schuette added that examples of fraudulent fund-raising practices prohibited by Michigan law include: (1) falsely telling a donor that he or she gave six months ago and it's time to give again, or (2) falsely telling a donors that 90 percent of their donations go to the charity, when that is in fact not true.
There are important measures consumers can take to protect themselves against bogus charities. Look for these warning signs when answering a charity solicitation call:
- Vague or unresponsive answers to specific questions about the charity and how money is used.
- Words making up a charity's name that closely resemble a better-known charity.
- Allowing no time to reconsider your pledge; they insist on collecting your donation immediately.
- Refusing to answer questions about where your money will go or to send information about the charity.
- Emotional appeals and high-pressure tactics to get you to make a quick decision or feel guilty about not contributing.
To improve transparency and provide donors greater access to this important information, Schuette enhanced the Attorney General's online charity search feature to include professional fundraiser data. The Attorney General's annual Professional Fundraising Charitable Solicitation Report provides a year-end compilation of data, while the online charity search feature provides campaign information as it is filed throughout the year.
The online charity search is designed as a central resource for prospective donors to perform general searches for various types of registered charities. For instance, donors may search by key words within the organization's purpose, as well as by city, county, state, name, or any combination of these. Inquiring prospective donors can visit www.michigan.gov/AGCharitySearch.
The Charitable Trust Section also serves as an important repository of publicly available information about charities, and protects citizens from illegal scams posing as legitimate charities. For more information on the Attorney General's oversight of charitable solicitation in Michigan, visit www.michigan.gov/AGCharities.