HIRING A FUND-RAISING FIRM: MUCH VIGILANCE REQUIRED (PART 1)


By James D’Ambrosio

(This is the first article in a series)

The New York Nonprofit Press, a monthly publication focusing on news and events about New York City-based nonprofits, recently ran a front-page feature — “Bad Connection: Cutting the Cord on Fund-raising Scams” — detailing scams operating in New York State and exorbitant fees charged by professional fund-raising firms. The article detailed an investigation by NYS Attorney General Eric T. Schneiderman, reviewing 561 charitable telemarketing campaigns during 2010. (Read the article here: http://bit.ly/tUluo0).

SOBERING FINDINGS

The findings were quite sobering. While professional fund-raisers garnered more than $244 million in gross contributions, they gave just 36.9 percent of the proceeds to charities. The remaining $154 million — 63 percent — was kept as fees and expenses. The article notes that while some charities did well on certain campaigns, many did worse: in over 75 percent of campaigns, charities kept less than 50 percent of monies raised; in 47 percent of campaigns, nonprofits kept less than 30 percent; and in 61 campaigns, agencies actually lost money. Ouch!  

While it may seem attractive to contract out fund-raising — especially small agencies unable to afford a full-time development person — clearly there are drawbacks. Like many business decisions, details matter. If you do decide to hire a firm, much diligence is required. There’s more at stake than costs, namely, your agency’s reputation, and potential legal implications if the firm doesn’t adhere to Federal Trade Commission regulations. The following guidelines are initial considerations in selecting a firm. (More details will be outlined in Part II.) 

HIRING A FUND-RAISING FIRM: INITIAL CONSIDERATIONS

♦ WHAT ARE THE COSTS?  There are two key issues: a) how much the firm charges in fees and expenses, and b) the percentage of money raised that is kept by the firm. This is crucial. It has been reported that professional fund-raisers may keep anywhere from 20-90 percent of funds raised. 

♦ PROFESSIONALISM When employees or volunteers call on your behalf, you have control over what they say and how they say it — a significant quality-control issue. When you contract out, you lose some control. How do you know callers will be courteous, professional and not badger potential donors? In short, you don’t. That’s why you have to investigate further. 

DO THEY KNOW YOUR DONORS? Nonprofits vary in purpose — direct-service providers, advocacy, watchdog groups, associations, health clinics, etc. Ask if they have experience in your area. This is important, as donors often give for specific reasons, i.e., a cancer survivor contributing to the American Cancer Society; a Vietnam Veteran giving to Veterans of Foreign Wars; or a librarian donating to the American Library Association. So if you’re a social-services provider and the firm primarily fund-raises for membership associations, it’s not a fit.       

♦ WHO ELSE HAVE THEY WORKED FOR? Not unlike finalists for a job, you should ask for references from previous and current clients. If they’re a reputable outfit, they should honor this request. If not, it’s a red flag. After all,  you wouldn’t make an important hire without a background check. The same holds true here.  

To be sure, contracting a fund-raising firm involves a certain amount of  complexity. In Part II, I’ll delve into further detail about some of these issues and how to adequately protect yourself. 

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QUESTION TO READERS: What has been your experience with fund-raising firms? What advice would you give to others looking to raise money this way?

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