Report Shows How Fundraisers Profit From Charitable Giving

Attorney General Spitzer today released a report highlighting the costs incurred by non-profit organizations that engage telemarketers to solicit charitable contributions from New Yorkers. It shows that less than a third of the money raised by telemarketing campaigns goes to charity while the balance is used to pay expenses associated with the fundraising.

The report, entitled Pennies for Charity, Where Your Money Goes: Telemarketing by Professional Fund Raisers provides a summary of the information filed with the Attorney General's Charities Bureau by professional telemarketers who conducted fundraising campaigns in New York State last year.

A total of $184.7 million was raised by 588 fundraising campaigns conducted in 2001. However, only $58.9 million, or 31.9 percent of the funds, actually went to charitable organizations. The remainder was retained by the telemarketers as fees and other costs.

"By compiling this annual report, I hope to keep two important issues in the public spotlight," Spitzer said. "First, donors need to make informed decisions prior to making a charitable contribution. Second, the people who serve on charitable boards have an obligation to remain actively engaged in their organizations' fundraising decisions. Board members must take responsibility for the selection of professional fundraisers and ensure that their organization's income for charitable purposes is maximized."

Bennett Weiner of the Better Business Bureau (BBB) Wise Giving Alliance, which compiles reports on national charities and evaluates those charities in relation to voluntary standards, said: "For many years, the BBB has recommended that on an annual basis, total fundraising costs should be no more than 35 percent of contributions. In BBB experience, the vast majority of charities are able to conform to these standards." BBB reports on national charities can be found at www.give.org and reports on local New York charities can be found at www.newyork.bbb.org.

Daniel Borochoff, president of the American Institute of Philanthropy (AIP), a charity watchdog that rates charities on their financial performance, stated: "During this time of great need, charities are being asked to do more with less. It is important that we accomplish as much as we can with our limited charitable dollars by supporting efficient charities the don't waste donations on expensive telemarketing campaigns. Before donating in response to a telemarketers call, find out what portion is going to the charity. Otherwise you might be feeding the pockets of telemarketers instead of feeding the hungry." The AIP provides tips on giving and ratings of charities at its website: www.charitywatch.org.

Among the significant findings of the Attorney General's report are:

  • In only 29 of the 588 campaigns did the charity receive at least 65 percent or more of the money raised;

  • In more than 82 percent of the campaigns the charities got less than half of the funds raised; and

  • Fourteen charities actually lost money under their fundraising contracts.

Since the publication of the report last year Attorney General Spitzer has initiated several efforts to reform telemarketing practices in New York, including:

  • Prohibiting the Fraternal Order of New York State Troopers, a 240-member organization composed of retired and active law enforcement officers, from soliciting in New York State. As part of the settlement the group terminated its contract with All-Pro Telemarketing Associates Corp., a New Jersey-based firm that retained 85 percent of the money contributed to the organization. Under that settlement, the organization also turned over more than $200,000 to the Trooper Foundation State of New York, Inc., a non-profit, tax-exempt charity that supports the New York State Police and its members. Related litigation brought by the Attorney General is pending against All-Pro and its corporate president;

  • Suspended the Firefighter Assistance Foundation, a California-based organization from soliciting in New York State. The investigation began following the receipt of numerous complaints alleging that contributions would be made to local firefighters and their families;

  • Proposed legislation that would 1) strengthen the anti-fraud statutes prohibiting charities from misleading the public, and 2) require professional fundraisers and professional solicitors to disclose to potential donors accurate information concerning the proportion of funds the charity has received in past campaigns; and

  • Requested amendments to the Internal Revenue Code that would limit the deductibility of contributions to charity to the amount actually used for charitable purposes, exclusive of the expenses charged by a professional fundraiser.

The Attorney General's web site, http://www.charitiesnys.com, contains an electronic copy of the report. The information contained in the Attorney General's report pertains solely to telemarketing campaigns conducted by charitable organizations registered to solicit contributions in New York.

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