Where Your Charity Money Goes: Telemarketers
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The Fiscal Times
December 21, 2012

Before you make any final year-end charitable contributions, you may want to take note of the findings of an annual report on charity fundraising released today by New York State Attorney General Eric Schneiderman.

The investigation found that in 2011, for-profit telemarketing fundraisers – those people who call you soliciting donations – were paid almost 62 percent of the money they raised, with just over 38 cents of every dollar actually going to charity. It’s just another reason to hate that dinner-time telemarketing call.

“The results of our report are sobering,” the report says. “Overall far too much money is spent on telemarketers fees and expenses, and far too little on charity.” The professional fundraising companies involved include InfoCision Management Corporation, Harris Direct, Menacola Marketing, Public Interest Communications, Strategic Direct Marketing and Telefund Inc., among others.

The New York attorney general has jurisdiction over charities that raise or spend more than $25,000 in the state, and any that use professional fundraisers. Based on filings on 602 fundraising campaigns on behalf of 434 charities, the report finds that charities received less than $93 million of a gross total of more than $240 million raised by telemarketing campaigns last year.

RELATED: Why Everything You Know About Charitable Giving Is Wrong

In just about 8 percent of the campaigns did the charity get at least 65 percent of the money raised, a level the attorney general’s office points to as being acceptable under the Better Business Bureau’s standards for charitable organizations. By contrast, in 78 percent of the telemarketing campaigns, charities kept less than half of the money drummed up, according to the attorney general’s office. In almost half the campaigns, the charities kept less than 30 percent of the funds raised. And then there’s this surprising stat: “In 76 of the 602 campaigns, charities actually lost money.”

In other words, about one in eight telemarketing campaigns covered in the report cost the associated charities money – and lots of it. As the report explains, that can happen when the charity’s contract with a telemarketer does not guarantee that the non-profit group will get a specific dollar amount or percentage of the money raised, or when the charity has to pay fees and expenses that exceed the amount donated. The 76 campaigns cited by the attorney general raised nearly $6 million, but not only did the charities involved not get that cash, they actually paid the for-profit telemarketers about $2.8 million more.

The New York report follows a request made late last month by Democratic Connecticut Sen. Richard Blumenthal, who sent a letter to the Federal Trade Commission chairman calling on the agency to investigate reports that telemarketing companies were using deceptive practices to solicit donations, with much of the money kept by the fundraisers.

“These practices are unethical and in some circumstances may be illegal,” Blumenthal wrote, claiming that, “These telemarketers use scripts approved by the charities to mislead potential donors about how much fundraised money the charities keep.” Blumenthal also cited a recent story by Bloomberg Markets magazine that found that InfoCision raised $5.3 million for the American Cancer Society in 2010, but none of that money went to cancer research or treatment. The telemarketing company kept the full amount, and was paid $113,000 more in fees by the non-profit.

The New York attorney general’s report suggested that anyone considering making a charitable donation resist pressure from telemarketers to give over the phone. “If you choose not to hang up, you should ask the caller what programs are conducted by the charity, how much of your donation will be used for charitable programs, how much the telemarketer is being paid and how much the charity is guaranteed,” the report recommends.

Sites like Charity Navigator, GuideStar, the American Institute of Philanthropy’s CharityWatch site and the Better Business Bureau Wise Giving Alliance also offer information about non-profits’ financial and governance track records.

Executive Editor Yuval Rosenberg oversees coverage of business, the economy, technology and Wall Street. A former web editor at WNYC, Fortune and Newsweek, he also writes on a wide range of subjects.