FTC FACTSfor Business

BUSINESS

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FEDERAL TRADE COMMISSION FOR THE CONSUMER

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RAISING FUNDS?

I f your nonprofit organization is planning a fund-raising campaign, you may be considering hiring a professional to do the

work. Professional fund-raisers conduct campaigns for a fee;

often, itís a percentage of the money they collect.

Because the fund-raiser will be representing your organization to potential

donors, itís important to investigate every firm youíre considering hiring. Inappropriate behavior by a fund-raiser can result in negative publicity for your

organization, fewer or smaller donations, and possible legal action involving you

and the firm in the case of legal violations.

Choosing a Fund-Raiser

A little research will help ensure that youíre working with a reputable fundraiser. Contact other nonprofit groups in your area for information and referrals

ó especially colleges, hospitals and cultural organizations. You also may want

to contact your local community fund or an association of professional fundraisers in your community.

What You

Should Know

About Hiring

a Professional
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Once youíve compiled a list of potential fundraisers, call them for background information.

Get written information about each, including a

blank contract. Then, schedule interviews and

ask how they would conduct your campaign:

ï Would they solicit by phone, mail, door-todoor, or use a combination of approaches?

ï Would they solicit money only ñ or would

they sell products or tickets to events?

ï What portion of the donation would come

to your organization ñ and what portion will

the fund-raiser take? Stay away from companies that promise something for nothing

or ìeasy moneyî for your organization.

ï Would subcontractors be used for any part

of the campaign?

ï How would the fund-raiser make sure its

telephone solicitors follow approved

scripts?

When youíre interviewing, be clear that while

the fund-raiser would conduct the campaign,

you would maintain overall control and expect

the company to provide periodic financial

reports. Ask to see financial data from other

campaigns to get a picture of their successes.

Ask what procedures are in place to make sure

that the telemarketer complies with the Federal

Trade Commissionís (FTC) Telemarketing

Sales Rule. The Rule applies to telemarketers

hired to conduct inter-state solicitations of

charitable contributions by phone. Fund-raisers

and any subcontractors must comply with the

following requirements:

ï telemarketing calls can be made only

between the hours of 8 a.m. and 9 p.m.;

ï telemarketers must promptly identify the

charitable organization they represent and

disclose that the purpose of the call is to ask

for a contribution;

ï telemarketers must not make misleading

statements during their pitch to induce a

donation; and

ï if a person asks to be placed on a ìdo not

callî list, the telemarketer must honor the

request. Any further calls to that person

may subject the telemarketer to a fine of up

to $11,000.

Many states also have regulations regarding

charitable solicitations. Ask whether the

telemarketer understands these requirements

and how they plan to follow them. Include a

statement about adhering to state regulations

and federal law in your written contract. In

addition, make sure that the materials used by

the fund-raiser comply with any state ìdo not

callî law. Some states require paid fund-raisers

to identify themselves as such and to name the

charity for which they are soliciting, even if the

call is in-state. Also, ask whether the company

is licensed or bonded ó a requirement in many

states. To learn about the law in the states

where the telemarketer will be calling, contact

the stateís charity regulator. Links to state

charity regulators can be found at the National

Association of State Charity Officials Web site

ó www.nasconet.org.

Ask for references and contact them about their

experiences with the company, and whether

they have suggestions based on their experience. Check out the company with state and

local consumer protection officials, charities

regulators and the Better Business Bureau.

These organizations can tell you whether they

have received consumer complaints about the

company. But be wary: the absence of complaints doesnít necessarily mean the company is

legitimate. Unscrupulous companies may settle

complaints, change their names or move to

avoid detection.

Finally, get bids. A reasonable bid is determined

by considering many factors: the time and type of

labor involved, the nature and duration of the

relationship between fund-raiser and client, and

the ability and experience of the fund-raising
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firm. Further, some state laws require nonprofit

managers to get competitive bids.

The Fund-Raising Contract

Once youíve selected a professional fundraiser, describe the details of the campaign in

the written contract to protect you as well as

the fund-raiser. Keep in mind that donors

ordinarily expect that most of their contribution

will go toward programs and services. The

contract should:

ï explain the services to be provided and the

financial responsibilities of each party;

ï authorize or prohibit the use of subcontractors;

ï identify the compensation to be paid ó a

flat fee and/or a percentage of the money

collected. Remember that some watchdog

organizations have standards that limit

overall fund-raising costs;

ï require that the fund-raiser use only material reviewed and approved by your organization when contacting the public, especially telemarketing scripts and printed

materials mailed to donors. Descriptions of

your organization and representations about

the tax benefits of a donation must be

accurate: make sure any description as to

how the money will be used is consistent

with the organizationís current plans and

objectives;

ï specify the contract period, including the

closing and settlement dates;

ï require the fund-raiser to agree to comply

with the FTCís Telemarketing Sales Rule

and applicable state laws;

ï outline cancellation criteria for both parties;

ï require the fund-raiser to provide detailed

reporting of results throughout the campaign and at its end. All donor checks

should be made out to your organization,

not the solicitor. Do not allow the solicitor

to endorse checks. Review sales and other

financial records on a regular basis, perhaps

weekly;

ï specify ownership of donor lists. Typically,

lists belong to the nonprofit. If you retain

ownership and decide to offer your lists for

rental or exchange, consider the privacy of

your donors. You may want to offer donors

the opportunity to opt-out of lists you

furnish to outside mailers and phone solicitors. If the telemarketer owns the lists, you

may wish to retain the right to obtain

certain donor information in order to provide tax information to donors and reports

to regulators.

The Campaign

Even though youíve hired a professional fundraiser to conduct a campaign, youíre responsible for the actions taken on your behalf.

Therefore, regular contact with the firm

throughout the campaign is a must. Here are

some additional tips for quality control:

ï If youíre conducting a telemarketing campaign, insist that the fund-raiser institute a

system for training and monitoring its

operators to make sure theyíre following

the authorized script. One method is to call

back donors at random to verify the conversation. Provide the telemarketer with answers for commonly asked questions.

ï Make sure that the fund-raiser has a system

in place to honor ìdo not callî requests.

ï Closely track complaints from the public. If a

pattern develops, review the area thatís

causing confusion or concern and discuss

ways to resolve the issue with the fund-raiser.

ï Keep tabs on the flow of money during the

campaign. Make sure you get copies of

original invoices as received, paid receipts

as paid, bank statements, checks and deposit slips. Monitor all expenses to be sure

they are reasonable and ordinary. Immediately question any expenses that appear

excessive or lack documentation.
Federal Trade Commission

Bureau of Consumer Protection

Office of Consumer and Business Education

May 2003

F C EDERAL RADE OMMISSION T FTC OR HE ONSUMER

1-877-FTC-HELP www.ftc.gov

Facts for Business

For More Information and to

Report Fraud

Several private nonprofit organizations promote

standards in philanthropy to evaluate the performance of public-service groups. These

standards include guides about the use of

professional fund-raisers. For more information, contact:

BBB Wise Giving Alliance

4200 Wilson Boulevard, Suite 800

Arlington, VA 22203-1838

703-276-0100

www.give.org

American Institute of Philanthropy

3450 Lake Shore Dr., Suite 2802 E

Chicago, IL 60657

713-529-2300

www.charitywatch.org

If you believe an organization may not be

operating for charitable purposes, is making

misleading solicitations, or is ignoring requests

to be placed on a ìdo not callî list, contact

your state Attorney General, your local consumer protection office or the Federal Trade

Commission.

The FTC works for the consumer to prevent

fraudulent, deceptive and unfair business

practices in the marketplace and to provide

information to help consumers spot, stop and

avoid them. To file a complaint or to get free

information on consumer issues, visit

www.ftc.gov or call toll-free, 1-877-FTC-HELP

(1-877-382-4357); TTY: 1-866-653-4261. The

FTC enters Internet, telemarketing, identity theft

and other fraud-related complaints into

Consumer Sentinel, a secure, online database

available to hundreds of civil and criminal law

enforcement agencies in the U.S. and abroad.