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Attorney General Lockyer Releases Nonprofit Fundraising Report Showing Lackluster Yield for Charities That Use Commercial Solicitors

Tuesday, March 30, 2004
Contact: (415) 703-5837

(SACRAMENTO) – Attorney General Bill Lockyer today released a report that shows in 2002 the average charity received less than 40 percent of the revenue raised in donation campaigns run by commercial fundraisers, with one-quarter of the campaigns netting nonprofits 15 percent or less of the total revenue.

"This report indicates commercial fundraising is an investment of dubious value for many nonprofits," said Lockyer. "While there has been some improved performance, the bottom line is too many commercial fundraising campaigns provide too few dollars to charities. Nonprofits should step back and look hard at their continued use of commercial fundraisers to determine whether these arrangements offer the most effective means to solicit crucial support for valuable programs."

Commercial fundraisers contract with charities to solicit contributions. Charities pay the fundraisers a flat fee or percentage of the proceeds, which covers expenses and profits. After subtracting fundraisers' payments, charities keep the balance of donations raised from a solicitation campaign.

The "Attorney General's Summary of Results of Charitable Solicitation by Commercial Fundraisers" for 2002 shows 573 campaigns raised $211.3 million. Of that total, $98.79 million went to the charities. In 2001, by comparison, 506 campaigns raised $281.9 million, of which $141 million went to charities.

The average commercial fundraising campaign in 2002 netted the charity just 38.14 percent of the total revenue raised, the report shows. That figure remained virtually unchanged from the 2001 average of 38.03 percent. To avoid distortion by a few campaigns, the average percent to charity is calculated by taking the percentage of contributions returned to the charity for each campaign, adding the individual percentages together, then dividing that figure by the total number of campaigns.

Of the 573 campaigns in 2002, 140 – or 24.4 percent – provided 15 percent or less of the total revenue to the charity. The percentage of low-yielding campaigns increased from 2001, when 21.7 percent (110) of the 506 campaigns provided the charity 15 percent or less. Only 206 of the 2002 campaigns, or 35.9 percent, provided more than 50 percent of the revenue to the charity. Still, that was a significant improvement over 2001, when just 24.3 percent of the 506 campaigns netted the charity more than half the revenue.

Lockyer today also issued the 2002 "Supplemental Report: Donations of Personal Property". The supplemental report details how much charities received from thrift stores that sell donated goods, and from commercial fundraiser-operated campaigns to sell donated vehicles.

Vehicle donation campaigns produced $45.69 million in gross revenue in 2002, according to the supplemental report, compared to $43.48 million in 2001. The average vehicle donation campaign netted the charity 41.57 percent of total revenue, up from the 2001 average of 36.76 percent.

For-profit thrift stores that bought goods from charities reported total revenue of $26.14 million in 2002, a dramatic drop of 52.2 percent from the 2001 figure of $54.7 million. The average charity in 2002 received just 15.69 percent of the total revenue from these sales, down from the 2001 average of 18.4 percent.

Thrift stores paid a fee or commission by charities reported total revenue of $20.43 million in 2002, a whopping increase of 172 percent over the $7.5 million reported in 2001. The average share of total revenue paid to charities from one of these stores was 15.83 percent, a significant decrease from the 2001 average of 20.12 percent.

The 2002 commercial fundraising report and supplemental report can be viewed at the Attorney General's web site, http://www.ag.ca.gov/charities/publications.htm .

Lockyer noted the reports use information from unedited financial statements filed by charities and fundraisers. The financial statements contain more detailed information about the filers, and can be viewed at the Attorney General's web site, http://www.ag.ca.gov/charities/. Most of the 89,084 charities registered with the Attorney General's Office solicit donations directly, and do not use commercial fundraisers.

Lockyer is sponsoring a legislative reform package, called the Nonprofit Integrity Act of 2004, that includes provisions to address growing concerns about commercial fundraising. The proposals seek to strengthen financial protections for charities that deal with for-profit solicitors. The plan would:

Require commercial fundraisers, within five days of receiving donations, to deposit the funds in a bank account controlled by the charity, or give the money directly to the charity; prohibit commercial fundraisers from giving celebrities or other individuals cash or gifts to appear at fundraising events unless the charity's governing board or CEO provides prior, written approval; require written contracts between charities and commercial fundraisers for each solicitation campaign; prohibit charities and commercial fundraisers from entering contracts unless the fundraiser is registered with the Attorney General's Office; and require that written contracts be submitted to the Attorney General's Office at least 10 working days prior to the start of the campaign.

Additionally, the Attorney General's web site has a model contract that highlights key issues charities should consider when hiring commercial fundraisers, as well as other information to help donors and charities make prudent, informed decisions. The contract can be found at http://www.ag.ca.gov/charities/publications/modelcontract.pdf .

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