Attorney General Lockyer Releases Nonprofit Fundraising Report Showing Marginal Yields for Charities That Use Commercial Solicitors

(SACRAMENTO) – Attorney General Bill Lockyer today released a report showing that in 2004, the average charity received only about one-third of the revenue raised in solicitation campaigns run by commercial fundraisers.

“The numbers continue to show that too many charities receive too few dollars when commercial fundraisers are employed to solicit donations,” said Lockyer. “Organizations need to carefully assess the return rate when evaluating whether to use commercial fundraisers to raise money for the valuable programs that serve our communities.”

According to the annual report, Summary of Results of Charitable Solicitation by Commercial Fundraisers, both the number of commercial fundraising campaigns and total revenue they produced increased in 2004, however the percentage actually reaching the charity declined. In 2004, 612 fundraising campaigns grossed $293.74 million, up $60.6 million from 605 campaigns in 2003. The total net proceeds to charities, however, declined as a percentage of gross revenue. In 2004, charities received $143.1 million of the gross revenue, or 36.5 percent. In 2003, by comparison, charities received $100.02 million of the $233.17 million, or 42.9 percent.

The return to charity from the average commercial fundraising campaign in 2004 dropped to 36.48 percent, from 41.02 percent in 2003, according to the summary.

In 2004, 46 percent of the charities received more than half of the total revenue raised from a campaign. This marks a notable rise of over 20 percent from 2001. However, the percentage of charities netting only 15 percent or less rose to 28 percent, up from 22 percent in 2001.

The Better Business Bureau's Wise Giving Alliance recommends that charities net 65 percent of the revenue raised from commercial fundraising campaigns. Of the 612 campaigns in California in 2004, only 116 met that standard.

Lockyer today also issued the 2004 Supplemental Report: Donations of Personal Property, which details how much charities received from thrift stores that sell donated goods, and from vehicle donation campaigns run by commercial fundraisers.

Vehicle donation campaigns produced $44.15 million in gross revenue in 2004, according to the supplemental report. The average vehicle donation campaign in 2004 netted the charity 48.17 percent,
almost 3 percent higher than in 2003. That continued a promising trend that saw the average net to charity from vehicle donation campaigns rise almost 12 percentage points from 2001 to 2004, from 36.76 percent to 48.17 percent.

For-profit thrift stores that resell goods they purchase from charities reported total revenue of $71.15 million in 2004, a slight decline from $74.26 million in 2003. However, the average amount paid to charities by these stores rose from 13.92 percent of the stores’ total revenue in 2003 to 16.41 in 2004.

Lockyer noted that these annual fundraising reports are compiled from unedited annual financial statements filed by commercial fundraisers. The financial statements contain more detailed information about the breakdown of costs and distribution, and can be viewed at the Attorney General’s web site, www.ag.ca.gov/charities.

Most of the 90,000 charities registered with the Attorney General’s office solicit donations directly, and do not use commercial fundraisers.

A comprehensive reform law sponsored by Lockyer, which took effect January 1, 2005, includes provisions to protect charities that deal with commercial fundraisers. The Nonprofit Integrity Act requires commercial fundraisers, within five days of receiving donations, to deposit the funds in a bank account controlled by the charity. The Act also requires written contracts between charities and commercial fundraisers for each solicitation campaign, and mandates that the contracts include specific protections and rights for nonprofits.

The Attorney General’s annual Summary of Results of Charitable Solicitation by Commercial Fundraisers, and the supplemental solicitation report on thrift store and vehicle donation programs, are available online at www.ag.ca.gov/charities . Also available at the web site are the Attorney General’s Guide to Charitable Giving for Donors, which includes tips to assist donors in making informed giving decisions, and Guide for Charities, which provides a summary of state and federal laws that govern nonprofits and commercial fundraisers, guidance regarding compliance and governance issues, and resources for both charities and donors.