When Charities Let Telemarketers Gouge Donors
Brian Mittendorf, 9 Jan 18
       

Some telemarketers retain nearly all of the charitable dollars they solicit. Gajus/Shutterstock.com

Ohio Attorney General Mike DeWine recently called Ohio Cops for Kids a “purported charity” when he sued the group for allegedly defrauding donors in his state.

The complaint claims that the group spent merely 2 percent of the money raised on its behalf on efforts related to its official mission of helping children whose families were victims of crime. Telcom Enterprises, a for-profit fundraiser the charity hired, kept 79 percent of those funds, and the nonprofit spent the rest on its salaries and overhead, according to DeWine’s lawsuit.

This alleged racket may sound like an isolated case of extreme malfeasance. But the Ohio Cops for Kids case is only the latest example of for-profit telemarketing companies accused of turning donations intended to support good causes into private gold mines.

Cleveland’s News 5 reported on an Ohio-based charity claiming to work ‘hand in hand’ with law enforcement agencies across that state but is being accused of bilking over $4.2 million from thousands of donors.

Telemarketing trouble

While researching the finances of charities and the for-profit fundraisers they hire, I have noticed two related problems with the practice of farming out fundraising.

One is legal: State and federal authorities have a limited ability to regulate charities and their fundraisers.

The other is cultural: Charities fight new regulations, arguing that they can police themselves. Yet, they are reluctant to call out their peers who abuse the public trust.

Paying for-profit companies to fundraise for charities isn’t inherently problematic. Because outsourcing gives nonprofits room to focus on work donors really care about, it can be more efficient than hiring in-house staff. This is especially true when there are high upfront costs for fundraising campaigns.

But more often than not, charities that rely on contractors for telemarketing campaigns wind up raising less money for the charity’s operations than they do for the telemarketers, especially when they pay fundraisers on a commission basis.

New York State Attorney General Eric Schneiderman’s office examines regional and national professional fundraising campaigns. In 2017, it found that telemarketing companies pocketed more funds than they passed along to the charities they worked for more than two-thirds of the time.

More shockingly, 18 percent of the time, telemarketers charged charities more in fees than they ended up collecting in donations, leaving the nonprofits worse off than had they not sought donations in the first place.

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