Schuette: Modest Improvement But Fundraisers Still Take Too Much From Charities

Contact: Joy Yearout 517-373-8060

March 12, 2014

           
LANSING - Attorney General Bill Schuette today announced the publication of Michigan's second annual Professional Fundraising Charitable Solicitation Report, which helps consumers know how to be smart donors.  This year's report found that charities received only thirty-eight cents for every dollar raised by professional fundraisers licensed in Michigan, up three percent from last year.

"Michigan citizens who give to their favorite causes deserve to know how much of their donation actually makes it to their intended charity and with our new report they can give wisely," said Schuette.  "While I'm pleased we've seen a three percent improvement since last year, it's not enough.  I will continue promoting this transparency in hopes consumers and charities will be able to do more to help their intended causes." 

Consumers may access the report directly here, or by visiting the "Charities" section of the Attorney General's website at http://www.michigan.gov/AGCharities and clicking on "Professional Fundraiser Reports."    
 

Professional Fundraisers vs. Charities

Under Michigan law, a professional fundraiser is defined as a person or organization that solicits contributions on behalf of a charity in exchange for compensation.  This is different from a charity that hires its own staff member for development and other fundraising activities.

Michigan law requires professional fundraisers to submit the results of their campaigns to the Attorney General.  The data includes the type of appeal conducted (mail, telephone, etc.), gross receipts raised, the amount paid to the fundraiser, and the final amount and percentage that went to the charity.  Any professional fundraiser licensed in Michigan is required to report these results, so the report includes data from charities across the country.  The report includes the results of fundraising campaigns reported to the Attorney General during the 2013 calendar year. 

Although hiring professional fundraisers and fundraising counsel may benefit certain charities, some professional fundraisers leave little of the donations for the intended charity.  According to data aggregated in the Attorney General's Report, on average, professional fundraisers pocket 62% of funds raised.
 

Fundraising Best Practices

According to the Better Business Bureau's Standards for Charity Accountability, charities should "spend no more than 35% of related contributions on fund raising. Related contributions include donations, legacies, and other gifts received as a result of fund raising efforts."

Schuette noted that states are limited in their ability to pass laws to regulate professional fundraisers' solicited contributions.  In several cases in the 1980's, the U.S. Supreme Court ruled unconstitutional state laws requiring that a minimum percentage of each donation go to charity (see Riley v. National Fed'n of Blind, Inc.,487 U.S. 781 (1988)).  As a result, states are limited to passing laws that prohibit fraudulent fundraising practices and require reporting from charities and their professional fundraisers.  (See Illinois ex rel. Madigan v. Telemarketing Assocs., 538 U.S. 600 (2003)). Michigan law addresses both aspects. 

Schuette added that examples of fraudulent fundraising practices prohibited by Michigan law include: (1) falsely telling a donor that he or she gave six months ago and it's time to give again, or (2) falsely telling a donors that 90% of their donations go to the charity, when that is in fact not true.
 

 Schuette Takes Action Against Fundraising Fraud

In May 2013, Schuette ordered Associated Community Services ("ACS"), a professional fundraiser in Southfield, to cease and desist its use of a deceptive telemarketing rebuttal. In the rebuttal, ACS telemarketers referenced the company's license with the Attorney General's Office as a way of convincing donors that their credit card data safe with ACS.  This was misleading because a professional fundraising license with the Attorney General's Office is not an endorsement of that fundraiser's credit card security practices. 

In February 2014, ACS settled with the Department of Attorney General, agreeing to pay $45,000 and modify its credit card rebuttal statement given by telemarketers.  For more information on Attorney General Schuette's investigation and this settlement visit the Department's website.
 

Empowering Consumers

There are important measures consumers can take to protect themselves against bogus charities.  Look for these warning signs when answering a charity solicitation call:

  • Vague or unresponsive answers to specific questions about the charity and how money is used.

  • Words making up a charity's name that closely resemble a better-known charity.

  • Allowing no time to reconsider your pledge; they insist on collecting your donation immediately.

  • Refusing to answer questions about where your money will go or to send information about the charity.

  • Emotional appeals and high-pressure tactics to get you to make a quick decision or feel guilty about not contributing.

To improve transparency and provide donors greater access to this important information, Schuette enhanced the Attorney General's online charity search feature to include professional fundraiser data.  The Attorney General's annual Professional Fundraising Charitable Solicitation Report provides a year-end compilation of data, while the online charity search feature provides campaign information as it is filed throughout the year. 

The online charity search is designed as a central resource for prospective donors to perform general searches for various types of registered charities.  For instance, donors may search by key words within the organization's purpose, as well as by city, county, state, name, or any combination of these. Inquiring prospective donors can visit www.michigan.gov/AGCharitySearch.
 

Attorney General's Responsibility to Protect and Preserve Charities.

The Attorney General's office has the primary responsibility for ensuring charitable assets are being used for the purpose for which they were donated and that organizations are acting as responsible stewards of these assets.  To fulfill this mandate, the Attorney General's Charitable Trust Section registers charitable trusts, registers charities to solicit funds, monitors charitable assets, and oversees any changes that may occur in a charitable entity's form or existence.  The Charitable Trust Section also serves as an important repository of publicly available information about charities, and protects citizens from illegal scams posing as legitimate charities.  For more information on the Attorney General's oversight of charitable solicitation in Michigan, visit www.michigan.gov/AGCharities.

 

-30-