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Abuses in fundraising

The fact that millions of people are willing to give billions of dollars a year to worthy causes does, unfortunately, attract the attention of people who are willing to prey on the generosity of donors for ill-gotten gains. Governments and nonprofit organizations have created a variety of efforts to prevent (and punish) such cynical abuse of people's generosity. The best defense, though, is still "caveat donor" — be careful with your giving. Here are some links that might be helpful:

  • Many states require registration and reporting for some or all active fundraising addressed to residents. Typically, there is a way for individuals to find out whether a particular appeal is properly registered and get some limited information about past performance. A list of state charities officials, with links to descriptions of their services, is on the website
  • The Council of Better Business Bureaus offers information about larger organizations that conduct national fundraising campaigns (and some others as well) through the BBB Wise Giving Alliance. On the website, visitors can look at reports based on a set of BBB standards for governance and operations of nonprofits and find out why some organizations have failed this review.
  • For evangelical organizations, the Evangelical Council for Financial Accountability (ECFA) offers a similar service. ECFA will not allow an organization that cannot meet its standards to identify itself by using the ECFA seal or in any other way that might suggest a connection.
  • Many people who work in fundraising belong to the Association of Fundraising Professionals (AFP). Local chapters across the country (and in other nations as well) provide professional connections for members and support public education about philanthropy. To be a member, one must be actively engaged in fundraising, observe the AFP Code of Ethical Principles and Standards and affirm the Donor Bill of Rights. AFP has a process for investigating possible violations of these standards and for denying membership status to anyone who is found to be in violation.

One of the most controversial questions about ethical fundraising has to do with compensation — specifically compensation calculated as a percentage of any amounts raised. Both ECFA and AFP forbid any such contingent compensation for their members. There are many points to be made on every side of this question. Those who dislike the idea point to the likelihood that donors would be upset if they learned that a portion of their contributions was being used to reward a fundraiser. That expectation creates a strong incentive to conceal such arrangements. Concealment, in turn, inevitably places a cloud over the relationships among the fundraisers, the donors, and the recipient organization. Some observers also add that continent compensation might motivate fundraising personnel in ways that run contrary to the interests of the donors and even, in extreme cases, to the interests of the organization receiving the balance of the contribution.

Donors often ask whether there is a bright line that separates "responsible" fundraising expenses from "excessive" fundraising costs. It is simply impossible to give a general answer even though everyone recognizes that "it depends" is hardly good enough. One pole of the discussion is provided by a series of U.S. Supreme Court decisions that have barred setting statutory limits on fundraising expenses (though allowing penalties for misleading potential donors about the level of expense actually incurred). Another pole is the observation that spending a great deal of money to raise the sum needed to accomplish some great goal should be applauded, not condemned.

The best conclusion that can be reached from attending to these discussions is that it is definitely up to donors to decide what goals they want to support, what approach they believe will best serve those goals, and which organizations show the greatest promise of using available resources well to pursue them. No one should ever make a donation under pressure or to an organization that offers inadequate or confusing explanations of its work. There are thousands of opportunities to support responsible, hardworking and honest groups; they are proud of their work and the way they do it. Donors need only ask, more frequently and more carefully, for evidence that the work is being done well. Responsible nonprofits will be able to provide it.

There's a discussion of what can be done when there's a suspicion of fraud or abuse within a nonprofit organization on the page called Dealing with fraud and abuse.