by Putnam Barber, Idealist.org
The fact that millions of people donate billions of dollars every year has, not surprisingly, attracted attention from scam artists as well as from legitimate causes seeking to expand their work by increasing the amount of support they receive from the public.
Examples of abuses in fundraising
Controlling and preventing abuses in the United States
In the US, the governments of many states have registration and reporting rules that apply to many, if not all, charitable appeals directed toward their citizens. In general, these rules are designed to secure some information which donors may use to decide whether or not to respond to an appeal. They also provide a process by which dishonest commercial fundraisers can be barred from approaching donors in the state. There is a state-by-state list of the officials responsible for these programs available from the website of the National Association of State Charities Officials.
The BBB Wise Giving Alliance is a program of the Council of Better Business Bureaus that uses a published set of standards to review the policies and practices of organizations that appeal broadly for donations. The results of these reviews are available online and in print.
For evangelical churches and missions, the Evangelical Council for Financial Accountability offers certification to groups that apply and demonstrate that they meet the standards for financial policies and management contained in ECFA's standards.
Many individuals who work as development officers and fundraisers belong to the Association of Fundraising Professionals. AFP has adopted a Code of Ethical Practice for people who do this work and a Donor Bill of Rights that outlines what every donor should expect when asked to support an organization or cause.
One strongly contested issue about fundraising activities has to do with the way compensation is calculated for employees or consultants doing the work. The standards of both ECFA and AFP prohibit paying fundraisers a commission or a percentage of the amount raised. Those who condemn this practice say that donors would be offended if they knew that a portion of their gift was used in this way, and, further, that consequent efforts to conceal such arrangements break to bonds of trust that should connect donors with the causes they support. Supporters counter that it is an efficient and fair way to compensate workers for the often difficult tasks of fundraising.
Donors often ask about the proportion of their gifts that will go to "the cause" rather than to the expenses of fundraising and program administration. Many of the state programs mentioned above provide reports which summarize that information for prospective donors. Clearly, a fundraising campaign which does not deliver support to announced mission or goals is a cause for concern. But it is not clear that having the lowest administrative costs is some sort of guarantee of effectiveness. Ira Kaminow, the founder of Just Tzedakah, poses the thought experiment: "Would you feel comfortable about donating to an organization that honestly and completely reported that it had zero administrative expenses?"
There is no practical way to guarantee that every appeal will meet the highest standards. Donors will always need to be cautious about giving money or other support. The reports and standards described above can help sort through the appeals that arrive by mail, email and phone. But in the end, each donor will have to decide personally which appeals to honor with a gift. Fortunately, there are many hardworking and effective organizations to support and a reasonable amount of attention will lead to those, and reduce the chance of having one's charitable impulses exploited.
This page is specifically about abuses of fundraising. There is a more general discussion of how things can go wrong in nonprofit organizations, and what can be done when that seems to be happening, on this page.