Are charities spending too much on fundraising

Hundreds of millions of dollars donated to New York charities last year were hoovered up by outside fundraising firms rather than going toward their intended cause, according to the New York state attorney general.

Of the more than $1.3 billion raised by charities in the state in 2018, about $369 million — or 27% — went to pay professional fundraisers' fees, Attorney General Letitia James said in a report. Although that is down slightly from 31% the previous year, it serves as a stark reminder for donors to look carefully at how how their money will be used, James said.

"New Yorkers are generous in their charitable giving, but unfortunately not all the money they donate reaches the charities that they intend to help," James said. "Too often, charitable dollars are pocketed by outside fundraisers rather than reaching the charity and furthering its mission."

The report looked at 891 individual campaigns launched last year and found that fundraisers pocketed half of the money raised during 273 of those campaigns. Of those 891, 59% of those campaigns saw the cost of hiring outside fundraisers exceed the level of donations. 

The figures come from fundraising efforts reported to the attorney general from more than 85,000 charities registered in New York. Donations included money sent to charitable nonprofits, charitable foundations or charitable trusts that focus on education, human services, the arts, housing, the environment and other issues. 

Using fundraising firms isn't unique to New York. Thousands of charities nationwide hire such entities to help process gifts and fulfill other donor requests. But philanthropy experts say that most well-managed charities don't overpay for the services.

"We think charities definitely shouldn't be overusing professional fundraising, but in our research that's a pretty small percentage," said Ashley Post, a spokeswoman for Charity Navigator spokesperson Ashley Post, which analyzes thousands of regulatory filings from charitable organizations.

Charity Navigator ranks the top 10 charities that it says overspend for professional fundraising. The organizations that make the list spent half or more of their yearly revenue on fundraising efforts, and includes charities in Connecticut, Florida, Indiana, Michigan and Texas.

Dialing for dollars

Missouri-based Disabled Police and Sheriffs Foundation, which spent 90% of its income on fundraising efforts and was shuttered earlier this year, topped Charity Navigator's list. Another organization, the Children's Leukemia Research Association of Long Island, New York, generated about $969,000 in revenue in 2017 (the most recent Charity Navigator data available), but roughly $671,000 went to fundraising expenses. 

The leukemia group has used telemarketers for at least two years to help generate donations, a move that took place soon after the group's founder died, said Angelo Russo, the association's executive director. Russo said her organization is on the list because of activity that took place in 2017.

So-called Form 990 filings from 2016 and 2017 show that most of the revenue went toward paying the telemarketing service, which threw off the association's programs-to-personnel cost ratio, said Russo, who took over as head of the organization in mid-2018. The group has since stopped using telemarketers.

"Hopefully after December 20 and they [Charity Navigator] post our 2018 financials, they'll see that our ratio has significantly improved," Russo said. 

A benchmark for evaluating charities

Officials in James's office said the percentage of donations going to professional fundraisers is declining, in part because the office has stepped up enforcement of what it calls fraudulent campaigns. They cited "Operation Bottomfeeder," which among other things shut down a telemarketing firm that presented itself as raising money for Vietnam veterans but sent little to former military personnel. 

December – the month of Giving Tuesday – may nudge some Americans to open their wallets, especially if the sums are big enough to qualify for tax deductions.  But because charities often don't specify how donations will be used, individuals should research how groups spend the money. 

"A charity that's spending 70% or more on their programs is one that we would feel comfortable with," Post said.