Professional Fundraisers for Charitable Purposes
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Charities use various professional fundraisers to solicit donations. Professional fundraisers may include commercial fundraisers, fundraising counsels, and commercial coventurers. There are mandatory registration requirements and contract requirements for commercial fundraisers and fundraising counsels that must be adhered to both by the charities and their respective fundraising professionals. Please note that certain terms must be included in the contract. A model contract is available.
Historically, use of professional fundraisers has meant higher costs for charities. Most of the charities that are registered with the Registry of Charitable Trusts do not employ professional fundraisers. Historical figures show that solicitation campaigns conducted by commercial fundraisers deliver to charities, on average, less than 50 percent of the contributions raised. The remainder is retained by the commercial fundraiser for reimbursement of expenses and payment of fundraising fees. Likewise, a charity may spend significant resources retaining fundraising counsel.
A commercial fundraiser is a type of professional fundraiser. It is a person, corporation, or unincorporated association retained by a charity to solicit money or property on the charity's behalf. The commercial fundraiser may solicit donations via direct mail, telemarketing, auctions, entertainment events, and through sale of used personal property (such as clothing and vehicles). The commercial fundraiser typically gets paid first. Donations get directed to the commercial fundraiser, and after all expenses are paid, the funds are then paid to the charity. Commercial fundraisers may be paid either a flat fee or a percentage of the donations collected in the charity's name. By law, the California Attorney General oversees the activities of commercial fundraisers, which must register with the Attorney General's Registry of Charitable Trusts before soliciting in California. A registration fee of $350 must be paid and the registration application must be accompanied with a bond, or cash deposit, in the amount of $25,000. Registration must be renewed each year. Commercial fundraisers also must file a Notice of Intent to Solicit 10 days before the solicitation campaign commences. Annual financial reports are also required to be filed. They must be filed by January 30th of each year. Commercial Fundraisers can only solicit for charitable organizations that are registered or exempt with registration with the Attorney General’s Registry of Charitable Trusts, per Government Code section 12599, subdivision (m). To verify if a charitable organization is registered or exempt use the Registry’s Verification Search tool. Commercial fundraisers must comply with contract requirements set by California law.
Charitable organizations and commercial fundraisers for charitable purposes have specific obligations when fundraising, per Government Code sections 12599.6(a)(b)(c)(d)(e). They cannot misrepresent the purpose of a charitable organization or the nature or purpose of the beneficiary of a solicitation. Charitable organizations must establish and exercise control over fundraising activities conducted for their benefit. This obligation includes approving all written contracts and agreements, and assuring fundraising activities are conducted without coercion. Charitable organizations also cannot enter into any contract or agreement with a commercial fundraiser that is not registered with the Attorney General’s Registry of Charitable Trusts. Commercial fundraisers cannot raise funds for any charitable organization required to be registered with the Attorney General’s Registry of Charitable Trusts unless the charitable organization is so registered or, if not, agrees to register prior to the start of a solicitation. Commercial fundraisers also must, within five working days, either deposit in a bank account controlled by the charitable organization or deliver personally to the charitable organization all contributions received on behalf of the charitable organization.
The failure to comply with registration and filing requirements may lead to the filing of civil litigation or administrative enforcement action and subject the commercial fundraiser to civil penalties and other remedies as provided in Government Code sections 12591.1, 12598, subdivision (e)(1), and 12599, subdivision (f). Please refer to California Law on Supervision of Trustees and Fundraisers for Charitable Purposes.
A fundraising counsel is an individual, corporation, or unincorporated association retained by a charity to plan, manage, consult or prepare solicitation materials for charitable purposes. Unlike the commercial fundraiser, the fundraising counsel does not solicit donations from the public, and does not exercise any control over solicited donations/funds. Instead, the donations go directly to the charity. The Attorney General oversees the activities of fundraising counsel, who must register with the Registry of Charitable Trusts before working with charities unless exempt. A registration fee of $350 must be paid and registration must be renewed each year. Fundraising counsels must also file a Notice of Intent to Solicit (CT-11CF, pdf) with the Attorney General and comply with contract requirements set by law. The failure to comply with registration and filing requirements may lead to the filing of civil litigation or administrative enforcement actions and subject the fundraising counsel to civil penalties and other remedies as provided in Government Code sections 12591.1, 12598, subdivision (e)(1), and 12599.1, subdivision (g).
A commercial coventurer is a person or organization who, for profit, is primarily engaged in a business other than in connection with raising funds for charitable purposes. A commercial coventurer raises money for charities by giving the charity a certain percentage from the sale of goods or services. A commercial coventurer represents to the public that the purchase or use of its goods or services will benefit a charitable organization. Unless exempt under Government Code section 12599.2, subdivision (b), a commercial coventurer is required to register and report to the Attorney General.
Crowdfunding sites provide an online place for individuals, businesses, and/or nonprofits to solicit funds. These sites provide easy-to-use interfaces to those who may not have the ability to build their own site. The individual business models vary, but many employ “gamification” techniques (e.g., trackable fundraising goals) and social media to encourage donations. Donations are made through the site and disbursed to the solicitor. In exchange, the sites may take a portion of each donation. If a crowdfunding site meets the legal definition of a commercial fundraiser or fundraising counsel, they are required to register and comply with all reporting requirements. Further information regarding crowdfunding can be found in the Attorney General’s Guide for Crowdfunding Sites, Charities, and Donors, pdf. Note that donations to crowdfunding sites may not be tax exempt.
Professional Fundraiser Report
Every year, the Attorney General’s office prepares a summary report based on the annual financial disclosure documents filed by commercial fundraisers and commercial coventurers. These reports include statistics for donations of both cash and used personal goods. The information in the reports is derived from unedited reports filed by the commercial fundraisers and commercial coventurers. The reports are provided below.