California AG: Fundraisers Yield 'Poor' Returns

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The California Attorney General's office issued a report yesterday showing that commercial fundraisers returned less than 40 percent of donations collected to charities on average in 2001.


Issuance of the report follows a landmark U.S. Supreme Court decision in Madigan v. Telemarketing Associates declaring that states can prosecute fundraisers for fraud charges related to specific claims they make but cannot set limits on the percentage of money they yield to charities or force them to disclose this rate. Nevertheless, California attorney general Bill Lockyer was critical in his assessment of commercial fundraising operations.


"These reports indicate many California charities earn a poor return on their investment in commercial fundraising operations," Lockyer said in a statement.


Historically, commercial fundraisers return less than half of the charitable donations they collect to the charities for which they work, Lockyer said. However, most of the 85,000 charities registered with the state do their own fundraising, he added.


According to the report, 420 commercial fundraising campaigns raised $281.9 million in 2001 in California. Of that, about $141 million went to charity.


However, the report calculates the average rate of return by adding up the percentages for each campaign and dividing by the number of campaigns, a method used "to avoid skewing by a few campaigns," the attorney general's office said.


Using that formula, the average rate of return in 2001 was 38.03 percent. That rate is up from 34 percent in 2000 but down from 1997 to 1999, when the rates topped 40 percent, according to the report.


Of the 420 campaigns recorded in California in 2001, 110 yielded less than 15 percent to the charity, while 123 yielded more than 50 percent.


The report also showed that charities are using commercial fundraisers to solicit vehicle donations more frequently. Vehicle donations solicited by commercial fundraisers produced $43.5 million in 2001, an increase of $12.8 million from 2000.


The report also took aim at for-profit thrift stores that sell donated goods for charities. The stores returned less than 21 percent of their total revenue in 2001, the report said.


Access to the full report is available at ag.ca.gov/charities/publications.


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