Fund-Raising Firms Kept 56% of Money

For-profit fund-raising companies raised almost $200 million for charities in 1998, yet turned over less than half the money to the nonprofit organizations that hired them, according to a report released Monday by state Atty. Gen. Bill Lockyer.

Charities that use commercial firms for at least some of their fund-raising include the Sierra Club, the American Cancer Society and Amnesty International. Many others are less known but have names that suggest they do good deeds for such popular causes as law enforcement officers, military veterans and sick children.

“While not true for all commercial fund-raisers,” Lockyer said, “most of the money raised by these enterprises went to solicitation expenses and fund-raiser profits, rather than the charity that hired them.”

Altogether, charities that hired commercial fund-raising firms in 1998 received $85.8 million, or 43.8%, of the $196 million raised on their behalf. The firms received $110.2 million, or 56.2%. The percentage that went to charities is about the same as they received from such efforts in 1997.

Most of the companies raise money through phone solicitations. Some also send direct mail appeals for money.

At least 130 profit-making fund-raising companies reported turning over 15% or less of the money they raised to charities that hired them. And 157 commercial fund-raising campaigns gave 50% or more of the money they raised to the charities.

In releasing the annual report on commercial fund-raisers, Lockyer urged that when telephone solicitors call, potential donors should “ask the questions: ‘Is it a commercial fund-raiser? What percent goes to the charity?’ ”

The attorney general has about 10 open investigations into commercial fund-raisers, said Deputy Atty. Gen. Peter Shack, who investigates cases involving charities. He said that about five civil complaints are pending in courts across the state.

The $196 million represents a fraction of the billions donated by Californians to nonprofit organizations. Most of the 80,000 charities registered in California do not use commercial fund-raisers.

At least seven of 130 commercial fund-raising appeals that netted charities 15% or less of their proceeds raised upward of $1 million.

Some representatives of charities and commercial fund-raisers contacted Monday disputed the numbers in Lockyer’s report. Others explained them by citing the high cost of finding donors.

MDS Communications Corp., of Tempe, Ariz., for one, raised $1.62 million for the conservative Christian group, Concerned Women for America. Concerned Women received $92,823 of the money, less than 6%.

But Jay Mount, MDS’ president, said that while some telemarketing efforts are aimed at persuading past donors to give again, the 1998 drive he undertook was directed at finding new donors. Prospecting for new donors is far more costly than tapping past contributors, he said. He estimated that the drive brought in 75,000 new donors.

“CWA was thrilled with our results,” Mount said.

Some charities are less than pleased with their paid solicitors.

Jerry Lennon, attorney for the California Organization of Police and Sheriffs in Burbank, said he was surprised by the sums raised by the charity’s fund-raiser, Network Management Press Inc., of Encino--$1.73 million. The charity received $38,562.

Lennon said the organization sued earlier this year to try to get out of its contract with Network. “There have been a lot of complaints” about the firm’s techniques, he said.

In the past, telemarketers representing police and fire organizations have been criticized for implying that potential donors might lose emergency services if the charity drives fell short.

Network’s attorney, Daniel Ritkes of Santa Monica, disputed the numbers cited by Lockyer, but did not know the correct numbers. He also criticized the California Organization of Police and Sheriffs, pointing out that it drafted the terms of the contract.

“All they’re doing is making a public showing that they’re taking a stand against telemarketing by filing a lawsuit against my client,” Ritkes said. “In reality, they love the results.”

Another commercial fund-raiser, Reese Brothers, based in Pennsylvania, reporting raising $1.068 million on behalf of Children’s Wish Foundation International of Atlanta in 1998. The charity, which seeks to grant wishes to sick or dying children, received none of the money, Lockyer’s report says.

“That’s factually incorrect,” said Errol Copilevitz, general counsel for the charity. The attorney said the charity’s contract with Reese requires that Children’s Wish receive 25% of the gross proceeds.

Copilevitz cited high costs associated with raising money. “That’s a fact of life. . . . Every organization has to spend money to raise money,” the attorney said. Reese Brothers could not be reached.

Lockyer spokeswoman Sandra Michioku stood by the numbers, saying that the report is based on annual tax filings made by the commercial fund-raisers to the Charitable Trust Division of the state Department of Justice.

“The numbers are based on information reported by the commercial fund-raisers,” Michioku said. “That’s what we have to go on.”