We Need a Flat Fee Requirement for Nonprofit Fundraisers
The Service should issue a revenue ruling concluding that an organization that hires a fundraiser on a contingency or revenue sharing basis categorically engages in private benefit and thereby forfeits tax exemption. Seriously, its about time we shut this scam down. Its hurting the charitable sector. Even the cops are getting ripped off now.
Two weeks ago we posted about the FTC and ten states suing a women’s cancer fighting organization because all but about 1% of $18 million raised by its fundraiser went to the fundraiser. Well, out in Aurora Colorado, the local police association hired a fundraiser to solicit charitable donations with essentially the same result. We all know how hard it is to say “no” when the cops or firefighters come calling for donations every year. Hell, it takes everything I got just to look straight ahead when they are standing at the intersection with their buckets or firefighter boots asking for donations. But at least in that case its the actual cops or firefighters putting the guilt trip on you, not some paid fundraiser. Here is what the Aurora Sentinel reported about recent police charitable fundraising effort in that town:
For Aurorans who get a call asking them to support the charitable work of the city’s unionized cops, opening their hearts and checkbooks is often an easy decision to make. But donors are likely unaware that the vast majority of contributions solicited by phone for the Aurora Police Association Charitable Foundation don’t benefit the charity’s Shop-with-a-Cop events, scholarship fund or other community service programs.
Instead, the money is pocketed by an Arizona telemarketing firm — Outreach Marketing, LLC — which since 2016 has kept more than $2.08 million in donations with the foundation’s express permission out of about $2.86 million raised, according to state and federal financial filings reviewed by the Sentinel. The APACF’s current contract with Outreach Marketing lets the telemarketer keep as much as 72 cents of every dollar pledged over the phone by community members. In past years, Outreach Marketing was allowed to keep up to 75 cents of every dollar raised. Nonprofit finance experts described the contract as allowing the telemarketer to take advantage of the foundation’s donors.
And then after the news report, here is what the editors said:
It’s certain that few of those who gave to the win-win Shop With a Cop proposal knew, or even suspected, that if they agreed to tap their credit card for $100, the telemarketer donation collector company on the other end of the phone got to keep as much as $75 of the donation. It’s scandalous, but not newly scandalous. News reports about the outrageous “commissions” levied by telemarketing companies like Outreach Marketing LLC in collecting for Shop With a Cop and other similar programs across the nation aren’t new.
What’s discouraging is that the fleecing industry continues to prey on police departments and the public without resistance. There is virtually no limit of federal, state and local governments that should immediately work to rein in one of the nation’s most prolific and persistent scams in the country. Current and former members of Congress, current and former Colorado state lawmakers and a bevy of local elected officials have worked hard to limit the damage created by dangerous “payday loan” companies. They are commercial leeches that feed off the economic blood of the poor. They continue to persist by arguing they provide a needed service.
First off, the U.S. Department of Justice and Congress must work together to closely investigate the practices of Outreach and other charity telemarketing firms. Congress must then regulate them to create transparency, equity and reason.
I agree with the sentiment, but getting DOJ and the Congress involved is over thinking it. The Service can shut this thing down right now. Let the telemarketers sue.
darryll k. jones