Charities and other nonprofits face an ongoing job of raising funds to finance their mission and operations. The more potential donors an organization reaches, the more potential there is for meeting the budget and raising money for special projects.
Fundraising is hard work, sending solicitation letters, planning and staging fundraising events, keeping in touch with donors and making sure they know they are appreciated is a full time job, often taken on by the executive director and volunteers. Some organizations have the capacity to create a separate board of directors dedicated only to fundraising. While this approach allows the executive director and other employees to focus on their daily jobs, there are still times when the economy is tough and the organizations needs to raise more money.
The subject of contracting the services of a professional fundraiser is not an uncommon agenda item for board meetings. The San Luis Obispo attorneys for nonprofits at Toews Law Group, Inc. say that there are good reasons to examine the possibility, just as there are good reasons to proceed with caution if the decision is to use the services of a professional fundraiser.
Pros for working with professional fundraisers
The keyword is “professional.” Professional fundraisers make their living by raising funds for charitable organizations and because of this they have:
- An extensive database of donors who would be interested in supporting your organization
- Access to market reports and analytics that keep them informed about donor demographics and donation tendencies
- Their own analytics indicating which donors in which demographic groups are more likely to support your cause and can tailor fundraising appeals directly to that demographic
- Years of experience developing and tailoring effective fundraising campaigns and marketing collateral
These are all important factors for successful fundraising, and many charities that rely on professional fundraisers report very successful results. But there are some drawbacks as well.
Cons for working with professional fundraisers
Back to that keyword “professional.” Raising funds for charities is what a professional fundraising company does for a living. Their services are not cheap and often come with a number of restrictions.
- Your organization does not have access to their donor database
- The contract often contains non-competition clauses which prohibit your from reaching out to the donors acquired by the fundraising service, including reserving the right to send “thank you” notes, over your board president’s signature from the fundraising company’s business address
- They can be expensive. While most professional fundraisers operate for a percentage (a high percentage) of the donations they bring in, some want to be paid up front with no guarantee of results
- If you contract with a fundraising company for a flat rate, you may be responsible to pay them regardless of whether they deliver donations
California provides some protections against fraud by professional fundraisers by requiring commercial fundraisers to register with the California Attorney General’s Registry of Charitable Trusts before soliciting in California. However, since professional fundraisers often reach across state borders, there is also a requirement for the charity to register with the state in which fundraising is to take place. Fines and other penalties are attached to failure to comply with a state’s requirements.
What about professional grant writers?
Grants are another way for charities to raise funds. Professional grant writers may be a consideration, but most are going to require an up-front payment and there is no guarantee they will be successful regardless of the extent of their contacts.
Some granting organizations frown on charities using professional grant writing services and when grants are awarded, its not unusual for the award to come with restrictions on how the funds are used, including to compensate a grant writer.
Grand writing is certainly a skill that can be fruitful. The best results usually come from:
- The charity via the Board of Directors or Executive Director developing a relationship with grant funding organizations, especially those organizations in the same community as the charity
- Designating board members, employees or volunteers to write the grants and pay for them to take a grant writing course. Most funding organizations are very specific about the information that is to be included in the proposal and the format of the proposal
- Subscribe to a funding resource, such as the nonprofit Philanthropy News Digest that publicizes available grants
Get the best legal advice
When you have weighed all the pros and cons and decide to work with a professional fundraising service, consult with the San Luis Obispo attorneys for nonprofits at Toews Law Group, Inc. to review the contract and to make sure all laws are being followed.
Toews Law Group, Inc. services for nonprofits include advice and counsel on many legal, tax and management issues. The attorneys can advise the best way to structure a Board of Directors between fundraising and program-oriented directors, setting up an executive committee, and more.
Call today for a consultation.
This information has been prepared by Toews Law Group, Inc for informational purposes only and is not legal advice. The transmission of this information is not intended to create an attorney-client relationship. Contacting us does not create an attorney-client relationship. Consult an attorney for advice regarding your individual situation. Contact information: Toews Law Group, Inc.,1212 Marsh Street, Suite 3, San Luis Obispo, CA 93401, (805) 781-3645