Gurney's Inn
January 03, 2007

Telemarkers Prey On The Generous

You know the ones — the endless phone calls pleading for your help.

The organizations are real, and they do good work indeed: the American Diabetes Foundation, the Coalition Against Breast Cancer, the Multiple Sclerosis Foundation, just to name a few.

After the caller tugs at your heart strings, you open up your checkbook for what by all accounts is a reputable cause. And you are right. But in many cases most of the money never gets to the charity you contributed to.

And it's all perfectly legal.

So says New York State Attorney General Eliot Spitzer in a scathing report "Pennies for Charity: Where Your Money Goes." In most cases, the telemarketers keep most of the money they collect for charities.

Over $170 million was raised from telemarketing campaigns in the state during fiscal year 2004, yet only $63.5 million, or a little more than 37 percent of the money found its way to the charities.

According to Charity Navigator, police, firefighters and veteran groups, unfortunately, are the worst violators, sometimes employing telemarketers that keep as much as 90 percent of the take.

According to CN, many of the organizations affiliated with these groups take what money people do contribute and simply funnel it back to telemarketers instead of using it to benefit their members. "Of the 18 police and firefighter charities evaluated by Charity Navigator 12 attribute more than 20% of their expenses to fundraising costs. Of these, 7 are spending more than 75% on fundraising, with one police charity spending more than 90% on fundraising."

The list of charities that employ telemarketers is diverse, and some telemarketing companies turn over a significant share of the funds they collect to the charity they represent. Yet only 137 telemarketing firms licensed by the state turned over at least 50 percent of the money collected, while 490 turned in less than 50 percent. Only one firm turned in as much as 90 percent. More than 100 firms (155) turned in 19 percent or less of the money, and 45 turned in less than 10 percent. In some cases, charities actually lost money by employing telemarketers.

The American Civil Liberties Union was one. The organization employed a firm called Telefund Inc. to raise money in 2004 and ended up losing $84,833, although Telefund collected over $100,000. The company failed to collect an additional $1.1 million in pledges.

The Coalition Against Breast Cancer employed The Campaign Center to raise funds, and the company succeeded in collecting $728,866 — but only 20 percent, or $145,000, went to the organization.

The Campaign Center is employed by a number of police and veteran groups on Long Island. In 21 fundraising efforts in 2004, the company turned over between 13 and 37 percent of funds collected to the respective charities.

The Share Group launched an ambitious telemarketing campaign on behalf of its client, The Humane Society, and succeeded in raising almost $1.5 million in cash — and kept all of it. To add insult to injury, the Humane Society had to fork over an additional $175,000 in expenses, according to the report.

PETA (The People for the Ethical Treatment of Animals) also hired Share group with the same result: the effort grossed $166,472 but lost a net of $30,454.

According to Spitzer, a net loss can occur "when the fundraising contract does not guarantee a charity a specific dollar amount" or the charity is charged fees and other expenses. It happened 23 times in 2004.

Once a charity gets your donation, even if it's just a small portion, many spend it internally on salaries, office supplies and other expenses. In other words, hardly any of the money donated is used to actually help those it was intended for.

The American Institute of Philanthropy recommends checking its Charity Ratings Guide before making a donation. Each organization is listed by category with its phone number, financial performance measurements and an overall grade (where enough information is available).

According to Forbes magazine, some of the most efficient charities include Big Brothers, the Juvenile Diabetes Research Foundation, Toys For Tots, and the Salvation Army.

Officials warn would-be givers to check with the Better Business Bureau or consult before making a donation.

The Federal Trade Commission advises those who wish to contribute to ask for written information about the charity, to watch out for similar sounding names that may not be the legitimate charity and to be wary of guaranteed sweepstakes winnings in exchange for your contribution. The FTC warns never to send cash or give financial information over the phone.

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