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Do non-profits pay too much to outside fund-raisers?

The Los Angeles Times took a look at how much non-profits pay for-profit outside fund-raisers – and found that the non-profits take home on average less than half of what the fund-raisers collect.

The investigation looked only at non-profits in California that had hired outside firms and non-profits with national campaigns that raised money in the state. According to the report, some 300 for-profit fund-raisers have registered in California, and since 2000 the amount of money that they raise has increased by more than 60 percent.

But, reports the L.A. Times, more than half of those dollars never make it to the charities for which they were solicited.

“In more than 5,800 campaigns on behalf of charities that were registered with the state attorney general from 1997 to 2006, the fund raisers reported taking in $2.6 billion. They kept nearly $1.4 billion – about 54 cents of every dollar raised,” the L.A. Times reports.

Among the newspaper’s other findings:

  • More than 100 charities raised $1 million or more from commercial appeals but netted less than 25 cents per dollar. Fund-raisers got the rest.
  • In 430 campaigns, charities got nothing: All $44 million donated went to fund raisers. In 337 of those cases, charities actually lost money, paying fees to fund raisers that exceeded the amount raised.
  • In hundreds of other campaigns, charities apparently entered into contracts that limited their share of donations to 20 percent or less, no matter how successful the campaign.

The L.A. Times piece is accompanied by a searchable database of non-profits in California and those with national campaigns that raised money in California that used for-profit third-party fund-raisers over the last decade or so. The list includes a number of Jewish groups.

Jewish groups actually fared pretty well when compared to the rest. All told, for-profit fund-raisers brought in more than $15 million while raising money for the Jewish groups that I found in the database. The Jewish groups took home a little more than $10 million, while the fund-raisers pocketed about $5 million.

It sounds like a lot – and I would agree that in a perfect world a much larger percentage of the money would actually go to the causes for which they were raised. But, according to the L.A. Times story, the American Institute of Philanthropy believes it is reasonable for organizations to spend up to 35 cents to raise a dollar – even for in-house fund raising. By that standard, as a whole, the Jewish groups surveyed were right on par.

There were some that fared particularly well. Of the nearly $1.5 million that the United Jewish Communities raised through third parties, 97 percent actually went back to the UJC. The Union for Reform Judaism (listed by its old name, the Union of American Hebrew Congregations) took home 89.9 percent of $872,123 raised its name by outsiders, and the Hillel at Stanford University netted 88.3 percent of $381,986.

(Luckily the Fundermentalist’s utility belt comes equipped with a calculator.)

Notably, a Jewish group also lost more than any other group on the list by using outsiders. The Touro Synagogue Foundation actually paid an outside group $25,953 to raise $4,600, or a net loss of 564.2 percent. Yikes. And the Chabad of San Francisco Project Pride took home only $109,344 of the $990,767 that a third party raised for it.

In general, Hillel outposts took home 75 percent of the money that was raised by outsiders, synagogues took home 68.8 percent and national organizations took home 69 percent. All reasonable averages if you hold by the yardstick of 35-cent-on-the-dollar fee.

The 13 synagogues that appear on the list just made it, taking home 65 percent.

The eight Jewish federations on the list fell slightly below the mark, walking away with 62.9 percent of the money raised in their names. Jewish Family Services outposts took home 59.4 percent.

The Chronicle of Philanthropy offered its take here and included a link to a searchable database from a national survey it conducted in 2001 (but you’ll need a subscription to check it out). And eJewishphilanthropy.com also weigheds in, though I am going to take umbrage with the blog’s decision to single out the L.A. Jewish federation for paying 35 percent in overhead to its outside fund-raisers. It’s hard to single out an organization for hitting the league average, though, yes, it would be nice if the overhead in general was much, much lower.

For the complete LA Times database, check out this link.

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