Charitable cash cow - Page 2

Private companies make big profits raising money for nonprofits

"So there's a lot of churning that goes on, because a lot of the same people don't give to the same organization year after year. It is an expensive process of getting the names and contacting people."

Because California is behind in processing the required disclosure forms, the Times had to specially request records from 2006, meaning more recent figures aren't available. The Guardian took a far less extensive look at the records, but we still found plenty of examples of charities earning astonishingly low rates of return.

In 2004, Campbell-based TBS Productions raised $418,377 for the San Francisco Police Officers Association and its annual "Parade of Stars" event held at the Palace of Fine Arts. But just $87,094 made it into the union's nonprofit Community Services Fund, which redistributes it in small increments to a variety of causes.

"I've wrestled with this since I've come on," said POA President Gary Delagnes. "There are two ways of looking at it. Do we really want to lend our name to an outfit that's taking 80 percent off the top? ... The decision we made was: you know what, we're to do so much good with the charitable money that it's worth it to us."

That same year the Oakland Police Officers Association also hired TBS for its "Cavalcade of Stars" event. The company raised $402,515 on behalf of the East Bay union for charitable purposes, but only $88,603 remained after covering the event's costs, a return to the union of 22 cents on the dollar.

That year, TBS coordinated events for at least 16 groups across the state representing law enforcement and emergency personnel, from the San Jose Firefighters Burn Foundation to the Fresno Deputy Sheriffs Association. But almost no one received a better return rate than 20 percent, and two raised just 15 cents on the dollar after accounting for the for-profit company's take. No one at TBS was available for comment when we called.

More than 250 fundraising campaigns in California netted 20 cents or less from each dollar raised for charities in 2004, according to figures maintained by the state.

Rich Steinberg, a longtime scholar of nonprofits at Indiana University, said several factors mitigate all this. He explained that the United States Supreme Court has been reluctant to permit heavy regulations on charity fundraising because a seemingly poor cost ratio isn't necessarily bad for a nonprofit.

"Big charities could do everything wrong but still have a good cost ratio" because their support is widespread, Steinberg said. The San Francisco Ballet and SFMOMA, for example, have done much better in some telemarketing campaigns, earning from 54 percent to 81 percent in return rates despite other times losing money.

Could it be that there are too many small, inefficient nonprofits with similar missions, each created in the belief that government wasn't filling some need? Perhaps. But attempting to curtail them could undermine the democratic spirit that leads to their creation.

"We should make it legitimate for any group of idiots to get together and try to do something good," Steinberg said.

If they want to succeed, he said, charities should not accept terms that give fundraisers a percentage of the donations. Instead they should establish fixed fees so that every dollar beyond that amount goes toward services. Second, to ensure more favorable rates, they can require competitive bidding among fundraisers.

Ken Larson, director of public policy for the California Association of Nonprofits, said that few of the tens of thousands of charitable organizations registered in California use commercial fundraisers to attract donors, a fact confirmed in reports compiled by the attorney general.

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