September 9, 1999 | Read Time: 6 minutes
State officials are divided about how best to protect donors from fraud as on-line solicitations grow more popular, according to preliminary findings from a new study of charity regulators in the 50 states.
In a presentation at a conference here on fund raising and technology, Michael Johnston, a Toronto fund-raising consultant, said that state officials are not sure if new regulations should be passed — nor do they know what types of restrictions would do the most to reduce fraud. The conference was sponsored by Indiana University’s Center on Philanthropy.
Thirteen of 23 regulators interviewed for the study believe that if a charity seeks on-line donations from residents of its state, the charity should meet the same registration requirements that apply to charities that send direct-mail appeals or make telephone solicitations. But the rest of the regulators said they would not subject on-line solicitors to those requirements.
“The split is telling,” said Mr. Johnston. He attributed it to confusion over the best way to make sure that Internet solicitations by charities are legitimate.
Another split was apparent when the regulators were asked if laws now on their books provided adequate controls for regulating Internet fund raising. A third said Yes, and another third said No, while the remaining third said they could not answer.
Mr. Johnston said states should not rush to adopt new laws for Internet fund raising, in part because he said many charities have trouble complying with state rules already in place. Instead, he urged state regulators to monitor Internet fund raising for a while to see what problems develop and then suggest new laws and regulations that would help wipe out the potential for fraudulent activities.
Mr. Johnston said he feared that if the states acted now, they might introduce rules that would hamper the evolution of a productive and cost-effective tool for charity fund raising.
Mr. Johnston said the survey of state regulators, which is being conducted by his company, Hewitt and Johnston Consultants, will be completed in August 2000. In addition to the survey, he said, the final study will include a comparison of the views of Canadian and U.S. charity officials on the effects of Internet fund raising and how it should be regulated.
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While charities worry about the technological difficulties involved in raising money on line, the real challenge is to win the attention of potential donors amid the growing amount of information available via the Internet, said Anthony Wilhelm, director of communications policy at the Benton Foundation, in Washington.
Non-profit groups now possess the capability to send hundreds or thousands of solicitations via e-mail much more cheaply than is possible with direct mail or telemarketing. But their electronic solicitations may not be enough to capture donors’ attention as more and more organizations get savvier in using the Internet, he added.
A growing number of commercial shopping sites, for example, offer different information to buyers every time they visit, changing what the user sees on the screen based on their previous inquiries, purchases, or other information the company gleans, Mr. Wilhelm noted.
Charities, especially small groups, he added, may have a tough time competing for donors’ attention with such sophisticated sites.
“It’s not enough to just be using the technology,” he said. “Will people actually look at your stuff?”
Increasingly, said Mr. Wilhelm, “the hard currency of cyberspace is attention. We have in important respects entered not so much the information society but the attention society.” Organizations that can hold the attention of would-be consumers and donors will be the ones to profit from the new technologies, he said.
As they keep trying to find ways to improve on-line appeals, charities should not abandon tried-and-true approaches, Mr. Wilhelm said. For example, handwritten letters are still much more likely to get opened by potential donors than are many charity Web sites. “Handwriting works,” he said. “It still has a lot of currency.”
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The growing divide between those who have access to the Internet, e-mail, and other new technologies affects not only individuals, but charities, too, said Mr. Wilhelm. As with individuals, the wealthier, more sophisticated non-profit organizations are using such technologies, while smaller groups fall further and further behind.
Small charities, he noted, frequently underestimate the expenses of implementing telecommunications technology. Even though the cost of computer equipment has dropped in recent years, he said, small groups can still be strained to the breaking point by costly mistakes in their efforts to obtain hardware, software, and the training they need to be effective in using the Internet, e-mail, software to maintain donor records, and other such tools.
Another problem, he said, is that charities, like companies, often suffer from a “productivity paradox” as new technologies designed to increase their effectiveness are introduced.
Instead of enhanced productivity, charities often see a decline in the quality and effectiveness of their operations. Demands for information or new services increase because of the new technology, staff members struggle to get up to speed in using the new tools, and tension and frustration build.
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Charities have not done enough to make their Web sites enticing to elderly donors, said Natasha van Bentum, director of planned giving at Greenpeace Canada, in Vancouver. As a result, they are missing out on a new way to communicate with the growing number of elderly people who use the Internet — many of whom have the potential to make big gifts.
Ms. van Bentum unveiled a new site she has designed to help charities use the Internet to seek planned gifts from older people (http://www.seniorsincyberspace.org). Such gifts include bequests and other types of donations that offer significant tax breaks and, in many cases, regular income payments for the donors or their heirs.
Ms. van Bentum said she designed the new Web site to give fund raisers an idea of how older people are using the Internet. To that end, the site includes recent statistics on the growing use of the Internet by older people. (It estimates, for example, that more than 17 million people over age 50 are now on line.)
The site also has links to several on-line resources about planned giving, including Web sites that other charities have created to promote planned gifts.
In addition, the new site contains links to Web sites like RetireWeb, ThirdAge, and AgeScape, which older people are visiting in increasing numbers to get news, retirement-planning tips, medical information, and a wealth of other information tailored to their needs and interests.
“Many of these senior sites are a lot more interesting than non-profits’ gift-planning sites,” said Ms. van Bentum. For planned-giving Web pages to work, she added, charities need to make sure their overall Web site has interesting material, changes often, and is a place that older people will want to visit repeatedly.
A lot of charities, said Ms. van Bentum, concentrate on making their planned-giving page look good, but they should also focus on little things, like keeping graphics simple, with easy-to-read text for elderly eyes, or adding an e-mail button on the first screen of any on-line material on planned-giving section so that people can immediately send an e-mail request for information to the organization. “It has to be more than just a pretty way to present text,” she said.
