Experts Offer Tips for Charities on Hiring a Commercial Fund Raiser

By HARVY LIPMAN

How can a nonprofit organization make sure that the commercial

fund-raising company it hires is trustworthy? Here is some advice from government regulators, charity officials, and fund raisers themselves:

* Conduct research. The Federal Trade Commission recommends seeking advice from other nonprofit groups in the charity’s geographic area, especially colleges, hospitals, and cultural organizations that are likely to have had substantial fund-raising experience. Then call the regulatory agencies — usually the attorney general or secretary of state — in the states where the fund-raising company does business to find out how much money it typically passes on to clients and whether it has had any problems with the authorities.

* Don’t sign a contract with a professional fund raiser until the document has been reviewed by the charity’s lawyer. Officials of several nonprofit groups that didn’t have their lawyers read their fund-raising contracts before they signed them said they later ended up in lengthy lawsuits trying to invalidate the contracts.

* Make sure any contract includes, at a minimum, the exact terms of how much money will be distributed by the fund raiser to the nonprofit group, or, if the nonprofit group is getting a percentage, exactly how that percentage will be calculated; the period of time the contract will run; the conditions under which either party can cancel the contract; and who will own the donor list.

* Insist that the contract ensures that the nonprofit group has complete control over the script that telemarketers will follow during each phone call, and make sure the company is willing to let charity officials visit its offices and listen in on calls.

* Avoid companies that hire other professional telemarketers as subcontractors to make fund-raising phone calls. Charity officials and government regulators note that it is very difficult to monitor what the subcontractors are doing. Many of the legal actions taken by government regulators against telemarketing companies have involved subcontractors who engaged in deceptive fund-raising practices. If charity officials feel they must hire a fund raiser who uses subcontractors, the experts say, they should make sure the contract lays out the standards the subcontractor must meet.

Gerald Lennon, the lawyer for the California Organization of Police and Sheriffs, says his group made the mistake of hiring a telemarketer without asking him to look over the contract. The nonprofit organization then began getting complaints that fund-raising companies hired by the telemarketer as subcontractors were misrepresenting themselves as police officers.

Mr. Lennon tried to convince a judge that the company had violated the contract by not properly overseeing its subcontractors. But the judge ruled that the contract didn’t specifically address the issue, and refused to invalidate it. It took 18 months for Mr. Lennon to negotiate an agreement with the telemarketer to terminate the contract.

* Determine how well the telemarketing staff is trained and paid. Those working on commission are more likely to make exaggerated claims on the phone, possibly getting the fund raiser and the charity in trouble. Companies that pay poorly are likely to have high turnover rates.

“Our employees go through 10 hours of formal training before they ever make a phone call,” says Thomas Page, president of Phone Bank Systems, in East Lansing, Mich. “Then they have supervisors hovering over their shoulders the first two or three days.” Phone Bank Systems, which works mostly for public-broadcasting stations, ranked among the 10 highest rated commercial fund raisers in The Chronicle’s analysis.

* Find out if company executives and staff members are willing to help plan a fund-raising campaign and learn about the charity’s mission.

Judy Levy, co-owner of Levy Pazanti, in Los Angeles — the highest-rated fund raiser in The Chronicle’s analysis — says she and her staff members hold strategy meetings with charity officials. They brainstorm ideas about how to raise money. “We act like an ex officio member of the board,” Ms. Levy says.

At the very least, adds Deborah Bonsack, executive director of America’s Athletes With Disabilities, in Silver Spring, Md., make sure fund raisers learn as much as possible about what the charity does. “I have arrangements with some of our telemarketers where their employees actually come out to our events, where they firsthand see what it is they’re raising money for,” she says.

* Avoid fund raisers who insist on setting up joint bank accounts to which they have access. The Federal Trade Commission also recommends that all checks from donors should be made out to the charity, and that the commercial fund raisers should not have the authority to endorse them.

* Be sure that hiring a fund-raising solicitation company is essential. Many charities give up too easily on raising money themselves, says Ms. Levy. “They don’t realize what fund-raising potential they have.”