For Small Charities, the Options Are Few and the Risks Are High

By HARVY LIPMAN

Even when small charities work diligently to negotiate the best possible

deal on contracts with commercial fund raisers, they are likely to find that many of the largest, most reputable solicitors aren’t interested in taking them as clients.

As a result, many of those nonprofit groups are left with little choice but to hire telemarketers who pay them only a small percentage of the money they raise — and often engage in questionable fund-raising practices.

That’s what the National SAFE Home Foundation — a charity that gives away more than 20,000 smoke alarms annually to needy families and operates a national fire-safety education program — learned when the charity decided it needed professional help to solicit donations.

At first, the charity’s president, Michelle Destino-Moran, vehemently opposed the idea of hiring a solicitation company, arguing that the charity’s image would be tarnished by the telemarketing industry’s bad reputation. But National SAFE Home’s own efforts at raising money had failed miserably. It even lost $5,000 on an outdoor fund-raising event that was rained out, and by 1994, after seven years of operation, it was $50,000 in debt.

The group’s chief financial officer, Lawrence Mattison, conducted research on various fund-raising options, including adding people to the staff to raise money. He concluded that would cost nearly $25 an hour — money the charity didn’t have.

So, over Ms. Destino-Moran’s objections, the board voted to hire a commercial fund-raising company. But most of the major solicitors were not interested in taking on a client that was not well-known, that could not afford to pay tens of thousands of dollars in advance to cover fund-raising costs, and for whom the expenses of a national campaign were likely to be quite high.

After spending months checking into telemarketers’ backgrounds, and searching for one that would give the group the best return on every dollar donated, Mr. Mattison could find few companies willing to take National SAFE Home as a client.

One company that did agree to work for the charity was Metro Marketing, a Sarasota, Fla., company that no longer exists, Ms. Destino-Moran says. National SAFE Home hired Metro Marketing, and soon, Ms. Destino-Moran says, she learned the company had subcontracted the telemarketing campaign to a New York firm that was not registered with the state. “We stopped our contract with them right away,” she says.

Fraud Investigation

Mr. Mattison says National SAFE Home — the acronym stands for Smoke Alarms for Every — then turned to the only other company he could find that was willing to take the charity on as a client: Non-Profit Telemedia, of North Little Rock, Ark. But four years into its contract with Non-Profit Telemedia, Ms. Destino-Moran learned from the Federal Bureau of Investigation that National SAFE Home might have reason to be concerned about its association with that company, too.

Non-Profit Telemedia was being investigated as part of a mail-fraud case, the F.B.I. told Ms. Destino-Moran. The company’s president, Kerry D’Amato, and vice president, Dennis McCormick, were indicted in August on federal charges that they had conspired with two other men to create a nonprofit organization called Kidwish USA, and then raised money for their personal enrichment. The government charged that of more than $1-million raised in behalf of Kidwish, 99.4 percent went to Non-Profit Telemedia.

Mr. McCormick pleaded guilty to the conspiracy charges. Mr. D’Amato was convicted last week on federal mail-fraud and money-laundering charges. Neither Mr. D’Amato nor anyone else at the company responded to numerous phone and written requests for comment.

Ms. Destino-Moran was not called as a witness in the case, and says that as far as she knows, Non-Profit Telemedia has lived up to the terms of its contract with the National SAFE Home Foundation.

And despite her original opposition to hiring a telemarketer, Ms. Destino-Moran says she is resigned to the fact that the charity needed a commercial fund raiser. “Without the money that we receive from them every week, we wouldn’t be in existence,” she says.

Under its agreement with Non-Profit Telemedia, the National SAFE Home Foundation receives 10 cents of every dollar new contributors donate, and 50 cents from repeat donors. Under that arrangement, the fund-raising company has taken in $2.4-million over four years, of which a little less than $265,000 — about 11 percent — went to the charity.

Mr. Mattison, the charity’s financial officer, says that low percentage simply reflects the economics of commercial fund raising, especially for small, little-known charities like his own.

In 1997, he says, Non-Profit Telemedia made more than two million phone calls in his charity’s behalf, producing 62,000 pledges. That means each of the company’s telemarketers contacted 32 people each hour it worked for the charity, getting an average of 2.2 pledges an hour, for a total of about $1.3-million. But donors sent in only $700,000 of that. Every person who doesn’t follow through on a pledge, Mr. Mattison says, adds to the fund raiser’s expenses, because the company mails forms and envelopes for sending in the checks to everyone who promises to contribute.

Even though her charity is dependent on a telemarketer for its survival, Ms. Destino-Moran says she still is not comfortable with the idea of using a professional solicitor. “I’d rather find another fund-raising alternative than telemarketing,” she says.