Defending New York fund-raising rules

To the Editor:

Nick Stavarz of Synergy Direct Marketing Solutions (Letters to the Editor, January 9), concerning the rules and regulations proposed by the New York State Department of Law, asserts that requiring charities to obtain bids prior to entering into a fund-raising contract will involve not-for-profit boards “in the minutia of running” their organizations and increase charities’ costs. As reported in the 2002 edition of “Pennies for Charity,” New York Attorney General Eliot Spitzer’s annual report on telemarketing, of $184.7-million raised by telemarketers in 2001, $125.8-million, or 68.1 percent, was paid to professional fund raisers, not to charities. This is not minutia. It is in fact nearly twice the Better Business Bureau’s Best Practice Standard of 35 percent.

If Mr. Stavarz is right that apparently many charities’ “board members understand little if anything about the dynamics of charitable fund raising,” they should. In every state the board is responsible for the success or failure of the nonprofit. If Mr. Stavarz is right that professional fund raising is crucial to a charity’s success, then New York is right to require board responsibility for such contracts. Mandating competitive bids for fund-raising contracts is wholly consistent with the requirement that boards try to maximize the return to charity.

Mr. Stavarz erroneously concludes that such safeguards make “it impossible to do… reactivation and acquisition programs.” He asserts that charities must “invest in research or projects that cost more initially than they generate, in order to secure. . . future success.” This assumes that the existing fund-raising relationship is always the best, a clearly erroneous assumption that obviously favors the interest of any professional fund raiser who wants to keep existing contracts.

Moreover, many charities contract year after year with the same fund raisers, even though their return does not improve.

Mr. Stavarz acknowledges that “there are enough unethical practitioners in the industry to warrant action by those who are in a position to do something about it.” Indeed, the overall telemarketing fraud situation in the United States is appalling. According to “Telemarketing Fraud: An Exploratory Study,” by Neal Shover of the University of Tennessee, Americans are seven times more likely to be victims of telemarketing fraud than robbery. The toll of the estimated aggregated financial loss to telemarketing fraud is upwards of $40-billion, exceeding the combined monetary loss of all street crimes. Mr. Shover reports that more than 10 percent of the 140,000 telemarketing firms operating in the United States were reported to be fraudulent in 1995. Mr. Stavarz says that “it is important to eradicate the unscrupulous practices and practitioners that are tainting our industry,” but he proposes no remedies.

Particularly after September 11, 2001, the public increasingly demands that its contributions be used for their interests. Representing Mr. Spitzer, we are charged with the oversight and regulation of charities that hold assets in this state and/or solicit contributions from New Yorkers. The proposed regulations are designed to enlist charities’ boards in this effort. Too long have too many board members sat back and let their staffs re-employ the same professional fund raisers without competition.

Karin Kunstler Goldman
Assistant Attorney General
Section Chief for External Relations, Public Education and Administration State of New York Office of the Attorney General

William Josephson
Assistant Attorney General-in-Charge
Charities Bureau
State of New York Office of the Attorney General