For years, telemarketers repeatedly called William Haas asking him to donate to the Virginia State Police Association and other public safety charities.
And for years, the Blacksburg man gave.
But earlier this year, Haas, 74, started asking questions.
He discovered that some of his donations weren’t tax-deductible and that in some cases, the telemarketers were keeping up to 85 percent of his donation.
“They’ll never see my money again,” Haas said.
“I just think there’s too much money going into the pockets on the other side.”
From 2004 to 2006, public safety charities in Virginia received about 26 percent — or about $6 million — of the $23 million that Virginians donated, according to data from the Virginia Department of Agriculture and Consumer Services.
Professional solicitors hired by the charities kept the rest.
Without the money generated through telemarketing, some of the public safety charities have said they would have to cut back drastically on the programs and scholarships they provide, or shut down altogether. Fundraising on their own is not an option, they say, because it is too expensive.
The American Institute of Philanthropy suggests that it should not cost more than $35 to raise $100, but that’s a goal that’s not always met.
The high cost of raising money doesn’t surprise those who have studied telemarketing and fundraising. Nor is the issue unique to public safety charities. Nationally, charities receive about a third of the proceeds of fundraising campaigns, according to the philanthropy institute.
“It is an expensive form of soliciting,” said Michael Wright, manager of regulatory programs for VDACS’ office of consumer affairs.
It can also be troublesome for solicitors.
At least three public safety charities in Virginia knowingly use a telemarketing company that has butted heads with the Federal Trade Commission over allegations of misrepresentation. In September, the FTC filed its second lawsuit against that company, Civic Development Group LLC.
Producing results
The Virginia State Police Association has helped troopers’ families pay for funeral expenses and successfully lobbied for the state to pay health insurance for members who retired on disability or who are on long-term disability leave.
“The money we make from fundraising helps us do these kinds of things,” said Kenneth Bumgarner, president of the association.
The association is currently raising money through golf tournaments and raffles to help pay for a van for Mike Smith, a Salem dispatcher who has muscular dystrophy. A small percentage of money the association receives from telemarketing will be used to match donations made to Smith’s fund.
Bumgarner said he’s bothered by the small return the association gets from the solicitors it hires, including CDG.
The association has signed contracts to receive as little as 18 cents for every dollar collected.
Bumgarner would like to find another way to generate money, but no other type of fundraising the association has tried or considered achieves the same results.
“Believe me, we’ve thought about it,” he said. “We’d like to have every penny of every dollar.”
The association has invested money that its members hope to tap into in the future to replace telemarketing.
Michael Nilsen, director of public affairs at the Association of Fundraising Professionals, said charities should approach fundraising as a way to develop long-term and fruitful relationships with donors.
“They’ve got to look at it as an opportunity to build champions and advocates,” he said.
Telemarketing makes it difficult for charities to build those relationships because solicitors often don’t share the donor lists with them, Nilsen said.
Also threatening those relationships, Nilsen said, is the sense of betrayal some donors feel when they discover how much of their money goes to the solicitors.
“We think this is one of the key reasons fundraising gets a lot of bad press,” he said. “You keep seeing these stories, and I think, frankly, in the long run, they [charities] are hurting themselves.”
Some charities know they are in a tough situation.
The Virginia State Firefighters Association received as little as 15 cents per dollar, or $154,849 of the $1,050,123 collected, during a yearlong telemarketing campaign with CDG that began in October 2004.
But that’s money the association couldn’t have raised itself, said the group’s first vice president, Norman Rice.
The Virginia Police Chiefs Foundation, which has used CDG for more than 10 years, knows from experience it can’t raise the amount of money that professionals can.
The foundation’s staff of three tried doing their own fundraising with mailers, but it was time-consuming and ineffective, said Lex Eckenrode, chief executive officer of the foundation.
“If we lost the CDG money today, we’d probably have to gear down and close up,” he said.
Money raised by CDG accounts for 20 percent to 25 percent of the foundation’s annual budget, which for 2007 is about $550,000, Eckenrode said.
Tax records show that in 2004 the foundation got $1,137,961 from various fundraisers, including CDG efforts, and other public support. The fee for fundraising was $1,028,480, so the foundation netted $109,481.
That money went toward the $259,776 the foundation spent on training for officers and a leadership school for young adults.
The foundation brings in additional money from fees, special events, grants and other fundraising.
But even with that money, Eckenrode said the loss of funds raised by telemarketers would be detrimental to the foundation.
“It would cripple us,” he said.
Behind-the-scenes work
Fundraising is expensive not only for charities but also for the companies doing the work, representatives of two fundraising companies said.
“We’re providing a service that has a cost associated with it,” said Len Wolstenholme, spokesman for Florida-based Xentel, a company that raises money for several Virginia volunteer fire departments and charities, such as the Roanoke and Richmond firefighters associations.
“We’re not holding a gun to anybody’s head to do business with us.”
By hiring professionals, a charity is guaranteed a certain percentage of the proceeds. The charity doesn’t have to spend any money to raise money because the fee is taken from what’s collected.
It is the professional fundraiser that is taking the risk, Wolstenholme said: If a campaign doesn’t raise enough money to cover expenses, the solicitor takes the hit.
“In our case, the charity is never worse off,” Wolstenholme said. “They’re always better at the end of the day.”
Between 2004 and 2006, Xentel and CDG kept $7.8 million of the $10.2 million that they raised for Virginia public safety charities. Those two solicitors alone accounted for almost half the money raised for public safety charities in Virginia in those years; another 17 or so professional solicitors raised the other half. CDG by far raised more money than any other solicitor.
Wolstenholme and CDG said most of the money the companies keep pays a long list of bills, from rent to research and accounting services. Labor is the biggest expense.
CDG said in a statement e-mailed to The Roanoke Times that the company is grateful to see a 5 percent profit from fundraising campaigns.
Wolstenholme stressed that there are things going on behind the scenes that people don’t realize.
“It’s not a simple process of me sitting down with the phone book,” he said.
Xentel invests a significant amount of money into data systems, analysis software, call management systems and the people who maintain and operate that technology, he said.
One fundraising company based in North Carolina has discovered a way to profit without taking a large amount of money from the fundraising pot.
The company, Community Support Services, typically gives charities 55 percent of every dollar collected in donations of less than $25, and 100 percent of every dollar collected in donations of more than $25.
But the company works only with rescue squads and fire departments, and it doesn’t raise as much as some of the larger fundraising companies. For instance, CDG raised an average of $1.48 million per campaign for public safety charities between 2004 and 2006. Community Support Services raised an average of $11,695.
It makes a profit by offering a free family portrait to donors, who often end up ordering — and paying for — more than one copy.
But digital cameras have hurt the photography business, and unless the company can find another product that interests donors, it may have to start taking more of the proceeds from the campaigns, said company President Gary Smith.
On Sept. 27, the Federal Trade Commission announced it had filed a lawsuit against CDG, accusing its solicitors of misrepresenting themselves or misleading potential donors when raising money for police, firefighting and other nonprofit organizations.
CDG said in a statement that the company will fight the allegations.
“We do not believe there is any basis for the current action and intend to defend it vigorously,” the statement said.
This isn’t the first time the FTC has brought action against CDG.
The company in 1998 settled a lawsuit without admission of wrongdoing. That suit alleged that the company misrepresented to consumers that the money they donated to the American Deputy Sheriffs’ Association would benefit law enforcement in their own community or state. The FTC charged that almost none of the money collected benefited law enforcement in the donors’ community or state.
The Virginia Police Chiefs Foundation is using CDG for its current fundraiser.
Eckenrode is aware of the solicitor’s past legal trouble. But he said that other than one complaint about an aggressive telemarketer, he has never had problems with the company.
“People are sued all the time,” Eckenrode said. “I deal with police departments, and they’re sued all the time. People are innocent until they’re proven guilty.”
Bumgarner, too, knows about the lawsuits.
He said he’ll monitor the current suit, and the association’s board of directors will schedule a meeting to discuss whether they want to continue to use CDG.
Xentel has been sued in at least three states, accused of misrepresenting itself and where the donor’s money would go, or of violating a state’s laws. The company has not been sued in Virginia.
Xentel settled those lawsuits with no admission of guilt. Wolstenholme said consumers were not taken advantage of and that the company didn’t fight the allegations because it would have been too costly.
Homework for donors
Haas did what many donors don’t do. He asked questions.
He wants people to be aware of where their money is going.
“I’d like to see the public gain knowledge of what is going on here,” he said.
Wright, who has worked for the Office of Consumer Affairs for 29 years, said donors need to do their homework.
It is the responsibility of the potential donor to find out how much money the charity gets from the donation, how much of the money goes to the charity’s programs, and what those programs are, he said.
It is also the donor’s responsibility to find out if donations are tax-deductible.
For instance, a donation to the Virginia State Police Association’s general fund is not tax-deductible because the money in that fund is used for lobbying. Donations made to funds that benefit specific individuals are also not tax-deductible.
“If you got all the facts and you still want to continue, then by all means. It’s your 20 bucks,” Wright said.