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Monday, November 10, 2014

Not All States Are Equal: Fundraising Campaigns and Professional Solicitors

Posted by Armanino Nonprofit Team

Many of America’s largest and best-known nonprofits trace their success, at least in part, to fundraising campaigns handled by professional solicitors. But in an era when states, and even some localities, are busily trying to register and regulate fundraising activities, what happens when something goes wrong?

A new case in South Carolina puts a sharp point on the question with a $1.054 million fine levied against Strategic Fundraising, a well-established firm based in St. Paul, Minn. According to various media reports, Secretary of State Mark Hammond cited the fundraising firm on Oct. 22 for a series of violations involving misrepresentation and failure to register individual solicitors as required by state law.

The charges are based on state officials monitoring 350 calls after receiving citizen complaints. What they found, according to a report in The Nonprofit Times, involved failure to disclose that the fundraisers were paid professionals, failure to disclose the name and location of the soliciting firm, and misrepresentation of the percentage of donations going to the nonprofit’s programs.

“What makes this case so egregious is that these were ‘robo-calls’ in which the individual solicitors were using pre-recorded scripts,” Hammond said in a statement. “This wasn’t a situation in which an individual caller made a mistake and went off script, these disclosure violations were a result of deliberate choices made by a professional fundraiser.”

And this isn’t Strategic Fundraising’s first brush with South Carolina law. In 2009, it signed a voluntary agreement of compliance promising to toe the line. Instead, it is now facing the largest fine of its type in a decade. Often in such cases, fines are reduced after negotiation. But that can’t undo the black eye suffered by the charities involved.

The takeaway here is the responsibility doesn’t end when the contract is signed. Your name, your reputation rests on every interaction with a potential donor. Due diligence extends to reviewing the script and asking about compliance procedures. Anything less has the potential to backfire with disastrous repercussions that may take years to undo.

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