INDEX
1.
Introduction
2.
Charitable Legal Status
3.
Defining your Mission and community
4.
Getting Money
5.
Getting professional help
6.
Conclusion
Introduction
Private association charities need funds to operate and carry on
the missions for which they were created. To obtain same, they usually need to
rely on private or public donations. Sometimes they seek the help of
professional fundraisers.
"A study by my staff has found less than 40 percent of money raised by
charitable fundraisers goes to the actual charity. The majority of professional
fundraisers keep for themselves the lion's share of the money they collect." NY
State Attorney General Eliot Spitzer, Web site FAQs (2004).
In 2003, Public Citizen told the US Supreme Court (in an amicus brief for
Illinois v Telemarketing Associates), "As this Court repeatedly has
recognized, fundraising cost information is of marginal, if any, relevance to an
assessment of a charity’s legitimacy or efficacy. Indeed, there is no consensus
as to what figure best represents a fundraising cost percentage or how such a
figure should be derived. . . [In] Village of Schaumburg v. Citizens for a
Better Environment, 444 U.S. 620 (1980). . . the Court explained that
because such appeals are ‘characteristically intertwined with informative and
perhaps persuasive speech seeking support for particular causes or for
particular views on economic, political, or social issues,’ they are treated as
speech fully protected by the First Amendment, rather than as commercial speech.
. .”
Thus, there is some controversy regarding the benefits of professional
fundraising. It is not my purpose here to argue those benefits, but just to
provide some background information about legal status and relationships that
may help charitable Trustees make informed decisions regarding their fund
raising programs.
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Charitable Legal Status
Charities come in many forms and many sizes, from national church
denominations, research centers and major foundations to local museums,
institutions, Police Athletic Leagues, "Y's" and Book Clubs. Despite
differences in size and mission, they have similar legal concerns when it comes
to raising the funds they need to prosper.
This article is not intended to be individualized legal advice to the
Trustees regarding professional fundraising and your organization should
consider the information herein as it may apply to your location and particular
circumstances for general informational purposes only.
To effectively meet their mission objectives, most charitable NGO
(non-governmental organizations) Trustee need to pay attention to their legal
status.
Primarily, there are three levels or grades to achieving full status. First,
“Non-Profit” Status. Most such organizations authorize their Trustees to form
nonprofit corporations in the state wherein they are active. Some, especially
religious organizations, choose to remain purely private, unincorporated
associations (at least two US States do not permit churches to form
state-sanctioned corporations). In any event, the "not for profit" aspect of the
organization's status is determined by the organizing documents and the laws of
the State.
Second, Tax Exempt and Tax Deductible Status. In the United States such
status is conferred through the IRS Code (and the limits on taxation in the
Constitution). While churches are "mandatorily exempt" (Code Section 508) all
others must apply and be approved under Section 501(c)(3) which says that any
organization organized and operated exclusively for religious, charitable,
educational, scientific research, sports or literary purposes can be exempt.
Such organizations may also accept Tax Deductible Donations and Foundation
Grants. Local organizations are often concerned about Sales Tax status; my
experience has been that a State Sales Tax Exemption will be allowed for
organizations that have had their Federal Exempt Status recognized. Again,
except for religious organizations that are automatically exempt, once approved,
the exempt status relates back 15 months and is reviewed after the first 5
years.
Finally, the relatively new status as a UN recognized "NGO" has become
coveted. Individual agencies and councils within the UNO system separately
qualify such organizations which are typically exempt organizations under
national law.
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Defining Your Mission & Community
The mission of a professional fund raiser is to raise funds for your
organization so it can get on with its mission. The better you understand your
mission and the more information you have about your community, the better the
professional fund raiser can perform its services (if you effectively
communicate it to the fund raiser). Professional fund raisers have many
resources at their disposal, including access to up-to-date lists of local
businesses, the main source of local charity funding.
Getting Money
Organizations raise funds in numerous ways: by means of telemarketing (only
where allowed by oversight organizations and local laws), e-marketing, event
marketing, direct marketing and through the mail. Members and beneficiaries
canvass door to door (who can resist a Girl Scout at your door, offering treats
in exchange for your help). They seek public and foundation grants. But, what fundraising methods are effective? You
sponsor an annual fair or other event and it does bring in the bulk of your
budget. Could a professional fundraiser help make the event even more
successful?
What works for one NGO may not work for another. Each community and
situation is different, and each needs a different mix of options to reach
optimal success. Professional fund raisers offer an entire range of
services, from actually conducting funding projects, such as contacting local
companies, through to assisting your organization in its traditional funding
activities, such as that annual fair – making it better by bringing a
professional perspective to the project.
Getting Professional Help
If you are a Trustee or Officer of a private association and you want your
Exempt and NGO status secured or maintained, you need to seek the advice of
legal, accounting and fund raising experts. Various companies
can provide important fundraising services and link you to professionals in
allied fields. You can find them under "Professional Fundraiser" through search
engines such as GOOGLE. For Grants and other public or foundation funding,
check www.grant-help.org.
Conclusion
I trust this brief excursion into some questions about professional fund
raising and charitable status is useful to charitable Trustees. Although I may not be
able to personally respond to all inquiries, as Fund Raising Counsel for
Emergent Marketing, I appreciate your feedback and questions, which you can
address to .
Please also take a look at the Nonprofit
and Church Loans web page.
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Ralph Fucetola, JD
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