Charity says
telemarketer fund
raising has benefitHowever, more than 50 percent
of the proceeds often goes
to the telemarketerSECOND OF TWO PARTS
When the Special Olympics Hawaii raised $349,031 from its annual telemarketing campaign in 2002, the Olympics got $132,632 and the Arkansas-based telemarketer pocketed $216,399.
The fact that the Special Olympics got 38 percent of what was raised is not a shock. In the competitive world of charity fund raising by phone, it's the norm.
"Most donors would be shocked if they knew how little of their donation actually makes it to the charity," said Daniel Borochoff, president of the American Institute of Philanthropy, a Chicago-based charity watchdog group.
"It's important that charities remember to honor the intentions of the donors, and most donors don't want the fund-raiser to walk away with all of their money," Borochoff said.
Thousands of charities in Hawaii and across the nation hire professional telemarketers to bombard potential donors with calls from telephone boiler rooms under contracts that give the telemarketer hefty cuts, often more than 50 percent, of what they raise.
"It's a horrible dilemma," said Nancy Bottelo, president and chief executive of Special Olympics Hawaii, who has been with the charity since 1987.
"I would love to say, 'Let's not do telemarketing,' but the reality is that it's very competitive out there (among charities)," Bottelo said. "It's much harder to raise money than it used to be. And if you don't do telemarketing, you leave money on the table, because someone else is out there doing it."
Hawaii does not monitor the outcome of telemarketing campaigns. Annual reports from states that track fund-raising results and the split between telemarketer and charity indicate that the Special Olympics' 38 percent is within the range of most other charities.
According to New York state's Pennies for Charities 2002 Report, which analyzes the results of telemarketing campaigns conducted in the state during 2001 on behalf of local and national charities, a total of $184.7 million was raised by 588 telemarketing campaigns. Of that, the charities retained only $59 million -- 32 percent of what was raised -- and the telemarketers got the rest.
The report found that 72 percent of the charities received 39 percent or less of the proceeds. At worst, 52 charities (8.8 percent of the 588) received 9 percent or less of what was raised.
Only eight charities -- about 1 percent -- received 80 percent or more of what was raised in their campaigns.
Contributing to charities is a Catch-22 for donors. A good chunk of their money goes into the pocket of the telemarketer and not the charity. Yet with more charities competing for money, the charities say the telemarketers bring them money they would not otherwise raise.
"The donor's bottom line is that they want most of their donation to go for a program. And they get upset when they find out it doesn't," said Bennett Weiner, president of the BBB Wise Giving Alliance in Washington, D.C.
Studies conducted for the alliance found that most donors expect about 80 percent of their donation to go to the charity's programs.
"If donors knew how much money in a telemarketing campaign goes to the telemarketer, most donors would give somewhere else," Weiner said.
For the past 10 years, Special Olympics Hawaii has contracted with Medallion Productions, a division of Arkansas- based Heritage Publishing, one of the biggest charity fund-raisers nationally. The contract between them guarantees the Special Olympics $43,000 or 35 percent of what is raised, whichever is greater, Bottelo said.
"The contract is pretty standard for Medallion, and they do fund raising for a lot of Special Olympics across the country," she said.
The Star-Bulletin confirmed Bottelo's view after examining Web sites maintained by attorneys general in states that regulate telemarketers. The Star-Bulletin found that Medallion or one of its sister companies gives the charity between a low of 27 percent (Special Olympics Indiana) to a high of 50 percent (Special Olympics Kentucky).
Bottelo said that the Special Olympics, like most charities, diversifies its fund-raising sources and costs by using telemarketing with other methods, such as special events and direct mail.
The advantage of telemarketing, which tends to be more costly than other methods, is a one-to-one conversation with a potential donor. And while that phone call might not raise a dollar, it might recruit volunteers or athletes, a benefit to the Olympics that has no monetary measure.
"Telemarketing is very expensive to do," Bottelo said. "The cost for hiring people to sit and dial a phone is costly."
Medallion President John Braune said, "If people gave locally, in cash and out of the goodness of their hearts (without being asked), then you could put me out of business."
Braune said large companies like his have economies of scale -- from large telephone banks to computers and donor lists -- that make it cheaper per phone call for his company to do the phone calling rather than the charity doing it in-house.
Braune's firm made 754,030 phone calls for the 2001 Special Olympics Hawaii telephone campaign and walked away with about 28 cents a call.
Errol Copilevitz, an attorney based in Kansas City, Mo., who represents large telemarketers, agreed.
"Large telemarketing companies have economies of scale that a small charity doesn't," Copilevitz said. "Beside, charities shouldn't be converted into telemarketing firms. They should spend their time and effort on their program services."
Braune said the cost of a fund-raising campaign depends on several factors, ranging from the popularity of the cause to the goal of the campaign.
If a charity is trying to get new donors, or "acquisitions," it will make cold calls and therefore make more calls to get one donor than from using a list of established donors.
"Is the goal to raise a certain amount of money or get volunteers or to get new acquisitions?" he said. "If it's to get new acquisitions, you might end up spending a dollar to make a dollar."
Braune said the most efficient campaign he ever ran was for an international relief organization, which he declined to identify, that needed money fast for a specific crisis. He said they worked from a list of donors who had given large donations in the past year, and 80 percent donated.
"The return you get depends some on whether you are calling established donors or looking for new ones," Braune said.
Watchdog organizations say telemarketing is a costly way to raise money and that too much goes to the fund-raiser.
"Sure, it's expensive to find new donors," said Borochoff, of the American Institute of Philanthropy. "It's an investment to outreach to new people. But still, it shouldn't cost most of the fund-raising effort."
He added, "The telemarketer is on a fishing expedition to find the small percentage of people who will give."
Professional telemarketers "dangle money in front of charities that they know they normally couldn't get, and there's no risk for them," Borochoff said. "The charity sees it as found money. But charities only succeed if they build loyal donors, and once donors find out how much the telemarketer takes, they will stop."
He said a telemarketer will tell the charity that they can raise them big money and shoulder all the cost and risk of the campaign so the charity doesn't have to pay anything up front.
"They tell them they will raise $100,000 for them, and they raise $1 million and keep the other $900,000," he said.
Borochoff criticized telemarketing, saying that because a fixed amount of money is donated each year to charity, the more the telemarketers take of that, the less is left overall for charities.
"The problem is that the money donated to charity has historically been a fixed pie," he said.
Several national studies show that Americans (including individuals, corporations and foundations) have fairly consistently contributed about 2 percent of the gross domestic product, regardless of economic conditions.
The average taxpayer donated $1,052, or 2.2 percent of their gross income, to charity, according to a study of 2001 income tax forms by the National Center for Charitable Statistics at the Urban Institute in Washington D.C. The average taxpayer in Hawaii donated $817, or 2.0 percent of income. Last year, Americans donated $240 billion to charities.
"If telemarketers are taking a larger chunk of the $240 billion that's out there, then there is less money for programs that help people," Borochoff said. "The charities need to think of the big-picture impact of how they raise money."
