Through fundraising solicitations, charities inform donors about how supporting their activities will advance their missions. To a great extent, these missions are the core reason why they are tax exempt under IRC section 501(c)(3).
When charities fail to explain their activities accurately and adequately, they may mislead donors, potentially attracting negative scrutiny from BBB, media - or even prompting regulatory action.
If a charity misleads donors through fundraising appeals, it might be sued by the New York Attorney General’s Charities Bureau. For example, on July 21, 2015, the Attorney General’s office issued a press release announcing that it had filed a court action “to shutter” the National Children’s Leukemia Foundation after an investigation revealed that the organization “did not conduct most of the programs advertised on its website and in its solicitations.”
This case illustrates the following point: you might lose your ability to operate in New York if you don’t conduct solicitations with transparency, integrity, and accuracy. Recent state actions against New York charities have also made it clear that the New York Attorney General’s office can and will hold charity officers and board members responsible for fundraising misdeeds.
In some cases, fundraisers may not recognize that their solicitations could be considered misleading. These situations typically come about when fundraisers use imprecise, incomplete, or inaccurate language or graphic designs to illustrate how a donor’s money will be used by a perfectly legitimate charity. Even large and sophisticated charities can make big mistakes by failing to vet solicitation language and images carefully.
Fundraising appeals are increasingly conducted in new formats such as social media channels, which can make adequate disclosure at the point of solicitation very difficult. This marketing challenge does not relieve a charity of its obligation to disclose upfront the terms and conditions that might reasonably affect a donor’s decision to give. In a commercial marketing transaction, “clear and conspicuous disclosure” at the point of purchase is what consumers and regulators expect. The same general principles apply to charitable donations, which are also exchanges of a sort.
According to the BBB Standards for Charity Accountability, a charity should “have solicitations and informational materials distributed by any means that are accurate, truthful and not misleading, both in whole and in part.” Problems can happen when charities fail to consider that a fundraising appeal may be literally truthful in its wording – but still be misleading because it omits critical information, uses a graphic representation that creates a false impression, or is inaccurate in some other way.
Recommendations for Charities
Be accurate when using stories and images in appeals. Successful fundraising solicitations often use a story to encourage a donor’s emotional connection with the charity’s work. Impact case stories should refer to genuine individual cases, rather than amalgams of cases. Photos and results descriptions should be current; anything over three years old should disclose the relevant time period.
Include a current program description. All appeals, even renewals, should include a clear description of the charity’s recent activities. Don’t assume that the donor knows what your organization has been doing lately.
Watch out for timing expectations. Urgent appeals, especially after a disaster, can provide potential donors with the expectation that funds will be spent just as quickly as they are raised. If that is not the plan, be clear upfront about the timing of the charity’s expected actions as well as all potential uses of funds. This will help to ensure that donors do not feel misled, and can also help guard against serious reputational or regulatory problems.
Document all fundraising claims. There’s a simple mantra that can help serve as a sniff test when a charity is preparing a fundraising appeal: “If you say it, be sure you can prove it; if you can’t prove it, don’t say it.”
Be careful if using financial ratios in appeals. Make sure that there is financial documentation or other substantiation to back up every financial reference, ratio, or pie chart used in appeals. Check to be sure that these are the most current figures and not figures that were valid years ago.
Be especially cautious about “100%” claims. For example: a charity may claim that “100% of your donation will support our programs” in fundraising statements. This is not a recommended type of appeal because it reinforces the destructive public perception that charities don’t need administrative or fundraising dollars to operate. If a charity chooses to make such a “100%” claim, it should also disclose how this claim is substantiated: is a donor underwriting fundraising and administrative costs, so that further donations can be attributed to programs? That should be disclosed right in the fundraising claim – and you should be able to back it up with documentation if asked to do so by BBB or by investigative reporters.
Get development staff out of their silos. To ensure accuracy, development officers need to talk to their executive directors, general counsels, and chief financial officers about the development of fundraising appeals. All too often, this doesn’t happen, and the mistakes that result can be unfortunate.
Establish and enforce fundraising practice guidelines. Mistakes are more likely to happen when there are no guidelines to follow. It’s a good idea to establish policies, vetting processes, and training procedures so that current and new staff or volunteers will understand what can and cannot be said, done, or depicted in a fundraising appeal emanating from your organization. Guidelines are of little value if they are not enforced, so be sure you also have a good process for monitoring your nonprofit’s fundraising appeals and practices.
Bring in professionals when necessary. If your organization is committing its dollars and prestige to an important fundraising campaign, it really pays to check the language and imagery used in that fundraising appeal with an accounting or legal professional. Fundraising appeals can be too narrowly phrased, as well as too vague. Charity leaders should ensure that the language and other appeal elements are broad enough to convey the intended uses of the donated funds, but also specific enough to communicate the funding purposes accurately. This can sometimes be tricky, especially in quick turn-around situations (such as disaster-related appeals), so seek professional advice when it is needed.
Put fundraising on your board’s risk management dashboard. If regulators might hold your board responsible for the way in which your organization conducts its fundraising appeals, your board members will need to know the key facts about how it is being done. Put fundraising solicitations on the board’s risk management checklist and report regularly on highlights of your monitoring efforts, so board members can stay informed and engaged on this issue.
Board members should be informed about financial arrangements with major outside fundraising firms, such as telemarketers, to verify that the terms will be in your organization’s best interests and that appeals made on your charity’s behalf by the fundraising firm will be accurate. Making fundraising a board-level priority will help ensure that it is an organizational priority.
Protect the donor. Here’s another simple test. Look at your fundraising appeal from the donor’s perspective. Does it clearly tell you all that you would reasonably want to know before making a donation? If it doesn’t, work on it until the appeal is very clear. Hint: before omitting any key information, consider carefully whether that information should in fairness be disclosed to donors.
Nurture a culture of disclosure and accuracy. It can often be hard for an organization’s enthusiastic marketing team to step back and take a donor’s view of a clever fundraising appeal. Creative minds can naturally get very married to their creations. If a charity has established a strong organizational culture of integrity, development team members will be far more likely to check solicitations carefully before launching them.
The most attractive fundraising appeal in the world will not do any good if it is potentially misleading. There is no more precious resource than donor trust in the charity world. Once donor trust is gone, so is all hope of raising money.
Testing an appeal for accuracy and adequate disclosure should be as much a part of the development process as testing an appeal’s fundraising drawing power. Strong leadership from the top about such matters is needed to establish expectations and practices that will help protect your charity and ensure its fundraising success.
Luana K. Lewis is the senior vice president of programs and services at the Better Business Bureau Serving Metropolitan New York. Formerly she was the director of proposals and research at the Ad Council, where she also served in media development and fundraising roles. She can be reached at firstname.lastname@example.org.