It’s still holiday season so you’ve probably seen some solicitations from charities for your money. They play to you holiday spirit, and if you’re anything like me, it works.

But charities go about raising funds in all kinds of ways. Some charities raise hundreds of thousands of dollars at a time. And anytime you have that kind of money flowing in, you’ve of course got people that want to profit from it.

As it turns out, there are consulting companies that specialize in helping charities raise money. This really isn’t surprising. Many charities don’t have the resources or people to do effective fundraising. It’s definitely an art if you don’t have a celebrity backing up your cause.

You might only be able to raise $100,000 on your own, but a fundraiser might be able to promise you $500,000. How do they do it? I couldn’t tell you. They probably have some pretty good tricks. Like any marketing company, they’re probably a serious hype machine. I’ll bet they are very good at playing to your soft side, showing you really sad stories and pictures of those impacted by whatever cause they’re fighting for.

But how much do you charge for such a service? $100 an hour? Maybe a flat fee of $10,000? How about a percentage of the money raised? That might make the most sense. This aligns the consulting company’s interests with that of the charity. The more money they raise, the more money they make!

But if you knew that your donation wasn’t completely going to a charity, would you be less likely to make a donation? Or make a smaller donation? I feel like if I knew 10% of my donation went to some for-profit fundraising company, I’d certainly hold back.

10% of $1 million is a sweet $100k. Not bad for what would take a couple of people a couple of month’s work to do. If that were the end of it, this wouldn’t be a very interesting story. The 10% figure I completely made up. The state of North Carolina got some national attention the other day because they published some findings on these fundraising consultants. Certain charities must register with their local governments and disclose financial information. In the state of North Carolina $300 million in donations were collected in the last year. Of that, less than 50% actually made it to the charity.

That’s right, the fundraisers themselves are taking more than 50% of the collections. If you were donating money to a charity and learned that, what would your reaction be?

Now it’s not all bad news of course. These companies do provide a service that even at such high fees, is still sought out. But I’m personally offended at the rate of how much they’re taking of donations. 10% is enough to make me think twice about donating, but 50% is outrageous.

What can you do about it? Not much except to contact your favorite charities and ask them if they do something similar. Or you can do what I do, don’t ever donate to charities that solicit donations. If they are contacting you, they are spending money to get donations. I find charities that I believe in, and then reach out to them offering my money. This way I know the money I’m giving will go to the charity, and not some 3rd party looking for profits.

Since we’re on the topic of charities, I want to point out that Weakonomics accepts donations because 50% of the money goes to the Jump$tart Coalition which pursues teaching personal finance in schools. This is not me asking you to donate to Weakonomics, instead I’d rather you just donate all your money to Jump$tart (directly to them) because it’s a cause I truly believe in.

Update: one of your fellow readers told me about some websites that actually track all sorts of information about charities. I’ve been playing with Charity Navigator.

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categories: business, government