Chapter 17 - § 17.6 • GUIDELINES FOR FUNDRAISING BY NONPROFIT ORGANIZATIONS

• Jurisdiction: Colorado

§ 17.6 • GUIDELINES FOR FUNDRAISING BY NONPROFIT ORGANIZATIONS

§ 17.6.1—Pitfalls

A nonprofit organization may be regulated under a state's charitable solicitation laws without realizing that fact. Even if a nonprofit organization does not perceive itself to be a charity, the organization may fit the definition once it begins to solicit donations by using a solicitation pitch that asks for support for a cause that benefits some charitable purpose. See § 17.2.3. This is true in Colorado. The organization is then subject to registration, reporting, disclosure, and representation requirements. See §§ 17.2.4 and 17.2.5. A Colorado nonprofit organization should candidly appraise the nature and purpose of any solicitation program in which it plans to engage to determine whether it is subject to the registration requirements and must register before soliciting.

§ 17.6.2—Dealing with Professional Fundraisers

Professional fundraising organizations frequently approach nonprofit organizations to propose a solicitation campaign or fundraising event. The proposal is often attractive for the nonprofit organization because the organization is usually guaranteed a minimum profit, while the fundraiser does all the work. On occasion, however, these arrangements have resulted in the fundraiser taking a large percentage of the proceeds; they have also been the sources of much bad publicity for charitable organizations and have led to lawsuits by the U.S. Department of Justice. Even though the majority of professional fundraisers are honest, ethical, and useful, this area remains a concern for nonprofit organizations.

Common Problems

Fundraisers often devise and use solicitation pitches based upon how much money can be earned at the expense of candor. False representations in solicitations may not come to the sponsoring nonprofit organization's attention until citizens begin to complain. Deceptive solicitations, if discovered by local media, can damage the sponsoring organization's reputation. High-pressure solicitation tactics also may reflect badly on the sponsoring organization.

Once a solicitation campaign is over, the nonprofit organization may have trouble collecting its share of the proceeds. It may also find large unpaid bills for telephone service or solicitor wages.

COMMENT: Most solicitations by professional fundraisers are free of problems. Most professional fundraisers are ethical. Nevertheless, nonprofit organizations do need to exercise prudence to avoid becoming

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