Professional fundraisers: Don’t skimp on your due diligence — or the truth

Is your business in the fundraising business? Want a refresher on the rules of the road? Check out the FTC’s recent settlement with Kars-R-Us.com, Inc. (“Kars”), a company that collected donations on behalf of the United Breast Cancer Foundation (UBCF).

The FTC alleges that Kars raked in millions of dollars soliciting donations through English- and Spanish-language TV, radio, and online ads. Kars claimed the proceeds went to UBCF and would “save lives” by supporting free or low-cost breast cancer screenings. The problem? According to the FTC’s lawsuit, between 2017 and 2022, UBCF spent less than 1% of the $45 million that Kars fundraised on breast cancer screenings.

Fundraisers must provide clear and truthful information to donors about who gets the donor’s money — and fundraisers may be on the hook for any deceptive claims they make. If you’re considering fundraising on behalf of a charity or nonprofit, due diligence now can save you time, money, and potential legal trouble later. Here’s how to start:

• Review the charity’s IRS 990 filings and financial statements, including financial audits, written plans, and itemized budgets. They’ll show how much the charity brings in and how funds are generally allocated.
• Do an online search. Has the charity been sued by state regulators or subject to any disciplinary actions? Has the charity been criticized for how they’ve used donations in the past?
• Evaluate the charity’s governance and compliance procedures. Among other things, verify that the charity: has 501(c)(3) status with the IRS; is registered to solicit donations in your state; has a board with independent members (a board consisting only of family members is a red flag); has a conflict-of-interest policy; and has regular board meetings and minutes.
• Ask for concrete information about the charity’s causes and campaigns. Review the charity’s rating and other information on sites like the BBB Wise Giving Alliance, Charity Navigator, CharityWatch, and GuideStar. Make sure that any claims you make while fundraising — like who the charity is supposedly helping and how much — can be substantiated.

Check out the FTC’s resources for online fundraising and how to review requests from charities.

Spot a fundraiser or charity not playing by the rules? Tell the FTC: ReportFraud.ftc.gov.