Scandal Alert: Is Your Consultant Operating Within the Law?
TL;DR:
If you’re paying anyone outside your organization to help in any stage or manner of fundraising—like event planning, grant writing, sponsorships, or marketing—they are legally required to be registered with the Attorney General. This rule protects nonprofits and the public trust, so always check their registration before hiring! W2 employees and volunteers are exempt.
What is a Professional Fundraiser?
Professional fundraisers are companies or individuals specializing in providing fundraising services and support, for pay. This includes certain event planners, individuals providing content of solicitation materials, and businesses who donate a portion of sales.
45 US States, including California, require people and companies to register and/or obtain a license prior to beginning fundraising activities.
In California, any person or company providing paid consulting on the content or strategy behind charitable solicitations of any kind should register with the Attorney General.
Fundraising consultants are required to register with the Attorney General, even if they are only performing one of the following services:
- Event planning, including events that:
- Sell tickets that are tax deductible (i.e. galas, luncheons, concerts)
- Solicit donations of any kind, including cash donations and donated items (live & silent auctions)
- Put together a raffle (galas, bingo, golf tournaments – yes, a “ball drop” is considered a raffle by the CA Attorney General)
- Establishing sponsorship programs (events, conferences, projects, capital campaigns)
- Marketing strategy, design and content creation with calls for funding (printed materials, mailers, social media, email marketing, sponsorship packets)
- Grant writing of any kind
- Retreat facilitation in which fundraising is discussed
What is considered Fundraising?
The California Attorney General defines Professional Fundraisers in the following categories:
- Commercial Fundraisers– a person or organization who is paid by a charity to solicit money or property on the charity’s behalf. The commercial fundraiser may solicit donations through various means, such as: direct mail, telephone, email or internet platform, auction at charity events, event ticket sales, vehicle donation, or thrift store operation. Commercial Fundraisers are an intermediary between the donor and the charity – they take possession of the funds or items from the donor and are required to transfer those funds or items to the charity within five working days. Commercial Fundraisers may be paid either a flat fee or a percentage of donations collected in the charity’s name.
- Fundraising Counsel – a person or organization who is hired by a charity to plan, manage, advise, counsel, consult, or prepare materials to solicit donations for charitable purposes. Unlike the Commercial Fundraiser, Fundraising Counsel does not solicit donations from the public and does not receive or exercise any control over the solicited funds or property. Instead, the donations go directly to the charity. Fundraising Counsels offer guidance and best practices to charities. Fundraising Counsels should be paid hourly, monthly or via a fixed fee agreement. While not illegal, being paid a percentage of donations violates the Code of Ethics of the Association of Fundraising Professionals (AFP) and the National Council of Nonprofits. VISIONALITY is a Fundraising Counsel.
- Commercial Coventurer – a person or organization who, for profit, is primarily engaged in a business other than in connection with raising funds for charitable purposes. A commercial coventurer raises money for charities by giving the charity a certain percentage from the sale of goods or services. A commercial coventurer represents to the public that the purchase or use of its goods or services will benefit a charitable organization. This is also known as “cause marketing,” and is becoming more and more popular. An example we’re seeing locally are restaurants or retail stores who donate a portion of sales on a certain day to a specific charity.
Why should I care?
Because it is illegal to engage in fundraising activities in California without registering with the Attorney General.
Nonprofits operate within the public trust and engage to help the most vulnerable among us. It is critical that nonprofits spend money judiciously by hiring professionals with training and experience, who are, above all, operating within the law and adhering to the regulations set forth by the Attorney General and other governing bodies.
The Attorney General requires language be included in the contract terms for fundraising contracts. This language protects the community at large, donors and the organization itself.
How do I make sure I’m in compliance?
W2 employees and unpaid volunteers of a nonprofit are not included in the definition of a fundraising counsel, and therefore don’t need to register.
Before hiring a paid (non-w2) consultant of any kind, determine if the work includes any revenue generation goals or components, and then search the Attorney General’s Registry to confirm the firm or individual is registered and therefore legally allowed to provide services to your organization.
You can test out the search tool by typing “VISIONALITY” into the “Organization Name” field. We’re registered! Is your consultant?
