SUMMARY OF RESULTS OF CHARITABLE SOLICITATION CAMPAIGNS CONDUCTED BY COMMERCIAL FUNDRAISERS IN CALENDAR YEAR 2016 XAVIER BECERRA Attorney General State of California SUMMARY OF RESULTS OF CHARITABLE SOLICITATION BY COMMERCIAL FUNDRAISERS FOR YEAR ENDING 2016 (Government Code § 12599) TABLE OF CONTENTS PAGES SUMMARY 1 - 5 TABLE SUBJECT/TITLE 1 ALPHABETICAL LISTING BY CHARITABLE ORGANIZATION 2 LISTING BY PERCENT TO CHARITY IN DESCENDING ORDER 3 THRIFT STORE OPERATIONS – GOODS PURCHASED FROM CHARITY 4 THRIFT STORE OPERATIONS – MANAGEMENT FEE/COMMISSION 5 VEHICLE DONATIONS – ALPHABETICAL BY CHARITABLE ORGANIZATION 6 COMMERCIAL COVENTURERS – ALPHABETICAL BY CHARITABLE ORGANIZATION California Department of Justice November 2017 SUMMARY Every year Californians provide generous support to a wide array of charities, either directly or through commercial fundraisers that charities hire to solicit donations on their behalf. The term “commercial fundraiser” refers generally to a person or corporation that contracts with a charity, for compensation, to solicit funds. The commercial fundraiser charges either a flat fee or a percentage of the donations collected. By law, commercial fundraisers are required to register with the Attorney General’s Registry of Charitable Trusts and file a Notice of Intent before soliciting donations in California. For each solicitation campaign conducted, commercial fundraisers are then required to file annual financial disclosure reports that set forth total revenue and expenses incurred. This Summary Report is prepared from self-reported information contained in the annual financial disclosure reports filed by commercial fundraisers for 2016 and includes statistics for donations of both cash and used personal property (such as clothing and vehicles) for the benefit of charity. Only information from complete financial reports received before October 20, 2017 is included. Information from late, incomplete, or defective financial reports is not included in the Attorney General’s Summary. Tables 1 and 2 provide information from reports submitted by commercial fundraisers that solicit donations via direct mail, telemarketing, auctions, and entertainment events. Tables 3, 4, and 5 provide information from reports submitted for thrift store operations and vehicle donation programs. Table 6 provides information from reports submitted by commercial coventurers. It is important to note that most of the charities registered with the Attorney General’s Registry of Charitable Trusts do not use commercial fundraisers to raise funds. Historical figures show that a solicitation campaign conducted by a commercial fundraiser in general fundraising campaigns returns to the charity, on average, about 64 percent or less of the contributions received. The remainder is retained by the commercial fundraiser as fees and expense reimbursements. In thrift store campaigns or in vehicle donation campaigns, the amount paid to charity was significantly less. Comparison Figures for the Past Three Years of Reporting General Fundraising 2014 2015 2016 Total Revenue $687,719,087 $474,774,308 $581,378,753 Amount to Charity $371,900,722 $342,977,445 $402,668,343 Percent to Charity 54.08% 72.24% 69.26% 1 Thrift Stores (Cost of Goods) 2014 2015 2016 Total Revenue $125,286,485 $50,856,151 $53,249,164 Amount to Charity $11,899,809 $14,113,083 $16,369,869 Percent to Charity 9.5% 27.75% 30.74% Thrift Stores (Fee/Comm.) Total Revenue $4,267,853 $1,953,902 $1,426,722 Amount to Charity $156,445 $96,147 $114,000 Percent to Charity 3.67% 4.92% 7.99% Vehicle Donations Total Revenue $23,555,600 $64,152,1931 $70,177,096 Amount to Charity $8,244,157 $25,498.453 $31,550,574 Percent to Charity 35.00% 39.75% 44.96% Commercial Coventurers Total Revenue $50,754,424 $168,962,579 Amount to Charity $21,618,526 $6,489,902 Percent to Charity 42.59% 3.84% Registered Organizations Commercial Fundraisers 264 258 248 Filed Financial Rpts 138 153 151 Commercial Coventurers 32 53 55 Filed Financial Rpts 18 22 17 Some of the Worst Performers Based on a 3 Year Cumulative Percentage The table below reflects a summary of some of the worst performing commercial fundraisers. In some instances the charities ended up owing money on their solicitation campaign. The below information is based on an analysis of 3 year cumulative percentage and focusing on revenue in excess of $100,000: Smallest % of Distributions to Charities: 3-Year Revenue Amount to Charities % to Charities 1. PUBLIC OUTREACH FUNDRAISING, LLC $1,521,611 -$4,562,495 -299.85% 2. FACE TO FACE OUTREACH, INC. $358,404 -$519,638 -144.99% 3. NEW CANVASSING EXPERIENCE, INC. $3,491,249 -$3,819,431 -109.40% 1 Enforcement efforts have resulted in greater conformance to timely report submissions. This, in turn, resulted in greater accuracy for the reporting of revenue, which would otherwise not have been reported. 2 4. APPCO GROUP U.S., INC. $2,763,526 -$2,673,745 -96.75% 5. GRASSROOTS CAMPAIGNS, INC. $20,754,719 -$12,926,003 -62.28% 6. DONOR DEVELOPMENT STRATEGIES LLC $252,993 -$146,195 -57.79% 7. INTEGRAL RESOURCES, INC. $1,245,057 -$312,935 -25.13% 8. KKA ENTERPRISES, INC. $7,380,658 $181,500 2.46% 9. RAMBRET INC. $1,118,549 $57,000 5.10% 10. ITSDONATED, LLC $734,797 $55,755 7.59% Description and Summary of Information in Tables 1 and 2 • Information was obtained from 783 completed financial reports, compared to 838 reports reviewed for the 2015 annual report. • Commercial fundraisers collected $581.4 million in charitable contributions in 2016, an increase of approximately $106.6 million over the amount reported in 2015. • The distribution to charity in 2016 was approximately $402.7 million, an increase of approximately $59.7 million over the amount reported in 2015. • The average distribution to charity from all campaigns conducted by commercial fundraisers in 2016 was 69.26%, a decrease from the 2015 average of 72.24%. Overview of Thrift Store Operations and Vehicle Donation Programs Thrift stores handle what is known under state law as “salvageable personal property”. They may be operated directly by a charity or by a for-profit vendor. For-profit vendors are defined as commercial fundraisers if they (1) receive a management fee or commission from a charity for which they operate a thrift store or (2) purchase a majority of the goods sold from charities or social welfare organizations at negotiated prices. (Government Code, § 12599.) Charities that operate their own thrift stores incur overhead and other expenses associated with the operation of a retail store. After those expenses are paid, the earnings are used for such things as management expenses and charitable program services. Vehicle donation programs have become more popular over the past several years. These programs are administered either directly by charities, or by commercial fundraisers that solicit donations and manage the program on a charity’s behalf, in exchange for compensation. 3 The process of donating a vehicle usually begins when a donor contacts a charity or commercial fundraiser in response to a solicitation campaign. In the initial phone conversation, the donor will be asked questions about the vehicle. Generally, the vehicle will be accepted unless the cost of towing the vehicle exceeds its value. Donors are responsible for notifying the Department of Motor Vehicles of the transfer of registration. Failure to transfer registration has subjected many donors to subsequent penalties and expenses incurred after donation, most often as a result of parking violations. The donated vehicle is then sold and the proceeds are divided between the commercial fundraiser and the charity. Because all costs associated with advertising, towing, storing, and selling the vehicle are deducted from the proceeds before any distribution to charity, charities usually only receive a marginal amount from the car’s sales proceeds. Description and Summary of Information in Tables 3, 4 and 5 Table 3: Thrift Store Operations – Goods Purchased from Charity: This table lists, in alphabetical order, each charitable organization that solicited donations of used clothing and merchandise (“salvageable personal property”) and sold the property to a for-profit thrift store operator. The name of the for-profit store operator is also listed. (25 completed reports) Table 4: Thrift Store Operations – Management/Fee Commission: This table lists, in alphabetical order, each charitable organization that solicited donations of used clothing and merchandise and paid a management fee or commission to a for-profit thrift store operator. The name of the for-profit thrift store operator is also listed. (2 completed reports) Table 5: Vehicle Donation Program: This table lists, in alphabetical order, each charitable organization that solicited vehicles and paid a management fee or commission to a for-profit reseller. (622 completed reports) The data contained in these tables can be summarized as follows: • For-profit thrift store operators that purchased goods from charities reported total revenue of approximately $53.25 million for the 2016 reporting period. Of this amount, approximately $16.4 million, or 30.7%, was paid to charitable organizations. Total revenue increased from 2015 by approximately $2.4 million, and the percent to charity slightly increased by 3%. • For-profit thrift store operators that were paid a fee or commission by charities reported total revenue of approximately $1.43 million for the 2016 reporting period, with approximately $114,000, or 7.99% paid to the charities.