PROFESSIONAL FUNDRAISER 101

What is a Professional Fundraiser?

A Professional Fundraiser is a legal term that ordinarily refers to an outside consultant that:1.) raises money, 2.) on behalf of a nonprofit, and 3.) receives compensation for his/her services. For your state’s legal definition, click here. Professional Fundraisers are not volunteers or permanent staff, like the college students from your alma mater who call you annually or a Girl Scout selling cookies. Rather, Professional Fundraisers are ordinarily consulting firms or individuals who are independent of the nonprofit, and who sell their skills to the organization.  Examples include a phone-bank that solicits donations for several charities, a person who writes grants, or someone who designs charitable fundraising campaigns. Professional Fundraisers often go by one of several names, including: Professional Fundraiser, Professional Solicitor, Grant Writer, Fundraising Counsel, or Fundraising Consultant.

How do Professional Fundraisers do their Work?

Professional Fundraisers, like all independent consultants in Nonprofitland, ideally exist to help serve the nonprofit community. But as a for-profit service, it’s important the Professional Fundraiser you choose has the required skills and operates according to best business practices. Professional Fundraisers should serve your nonprofit, not use your nonprofit as a profit-making tool. The Federal Trade Commission has a list of best practices nonprofits should use when hiring a professional fundraiser. Likewise, Professional Fundraisers have their own ethical code regarding proper compensation to protect nonprofits. It is not ethical for a Professional Fundraiser to be paid a commission based on performance. It is important to think of Professional Fundraisers like other service providers such as plumbers. If your nonprofit hires a plumber, you would pay them a fee based on the time and effort they put into fixing your pipes, not a commission. The same is true for a Professional Fundraiser.

Do Professional Fundraisers need to Register?

Often, states regulate Professional Fundraiser and require them to register prior to soliciting funds. However, each state’s registration laws vary. Professional Fundraisers register with the state to demonstrate that they will fundraise for charities in compliance with the laws, and fulfill their obligations to the nonprofits they serve. States want to deter fly-by-night, “take the money and run” operations, and halt misleading fundraising practices such as raising money for a look-alike organization such as the “American Society for Cancer.”

To register or to renew their registration, Professional Fundraisers often need to submit their contracts for the services they will or have provided to various nonprofits. To be safe, make sure your Professional Fundraiser has registered before signing a contract. Check with your states’ charity registration office to determine if your Professional Fundraiser is properly registered.

Where do Professional Fundraisers Register?

Generally, Professional Fundraisers operate in the same state that the nonprofit is located. If the nonprofit has an interstate following, like the American Cancer Society, then the fundraiser might solicit across state lines. When this happens, the Professional Fundraiser must be registered in every state in which they solicit. Further, using a Professional Fundraiser may subject the nonprofit to charity solicitation requirements, even if they would otherwise be exempt from solicitation registration. Always be aware of where your nonprofit may legally solicit and where your Professional Fundraiser is soliciting. And, when in doubt, check with your states’ charity registration office or Legal for Good PLLC.