Money & Legal

I'm wondering about the for-profit entities that are contracted by charities, specifically DialogueDirect, Inc. Their one charity client is Children International and their employees are always out near Pike Place Market canvassing for sponsorships.

Apparently, DD negotiates a flat contract with CI at the beginning of the year, which comes out of CI's fundraising budget (12.5%). DD uses the money to hire the canvassers in several states, hopefully getting enough sponsorships that CI gives them another contract.

Here is a profile report for DialogueDirect, Inc. from the Washington Secretary of State website. How do I interpret this report?

Contributions: $299,193
Amount to Charity Clients: $-367,965

According to the financial information shown at left, -122% of the contributions raised by this organization were returned to or retained by the charity client(s).

It seems like there is a mistake on the report. Here is a profile report for another fundraiser, which I interpret to mean that the charity paid the fundraiser $3 million and they raised $21 million. How does DD get paid negative $368k? Does it have to do with the fact that DD doesn't actually handle money, instead sending sponsorship signups directly to CI in their name?

Second, assume that CI's program expenses are 80% (it's actually 80.4%). How much would DD have to raise for CI to get a return on their investment? For example, if CI paid DD $100k, which they could have put directly into program expenses, and DD raises $100k, they only actually put $80k of that into program expenses. So wouldn't DD actually have to raise $125k for CI to "break even" in terms of actual charity?

What are the economics there? Their administrative costs are 6.9% and their fundraising expenses are 12.5%, if that matters. Unfortunately I don't know how much of the 12.5% is going to DialogueDirect. Their fundraising costs for FYE 09/2008 were $17,198,994, and their revenue growth is about 10%, so if necessary we could estimate their fundraising costs for FYE 12/2009 (what the DD profile report is for).

I suppose it isn't too different than hiring a for-profit entity to print their materials, or serve their internet, etc, but it seems like there is something inherently lame about a non-profit entity using a contracted for-profit fundraiser. What do you think?

(I know there is some hubbub online about how DD treats and pays their employees, but that isn't particularly relevant to the debate I was having with one of their canvassers.)