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June 22, 2017

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What to look for in fundraising agreements

by the AFRDS


What to look for in fundraising agreements and what they mean

Ancient Romans called it a "pact." Webster's says it's "a binding agreement." Roget's Thesaurus offers a dozen alternatives - "deal", "arrangement", "understanding", "covenant", or "promise" to name a few. But to Shiree Lynch, Georgia State PTA President, it means only one thing: "A contract is a contract." And, when it comes to fundraising, she says parent groups should not do business without one. "Written agreements between fundraising companies and parent groups are absolutely vital," Lynch says. "They spell out for everyone exactly what the expectations are of the other."

Jenny Raber, First Vice President of the West Virginia PTA, agrees.

"When making fundraising decisions, parent groups should think of themselves as small businesses," Raber says. She has 15 years of PTA experience but, it's her role as co-owner of two businesses that fuels Raber's belief in the importance of fundraising contracts. Acknowledging that fundraising drives, particularly product sales, can bring in thousands of dollars, Raber believes safeguards should be in place. "Written contracts are one form of safeguard," she says.

Most professionals in the fundraising industry agree that some form of written agreement is a good idea. With all major decisions in writing, both parties can assume responsibility for complying with the terms, and begin the fundraising project with a clear understanding of who is responsible for what. But there is some debate on the necessity of signed agreements.

Alicia Burlew, a 17-year fundraising veteran, works for a 23-year-old fundraising company based in Oklahoma that has always required written agreements - signed by both parties - for reasons she considers obvious.

"It protects the group in terms of getting what they asked for. And it protects our company as far as getting paid," Burlew says. But, she adds, these agreements are vital business tools for other reasons.

"A signed agreement is the first order of business but often it's the final point of reference if questions come up," says Burlew, who uses the fundraising agreements to keep track of details. She even notes on each agreement why the group is raising the money - to upgrade the playground or expand the media center, for example. "That way," she says, "we all stay focused on the target."

Gary Ulrich, president and co-owner of a Pennsylvania-based fundraising company, agrees that good record-keeping is vital from the start. Though he takes a different approach to the notion of "signed" agreements.

Ulrich says the first question he often gets from a customer on the brink of striking a deal is "Do I have to sign anything?"

"It makes them nervous," says Ulrich who tells customers it isn't necessary that they sign a contract. If the group is not satisfied, Ulrich knows he could lose their trust and eventually, their business. The 20-year fundraising veteran believes that's assurance enough that a commitment has been made. Then, with the sponsor's participation, Ulrich completes a "purchase order" containing all the program specifics including costs and a detailed list of products, services, support materials and delivery dates for each. "It's really more for internal purposes, but we can refer to this document throughout the process."

Once A Commitment is Made...

...the tough part is largely over and the wheels are set into motion. Almost immediately, the fundraising company will purchase items (brochures, catalogues, products, etc.) based on that agreement - signed or otherwise. Acting in good faith, companies must often make financial commitments early in the process to ensure the fundraising program is a success. Michael Keyes, president and owner of a fundraising company based in Michigan, explains.

"Fundraising has become so sophisticated, with hundreds and hundreds of products. Many are imported from other countries," according to Keyes. "Companies like mine find they have to project earlier in the sales cycle so that our suppliers can ensure we will have enough inventory in the fall." Some companies offer early signing benefits which can create logistical issues for some parent groups.

"Spring is usually before the new leadership is elected," says PTA leader Lynch. An outgoing president or fundraising chairperson, eager to make the best possible arrangement for the group, may make a commitment for the following school year without the knowledge or support of the new leadership. But, according to Lynch, prematurely signed agreements - or those that do not have the full support of the incoming leadership - put both the fundraising company and the sponsoring group in a predicament.

She advises outgoing chairs to confer with incoming chairs before making a commitment to a particular company or program. Likewise, she believes, companies should be sure they are working with the right decision-maker before actively pursuing their business. Pat Bieneman, president and co-owner of a fundraising firm in Washington state agrees. "Most of our contracts are signed by the organizations' outgoing officers," admits Bieneman. "But we encourage them to involve the incoming board or fundraising chairs in planning the fall fundraiser." In fact, Bieneman says, many of her groups have found that good planning makes for smoother transition among volunteers.

Savvy parent groups, according to Bieneman, appoint a new fundraising co-chair every year to serve a two-year term. The first year is spent learning, gaining experience and helping select next year's major fundraising project - a project they will lead in the second year of their term as fundraising chair. The continuity is helpful in many ways, Bieneman says, but, most importantly, "there's agreement among leadership from one year to the next and no one feels like a fundraiser has been foisted upon them."

Despite efforts to reach consensus on fundraising programs, sometimes unforeseen circumstances prompt groups to want to renege on their commitments. Parent group leaders and fundraising experts agree, this is almost always a bad idea. It doesn't matter if the agreement was sealed with a handshake or a signature.

"If a group has an agreement with another company, we politely decline and walk away," says Burlew. Her company belongs to the Association of Fund-Raising Distributors and Suppliers (AFRDS), a professional trade association for companies that assist non-profit groups in their fundraising efforts. AFRDS developed the industry's Code of Ethics and Standards for Professional Practice which includes the following: "No member shall knowingly interfere with the contractual relationships of any party or entity." To do so, Burlew and her AFRDS colleagues believe, reflects badly on the company itself and the industry as a whole. "I don't work that way and I don't want our salespeople to work that way."

Ulrich agrees. "A big red flag should go up if a sales rep suggests you break an agreement with another company," he says. Likewise, companies say they are wary of groups eager to break a contract with another firm for what they perceive to be a "better deal." "What does that say about the integrity of the organization?," company reps will speculate. "Will the group ultimately decide to back out of their agreement also?"

When Lynch hears from a local PTA having second thoughts about following through on an agreement with a particular fundraising company, she asks, "Do you have a signed contract?" If the answer is "yes," she repeats her mantra: "A contract is a contract." Unless the company has committed some kind of flagrant offense, Lynch counsels groups to follow through on the agreement.

According to Ulrich: "I work hard to stay close to the decision-maker. If I do my job right, I'm listening and answering their questions - leading them through a process to find a good fit. Rarely do they change their minds." Few would disagree. A successful venture between two parties in almost every business enterprise, including fundraising, is about finding "a good fit." And folks who know fundraising say, once you've found a good fit, it's best to get it in writing and then - whether you sign it or not - stick to it.

What to look for in a fundraising agreement

While some companies do not require sponsors to sign a contract, most rely on some type of written statement to document arrangements. Here are some things to look for when reviewing a fundraising agreement:

  • Check all the numbers. Are the costs, amount of profit to the group, etc., the same as those you agreed to verbally?

  • Are all of the services you require included? (For example: kick-off presentations, incentive programs, tallying, packing, shipping.) Is it clear who - the sponsoring organization or the fundraising company - covers the cost for these services?

  • Are the promotional materials you reviewed and approved listed: (take-home brochures, display kit, sample packs, etc.)?

  • Are important dates included and consistent with your verbal agreement?

  • Is there a clause covering the procedure for handling damaged, unsold or returned merchandise (appropriate for some products)? What about back-orders and substitutions of popular items?

  • If you are required to sign a contract, be sure you have ALL the appropriate signatures (many groups require at least two) and that it is clearly an agreement between two organizations, NOT between two individuals.

***********************

Editor's Note: This article is from a past issue of the Fundraising Edge, a publication of the Association of Fund-Raising Distributors & Suppliers and is reprinted with permission.






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