InfoCision Management Corporation is a telemarketing company that has been in the news recently because it has been handling the telemarketing accounts for a number of charities, but has not been very up-front about where the money raised actually ends up.
InfoCision telemarketers used both the traditional asking-for-money strategy along with a slightly sneaker system where they asked targets to send letters asking for donation to 15 of their neighbors (this is their "neighbor-to-neighbor program"). Whatever money was raised was processed through InfoCision, with the result that they kept 60-100% of the money for themselves.
While this is bad, it gets much worse. As a general rule-of-thumb, it is expected that a well run-charity should spend no more than about 25% on fundraising and operating fees, and about 75% of the money raised should go to supporting the programs and services that they provide. InfoCision instructed its employees to say, if asked, that at least 70% of the money donated would go towards the target charities. And worse, in at least two cases, the charities in question were involved in lying to the donors. The American Cancer Society (ACA) and American Diabetes Association (ADA) signed agreements with InfoCision that set the default amount coming to them at 44% -- but approved the telemarketing script used, which included the 70% statement. The ADA actually approved a contract that estimated that 85% of funds raised would stay with InfoCision in 2011 -- perfectly willing to stay with, and encourage, the company despite these ongoing business practices.
The contracts with InfoCision were apparently somewhat twisty; despite the aforementioned agreement, in 2010 the ACA did not receive any money, but had to pay InfoCision $113,000 for their services. Infocision kept, in effect, 102% of the money, making 5.4 million dollars between the ACA and those trying to give the ACA money. The American Diabetes Association fared better, giving only only 78% of donations to InfoCision in 2010.
Other charities that have hired InfoCision include the March of Dimes (which handed over 57% of earnings), the American Institute for Cancer Research (69%), and the American Lung Association (88%). Keep in mind that well-run charities of this stature aim for something like 25% -- after paying organizational expenses.
What can you do? Well, don't give money over the phone, or at least, not unless you call them. You should never give money to a stranger on the phone. Even if you have researched the organization, you have no guarantee that you are giving to that organization directly... or at all. These days any organization of size has a website that will walk you through the process of giving money on-line and provide a phone number so that you can contact them directly. If you are dealing with a smaller organization, such as police leagues, sheriff's associations or firefighters' relief organizations, contact your local departments yourself and ask them their prefered method of accepting donations.
And at the risk of belaboring the point, do research charities before you give. It is very easy to assume that organizations with names like "American Cancer Society" and "American Diabetes Association" are the American organizations for cancer and diabetes. In truth, while these are big organizations, neither are rated very highly. The Cancer Research Institute, the Damon Runyon Cancer Research Foundation, and the Dana-Farber Cancer Institute all have much, much better ratings in the areas of cancer research. If you were looking for a charity focusing on diabetes, the Diabetes Action Research and Education Foundation is head, shoulders, and kneecaps above the ADA. And don't assume that a familiar name is a good bet either -- March of Dimes has a fairly low rating, despite being decades old and raising over $200,000,000 a year.
Bloomburg's original expose
FTC's guide to spotting scams