Charitable organizations rely heavily on fundraising to support their missions and serve their communities. When professional fundraisers are involved, it's crucial to ensure transparency and accountability in how donations are collected and used. That's where the California Commercial Fundraiser Bond for Charitable Purposes comes in. This bond acts as a safeguard, protecting both charities and donors from potential financial harm caused by unethical fundraising practices. Let's explore what this bond entails and why it's essential for ethical fundraising in California.
What is a California Commercial Fundraiser Bond for Charitable Purposes?
A California Commercial Fundraiser Bond for Charitable Purposes is a type of surety bond that guarantees a commercial fundraiser's compliance with the Supervision of Trustees and Fundraisers for Charitable Purposes Act. It's a promise to the state and the public that the fundraiser will conduct their activities honestly, ethically, and in accordance with the law.
This bond is a three-party agreement:
- The Principal: The commercial fundraiser, who is required to obtain the bond.
- The Obligee: The State of California, specifically the Attorney General's Registry of Charities and Fundraisers, and the public, who are protected by the bond.
- The Surety: The bonding company, which financially backs the bond.
In essence, the bond ensures that if the commercial fundraiser engages in any fraudulent or unethical practices that result in financial losses for charities or donors, those affected can file a claim against the bond to recover their losses.
For a general overview of surety bonds, this article provides a good starting point: What is a Surety Bond?
Why is it Needed? (Explaining the Law)
The requirement for a California Commercial Fundraiser Bond is rooted in the Supervision of Trustees and Fundraisers for Charitable Purposes Act, found within the California Government Code. Specifically, Section 12599.5 mandates that all commercial fundraisers for charitable purposes must obtain a surety bond in the amount of $25,000.
The bond is needed to:
- Protect Charities: Safeguard charitable organizations from financial losses due to fraudulent or unethical fundraising practices.
- Protect Donors: Ensure that donations are used for their intended charitable purposes and not misused or misappropriated.
- Promote Transparency and Accountability: Encourage commercial fundraisers to operate with transparency and maintain accurate records of their activities.
- Provide Financial Recourse: Offer a means of compensation if a commercial fundraiser engages in misconduct or violates the law.
How Do I Get a California Commercial Fundraiser Bond for Charitable Purposes?
Obtaining a Commercial Fundraiser Bond involves these steps:
- Contact a Surety Company: Reach out to a reputable surety company specializing in these types of bonds.
- Complete the Application: Provide the necessary information to the surety company.
- Underwriting Process: The surety company will review your application and assess the risk involved.
- Pay the Premium: If approved, pay the bond premium.
- File the Bond: Submit the bond to the Attorney General's Registry of Charities and Fundraisers as part of your registration.
What Information Do I Need to Provide?
When applying for a Commercial Fundraiser Bond, you'll typically need to provide:
- Personal information (name, address, etc.).
- Business information (if applicable).
- Financial information.
- Fundraising experience and history.
Example Scenario
Imagine a commercial fundraiser who collects donations for a charity but then uses a portion of those funds for personal expenses. If this misappropriation is discovered, the charity or affected donors can file a claim against the fundraiser's bond to recover the misused funds.
How to Calculate the Premium
The premium for a California Commercial Fundraiser Bond is typically a small percentage of the bond amount, which is $25,000. The premium can range from 1% to 5% of the bond amount, depending on factors like:
- The applicant's credit score.
- The surety company's underwriting guidelines.
For more information on surety bond cost, please review this article: Surety Bond Cost
What Are the Penalties for Operating Without This Bond?
Operating as a commercial fundraiser in California without the required bond is illegal and can result in:
- Registration Denial: The Attorney General's Registry will not register a commercial fundraiser without the bond.
- Registration Suspension or Revocation: Existing registrations can be suspended or revoked for non-compliance.
- Fines and Penalties: Operating without registration or violating fundraising laws can lead to significant fines.
- Legal Action: The Attorney General may take legal action to stop illegal fundraising activities.
For information regarding California bonds in general, please review this page: California Bonds
FAQ
Q: Is the bond amount the same for all commercial fundraisers?
A: Yes, the required bond amount in California is $25,000.
Q: What happens if a claim is filed against my bond?
A: The surety company will investigate the claim and may pay it if it's valid. You are then responsible for reimbursing the surety company.
Q: How long is the bond valid for?
A: The bond is valid for the duration of the commercial fundraiser's registration, which needs to be renewed annually.
Q: Where do I get a Commercial Fundraiser Bond?
A: From a surety company licensed in California.
Q: Can I get a bond if I have bad credit?
A: It may be more challenging, but some surety companies specialize in helping those with less-than-perfect credit.