Charitable organizations rely on donations to support their important work, and professional fundraisers play a crucial role in connecting these organizations with donors. To ensure ethical fundraising practices and protect the public, many states require professional fundraisers to obtain surety bonds. These bonds, known as Professional Fundraiser Bonds, act as a financial safeguard, guaranteeing that fundraisers operate in compliance with state laws and uphold ethical standards. Let's explore the world of Professional Fundraiser Bonds and their significance in maintaining trust and transparency in charitable giving.
What is a Florida Professional Fundraiser Bond?
A Florida Professional Fundraiser Bond is a type of surety bond that guarantees a professional fundraiser will comply with state regulations governing charitable solicitations and conduct business honestly and ethically. It's a financial assurance that protects the public and the charities they support from potential losses caused by the fundraiser's misconduct.
Think of it as a three-way agreement:
- The Obligee: The state agency requiring the bond (they set the rules for professional fundraisers).
- The Principal: The professional fundraiser who needs the bond (the individual or organization raising funds).
- The Surety: The surety bond company that issues the bond and backs it financially (the safety net for the public and charities).
If a donor or charity suffers a financial loss due to the fundraiser's illegal or unethical actions, they can file a claim against the bond. The surety company investigates, and if the claim is valid, compensates the harmed party up to the bond amount. The fundraiser is then responsible for reimbursing the surety company. It's important to understand that this bond is not insurance for the fundraiser; it's there to protect the public and the charities. Understanding the differences between surety bonds vs. insurance is vital.
Why is it Needed? (Governing Law)
Professional Fundraiser Bonds are required because states want to regulate charitable solicitations and protect the public from fraudulent or unethical fundraising practices.8 Each state has its own laws, but the overall goal is to maintain transparency and accountability in the charitable sector.
The specific law requiring the bond varies by state. For example:
- Florida: Requires a Professional Solicitor Bond under Florida Statute 496.41.
These laws often cover things like:
- Registration: Making sure fundraisers are registered with the state.
- Record-keeping: Requiring fundraisers to maintain accurate records of donations and expenses.
- Contracts: Mandating that fundraisers have written contracts with charities.
- Prohibited Practices: Outlining unethical fundraising practices, such as misrepresentation or misuse of funds.
The bond acts as a financial guarantee, ensuring that funds are available to compensate those harmed by a fundraiser's misconduct. This is part of a larger process known as surety bond underwriting.
Who Needs to Get this Bond?
If you're a professional fundraiser and your state requires bonding, you'll need a Professional Fundraiser Bond. This typically includes:
- Individuals: Consultants, fundraising counsel, and paid solicitors who work on behalf of charities.
- Organizations: Companies that provide fundraising services to charities.
It's crucial to check the specific licensing and registration requirements in your state to determine if you need a bond.
How do I Get a Florida Professional Fundraiser Bond?
Getting a Professional Fundraiser Bond is a straightforward process:
- Contact a surety bond agency: Look for one specializing in this type of bond.
- Apply: You'll provide information about yourself or your organization, including financial statements and fundraising experience.
- Get approved: The agency will review your application, including your credit history and background check.
- Pay the premium: This is a small percentage of the total bond amount.
- Receive your bond: The agency will issue the bond, and you can submit it to your state licensing agency.
Before you start, it's helpful to know 10 things to know before buying a surety bond.
What Information do I Need to Provide?
When applying, be prepared to share:
- Personal/Business details: Legal name, address, social security number or business EIN, business structure, etc.
- Fundraising experience: Information about your experience in fundraising, including any relevant certifications or licenses.
- Financial info: This might include a credit check, financial statements, and bank references.
- References: Contact information for professional references who can vouch for your fundraising experience and ethical practices.
- Bond amount: The amount required by your state, which you can usually find on the state licensing agency's website.
Accurate and complete information is essential for a smooth application process.
How Much is a Professional Fundraiser Bond?
The cost (called the "premium") depends on a few factors:
- Bond amount: Set by your state.
- Your creditworthiness and financial stability: Good credit and strong financials usually mean lower costs.
- The surety company: Each company has its own rates.
You'll typically pay a small percentage of the total bond amount each year.16 It's wise to compare quotes from different agencies.
What are the Penalties for Operating Without This Bond?
Working as a professional fundraiser without the required bond can lead to:
- Fines: You could face significant fines imposed by the state licensing agency.
- License suspension or revocation: Your fundraising license or registration could be suspended or permanently revoked.
- Legal action: The state could take legal action against you, potentially leading to further fines or even imprisonment.
- Reputational damage: Operating without a bond can damage your reputation and make it difficult to attract clients or work with reputable charities.
- Loss of business opportunities: You may be unable to secure fundraising contracts with charities that require bonded fundraisers.
Always comply with your state's licensing and registration rules to avoid these issues.
The Renewal Process
Most Professional Fundraiser Bonds need to be renewed annually. The renewal process involves providing updated information to the surety bond agency and paying the renewal premium. The agency will then issue a new bond. It's essential to keep track of the bond's expiration date and initiate the renewal process in advance to avoid any lapse in coverage.
FAQ
Q: What happens if someone makes a claim on my bond?
A: The surety company will investigate the claim. If it's valid, they'll pay the claimant up to the bond amount, and you'll be responsible for reimbursing the surety company.
Q: Will I automatically get approved for a bond?
A: Not necessarily. The surety company will review your application, credit history, and background check before approving you.
Q: How do I know the required bond amount?
A: Check your state's professional fundraiser licensing or registration regulations. The bond amount is usually specified there.
Q: Should I talk to a lawyer about this?
A: While not legally required, consulting with a lawyer can be helpful to understand the legal aspects of the bond and state fundraising laws.
Q: Who do I give the bond to once I have it?
A: You'll typically submit it to the state agency that handles professional fundraiser licensing or registration.