Contract elements required by law

Q1. What must be in a contract between a paid solicitor or professional fundraising consultant and a charitable organization?

A1. The following summarizes the provisions of the Colorado Charitable Solicitations Act that apply to contracts and the proper handling of contributions. [1]

1. Every contract must be in writing.

2. Every contract must be signed by an authorized official of the charitable organization or sponsor. The authorized official must be a member of the organization’s governing body.

   For paid solicitors, the contract must also be signed by the authorized contracting officer for the paid solicitor, or by the individual paid solicitor if he or she is not part of an organization.

3. A copy of the contract must be given to the charitable organization before any material services are performed under the contract.

4. Upon request, a copy of the contract must be given to the Secretary of State.

5. If a paid solicitor or professional fundraising consultant will have custody of any contributions, each contribution must be deposited within two business days of receipt into an account in the name of the charity. The charity must have sole control over all withdrawals from the account.

6. All contracts must include:

   • A statement of the charitable purpose for which the solicitation campaign is being conducted.

   • A statement of the respective obligations of each party.

   • The beginning and ending dates of the contract.

7. Professional fundraising consultants must include the following:

   • Whether the professional fundraising consultant will have custody or control of contributions at any time.

   • A clear statement of the fees that will be paid to the professional fundraising consultant. If the fees are based on a percentage of contributions or other formula, a clear statement of the percentage or formula used must be included.

A professional fundraising consultant who will at any time have custody or control of contributions from a solicitation conducted on behalf of a charity in Colorado must register with the Secretary of State in Colorado before performing any material services in connection with that solicitation.

1. Paid solicitors must include a statement of the specified minimum percentage, if any, of the gross receipts from contributions that will be remitted to the charitable organization. If the solicitation involves the sale of goods, services, or tickets to a fundraising event, the specified minimum percentage, if any, of the purchase price that will be remitted to the charitable organization must also be included.

   Any stated percentage cannot include any fundraising costs payable by the charitable organization.

2. Paid solicitors must include a statement of the specified percentage, if any, of gross revenue that constitutes the paid solicitor’s compensation.

   If the paid solicitor’s compensation is not contingent upon the number of contributions or the amount received, the paid solicitor’s compensation shall be expressed as a reasonable estimate of the percentage of gross revenue. The contract shall clearly disclose the assumptions upon which such reasonable estimate is made.  The stated assumptions must be based upon all the relevant facts known to the paid solicitor regarding the solicitation to be conducted.

   Compensation means all salaries, commissions, fees, and other expenses paid by the charitable organization or sponsor to the paid solicitor.  It is assumed that paid solicitors will pay all necessary business expenses from their total compensation.

   The purpose of these questions is to disclose or estimate in advance the amount of the gross revenue from the solicitation campaign that will constitute the paid solicitor's compensation. The amount shall be expressed either as a fixed percentage of the gross revenue or as a reasonable estimate.

[1] See 6-16-104.3(2) and 6-16-104.6(2), C.R.S.