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11. Contract Requirements Protect Charities

For the protection of charities, the Act also requires that contracts between charities and their paid solicitors and professional fundraising consultants be in writing and include certain elements designed to protect charities. [1] These include:

• Every contract between a paid solicitor or professional fundraising consultant and a charitable organization or sponsor must be in writing.
• Every contract between a paid solicitor or professional fundraising consultant and a charitable organization or sponsor must be signed by an authorized official of the charitable organization or sponsor, who must be a member of the organization’s governing body. With respect to 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 an individual.
• A paid solicitor or professional fundraising consultant shall provide a copy of the contract to the charitable organization prior to the performance of any material services under the contract.
• A paid solicitor or professional fundraising consultant shall provide a copy of the contract to the Secretary of State upon request.
• If a paid solicitor or professional fundraising consultant will have custody of any contributions, each such contribution must be deposited within two business days of its receipt into an account in the name of the charity, and the charity must have sole control over all withdrawals from the account.
• With respect to both paid solicitors and professional fundraising consultants, the contract must include, but is not limited to, the following provisions:
• A statement of the charitable purpose for which the solicitation campaign is being conducted.
• A statement of the respective obligations of the paid solicitor or professional fundraising consultant and the charitable organization.
• The effective and termination dates of the contract.
• With respect to professional fundraising consultants, the following provisions shall be included in the contract:
  • Whether the professional fundraising consultant will at any time have custody or control of contributions.
  • A professional fundraising consultant who at any time has or will have custody or control of contributions from a solicitation conducted on behalf of a charitable organization in Colorado shall also register with the Secretary of State before performing any material services with respect to such solicitation.
  • A clear statement of the fees that will be paid to the professional fundraising consultant, or if the fees are to be calculated based on a percentage of contributions or other formula, a clear statement of the percentage or other formula.
• With respect to paid solicitors, the contract shall contain a statement of the specified minimum percentage, if any, of the gross receipts from contributions that will be remitted to the charitable organization, or 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.
  The purpose 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, if the paid solicitor’s compensation is contingent upon the number of contributions or the amount received, or as a reasonable estimate, expressed as a percentage of the gross revenue, if the compensation is not contingent upon the number of contributions or the amount received.
  • Any stated percentage cannot include any fundraising costs payable by the charitable organization.
• With respect to paid solicitors, the contract shall contain a statement of the specified percentage, if any, of gross revenue that constitutes the paid solicitor’s compensation.
  “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 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, if the paid solicitor’s compensation is contingent upon the number of contributions or the amount received, or as a reasonable estimate, expressed as a percentage of the gross revenue, if the compensation is not contingent upon the number of contributions or the amount received.
• 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.