surety bonds

How Do Fundraiser Bonds Protect Nonprofits?

posted by
Danielle Rodabaugh,
Educational Outreach Editor 

Some nonprofit organizations hire professional fundraisers to help them reach their funding goals more quickly and easily. But how do nonprofits know that the professionals they choose to work with will appropriate the funds in full? One way government agencies help curb professional fundraising fraud is by requiring individuals and businesses to purchase surety bond insurance before they can be licensed to work on behalf of nonprofits and other organizations.

Fundraiser bonds are not like financial bonds that are used for investment purposes, nor are they like performance bonds that provide financial returns to investors. Although insurance companies underwrite bonds, they do not function the same way as traditional insurance policies.

Thousands of individual surety bond types exist, each providing a specific type of financial protection that depends on the bond's purpose and its contractual language. Despite their individual differences, all commercial bond types work in the same basic way. A simple surety bond definition explains that surety bonds join three parties together into legally binding contracts.