Sign In / Sign Out
Navigation for Entire University
Current nonprofit sector research and recommendations for effective day-to-day practice from ASU faculty, staff, students, and the nonprofit and philanthropic community.
![]() |
posted by Danielle Rodabaugh, Educational Outreach Editor at SuretyBonds.com |
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.
Fundraiser bonds are a specific type of license and permit bond, which government agencies often require before certain professionals can be licensed to work. License and permit bonds function as lines of credit that can be tapped into to pay for monetary losses or fines that result from licensing violations made by, in this case, professional fundraisers. Simply put, surety bonds guarantee professional fundraisers handle funds ethically.
Each professional fundraising bond provides a financial guarantee that charitable funds will not be mismanaged or misplaced by professional fundraisers, which are typically defined as any individual, corporation or other entity that solicits funds, assets or property for compensation. If a nonprofit experiences any losses, damages or penalties due to the performance of a professional fundraiser, the bond amount can be used to reimburse the agency.
The amount the protection bonds provide varies depending on state specifications, but it typically falls between $10,000 and $25,000. The bond amount is used as a financial guarantee, so the higher the bond amount, the more financial protection is afforded.
The surety bond application process is also used to keep unqualified individuals from working jobs through which they might take advantage of consumers, businesses or nonprofits. For example, those who have bad credit scores or other poor financial credentials typically have difficulty getting approved for a professional fundraising bond. Or if they are, they might have to pay a much higher premium to purchase a special bad credit surety bond. If an individual cannot qualify, or pay for the needed bond, he or she will be unable to work as a professional fundraiser.
In summary, if you work with a nonprofit organization that has decided to use a professional fundraiser, be sure the individual or company is licensed according to state laws. If your state requires professional fundraisers to be bonded, verify that your partner has a valid surety bond on file with the state. Doing so could keep your organization from losing money at the hands of an unethical professional who's just looking for an easy way to scheme unsuspecting philanthropists out of money.
Danielle Rodabaugh is the chief editor for the Surety Bonds Insider, the surety industry's leading publication that tracks legislative changes and news updates within the market. As a part of the agency's educational outreach program, Danielle educates consumers on their rights under surety bond protection. In her free time Danielle volunteers as a photographer for the city of Columbia, Missouri, and advocates for the Christian Foundation for Children and Aging.
![]() |
Like this article? Get another! Click here to read "Research Friday: Human Capital Performance Bonds. What are they? How do they work?" by Patsy Kraeger. |
Yes, surety bonds are a type of insurance. However, they function more as lines of credit because the insurance company will require the principal (policyholder) to reimburse it for any claims paid out. Bonds protect consumers in the same way insurance policies do, but they way financial accountability is distributed differs.
Thank you for visiting the ASU Lodestar Center website.
Please indicate how you would like to proceed.
Don't have an account? Register today!
In other words these fundraiser bonds are a kind o...
In other words these fundraiser bonds are a kind of insurance against a possible fraud, am I right?