- - Monday, November 9, 2015

ANALYSIS/OPINION:

With Halloween behind us, a deluge of Christmas advertising is already starting to pervade the landscape. And with that is the beginning of another round of year-end fundraising appeals from charities. If you get a letter in the mail or see a tear-jerking ad on TV, make sure your heart doesn’t get ahead of your head.

Individuals donated $258 billion to charity last year, according to the national Philanthropic Trust. That’s a pool of good. It’s also an opportunity for scammers to profiteer. One estimate estimates charity fraud is as high as $40 billion a year.

In May, one network of scammers was exposed by a combined action from all 50 states and the Federal Trade Commission. Investigators charged four cancer charities, and the Federal Trade Commission said they “operated as personal fiefdoms characterized by rampant nepotism, flagrant conflicts of interest, and excessive insider compensation.” The network was the Cancer Fund of America, Cancer Support Services, the Breast Cancer Society, and the Children’s Cancer Fund of America.

At face value, all four of these groups sound reputable. The Cancer Fund of America had operated for almost 30 years, and, like any other charity, filed publicly available tax returns and had financial audits. But a closer look from authorities revealed that 97 percent of the money — $187 million — never went to cancer patients.

It’s an egregious example of charity fraud. And it’s one that likely should have been stopped sooner. CharityWatch, a small but tough watchdog, had given an “F” grade to the Cancer Fund of America for 20 years. But who reads that stuff when slick commercials or clever appeals take up residence in your mailbox?

And there’s plenty of other instances of charities that are rotten.

A few more medical groups: the American Association for Cancer Support, the National Cancer Center, and the Cancer Survivors’ Fund all sound like worthy groups. But all get “F” grades for inefficient spending practices.

Veterans charities aren’t much better. AMVETS National Service Foundation takes in $30 million in revenue yet gets an “F” grade. Other flunkies include the National Veterans Services Fund, Healing Heroes Network, and Foundation for American Veterans. Even the Wounded Warrior Project isn’t great, only earning a C-plus grade (it used to get a D).

With some charities having no qualms about using sick kids and injured veterans as fundraising props, it’s no surprise that others use our furry friends. Medical charities, veterans and animal groups all share a common denominator. They appeal to the emotional side of our best intentions. For example, the Humane Society of the United States (which has been the subject of much controversy) does not run a single pet shelter despite running ads full of needy dogs and cats. It isn’t related to local humane societies that have similar names. Only 1 percent of the money raised by the Humane Society of the United States goes to such groups. (Fortunately, at least one state attorney general is investigating this group’s fundraising.)

Most charities are not reviewed by charity watchdogs. Charity Navigator reviews 10,000 charities out of 1.5 million that exist in the United States.

All groups, however, must make their tax returns available to the public. These can be used to perform basic financial analysis. Make sure to look at it before you donate. Having said that, it often takes a trained accounting eye to see how much a charity spends on overhead, including salaries, pensions and other benefits. For instance, the Humane Society of the United States contributes more to its executive pension plan than to local shelters.

A lot of questionable practices exist concerning “gifts in kind” and “joint accounting” to hide what is actually being delivered to the intended beneficiaries. A much better decision is to give to your local shelters who are much more in need of resources.

A few states name and shame bad charities, such as South Carolina’s “Scrooges and Angels” list. But by and large, with limited resources devoted to private and public charity watchdogs, it’s up to us to make sure we’re helping those in need, not propping up the Grinches.

As Samuel Johnson observed, “The road to Hell is paved with good intentions.” And in many cases the assumed good intentions are barely in evidence.

Richard Berman is president of Berman and Co., a Washington public affairs firm.

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