- - Monday, May 28, 2018

You wouldn’t want your surgeon to be someone who got a “D” in medical school. And you wouldn’t trust your retirement account in the hands of someone who got a “D” in business school. By the same reasoning, the public should be paying attention to the latest rating guide from CharityWatch — and the “D” grade it issued to the Humane Society of the United States (HSUS).

We’ve all seen those commercials on TV with the sad piano music and the images of needy pets. It’s an effective ruse — who wouldn’t want to give money to help pets? But the reality is far different.

Like any common huckster, HSUS promotes itself as the best — the “most effective” animal rights group in the country. But CharityWatch crunched the numbers and found that about 50 percent of HSUS‘ budget is spent on fundraising and other overhead costs.


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In other words, donations that were supposed to go to the dogs (literally) ended up going to the dogs (figuratively).

Yet, HSUS says in its fundraising materials that it spends around 80 percent of its budget on programs. What’s the difference? CharityWatch finds that HSUS — along with a lot of other charities, which I’ll get to in a moment — counts millions and millions of dollars of fundraising costs as program spending. Basically, this amounts to counting vast amounts of fundraising material as spending that “educates” people about problems. It’s known as “joint cost” accounting, and the result is that it allows bad charities to mislead the public about how efficient they really are.



HSUS may be among the most corrupt charities in America. It paid close to $11 million in 2014 to settle a fraud-bribery lawsuit, and this year its board of directors gave a vote of confidence to its CEO, Wayne Pacelle, after he was credibly accused of sexually preying on staff. One board member even remarked, “We didn’t hire him to be a choir boy.” Mr. Pacelle finally resigned under donor pressure and has been hiding under a rock since.

But CharityWatch’s guide reveals far too much waste in the charity world generally.

In the veterans’ space, 28 out of 57 charities graded — about half of them — get “D” or “F” grades. One, the Veterans Support Foundation, only spends 18 percent of its budget on programs. Another, the Center for American Homeless Veterans, spends just 7 percent. Twice as many get “D” or “F” grades than get “A” grades.

Things aren’t much better with cancer charities. Of the 45 rated by CharityWatch, 19 get “D” or “F” grades. The United Cancer Support Foundation spends just 9 percent of its budget on programs. Same with the Cancer Survivors’ Fund. Only 13 groups get “A” grades.

Sound bad? Consider that CharityWatch only rates a few hundred nonprofits. There are millions out there. The potential for fraud is huge — over $300 billion is given to charity annually in the United States.

There’s room for Congress to make changes here. The tax reform law made the standard deduction much more appealing for many Americans, reducing the amount of taxpayers taking a charitable deduction. As such, expectations are that the number of small-dollar donors will drop considerably. The Tax Policy Center puts the number at 21 million fewer Americans taking the deduction in 2018.

Rep. Chris Smith, New Jersey Republican, has introduced legislation, the Charitable Giving Tax Deduction Act (H.R. 5771), to combat this reduction. The bill would allow taxpayers to write off charitable contributions even if they take the standard deduction.

However, this will simply result in tax-deductible donations flowing into the coffers of both good charities and America’s most wasteful charities.

Therefore, Congress should slightly adjust this proposal if it moves forward. There is no “right” to a charitable deduction. Congress can and should allow it only for charities that spend at least 65 percent of their budgets on programs — without using the “joint cost” loophole that allows them to count fundraising costs as program expenses.

The result would be that donors would shift their tax-deductible donations from inefficient (such as HSUS) to more efficient charities. The bad ones would find it harder to stay in business, while the good ones would be rewarded.

If the goal is doing good, that’s something everyone should be able to get behind.

• Richard Berman is the president of Berman and Co., a public relations firm in Washington, D.C.

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