Donors should do their homework on nonprofits before writing a check

OPINION:

Millions of Americans will follow Christmas with one more gift before the new year: a charitable donation. However, there’s a good chance that this generosity will be abused. A growing number of bad actors in the philanthropy field are siphoning off donors and funds from more productive, more deserving charities. Look no further than charity scams taking advantage of the latest series of devastating tornadoes. 

Not all bad apple charities wait around for an extreme natural disaster to pounce. Some poorly run philanthropy groups operate all year round. And although they fall short of con artists, much of the money they collect is not spent on the causes they claim to support.

Some organization executives enjoy extravagant salaries. Money is used to throw lavish events. Billions of dollars are also spent on overhead and fundraising, with the largest beneficiaries being telemarketing and direct mail companies. The Breast Cancer Survivors Foundation, founded in 2010, has raised roughly $3 million annually to supposedly help victims of the disease. But what’s really happening? An investigation determined that 92 cents of every dollar collected went to a for-profit fundraiser and its enterprises. 

Several watchdog groups help rate charities, but most Americans don’t subscribe to these services or don’t go looking for them. And media coverage exposing fraud or touting the best organizations is inconsistent. Ensuring that dollars go to “A” or “B” graded philanthropies over “C,” “D” and “F” rated ones isn’t straightforward. Even the worst charities can produce and pay to broadcast slick television commercials to hoodwink donors.

Examples of charities not practicing what they preach can be found in nearly every issue area — ranging from animal rights to veteran charities. An element of brand confusion muddies the waters. 

Query: What’s the difference between Homes for Our Troops and Homes for Veterans? While they have similar names and missions, one gets an “A,” and the other receives an “F.” The former spends 87% of its budget finding homes for troops while the latter spends 9%. The $1.6 million donated to Homes for Veterans would be better spent by Homes for Our Troops.

The name game problem isn’t rare. Compare the records of Operation Homefront (which has a “B+” rating) and Operation Finally Home (which has an “F” rating). Or Wounded Warriors Family Support (which enjoys an “A” rating) and the Wounded Warrior Project (which has a “C+” rating).

According to the rating system used by CharityWatch, more than double the amount of money donated to highly rated veteran groups is donated to poorly rated ones. That amounts to over $900 million a year that could be better spent supporting our veterans and their families. 

On the animal care side of the aisle, the Humane Society of the United States represents another example of name confusion. Polling indicates the public associates HSUS with local animal shelters, but local shelters are independent of HSUS. While HSUS does shelter something, it’s not dogs and cats. 

The group’s latest tax returns reveal almost $70 million in donations are sheltered in offshore accounts, mainly in the Caribbean. In 2020, nearly half of HSUS’ contributions covered fundraising for more donations! And most telling, the organization only spends about 1% of its budget on grant support to local animal shelters. Charity Watch gives the HSUS a “D” score.

If you were an employer searching for a job candidate, would you hire a “C” student when plenty of “A” students are available? Picking philanthropy to support should follow similar standards. Imagine how much more help would be afforded to those in need. Generous Americans should do more of their own homework before writing a check.  

• Richard Berman is president of Berman and Co. in Washington, D.C.