Worst Charities? Or Victims of an Indifferent Public?

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There are different ways to rank charities. One is to look at the percentage of the money they raise that actually goes to their programs. That's what the Tampa Bay Times, working with the Center for Investigative Reporting, did in an annual roundup called America's Worst Charities, "ranked by money blown on soliciting costs."

And the numbers, taken alone, are impressive. At the top of the list are organizations that raise tens of millions and spend nearly all of it on fundraising. The few charities that responded to DailyFinance requests for comments said that the system of getting money from donors to charities is broken and that the reporters made some questionable assumptions about what the organizations do and how they operate.

The Times and CIR said they ran their methodology for identifying questionable nonprofits past a panel of experts, who reportedly called it "sound."

"We focused on these charities because relying heavily on for-profit fundraisers is one of the most inefficient ways to collect donations," the two news organizations wrote. "Regulators and industry experts widely consider the practice a red flag for bad charities."

And in some cases, the numbers might raise eyebrows, as the top five groups on the list showed:
  1. The Kids Wish Network, which brought in $137.9 million according to 10 years of federal tax files, paid 84 percent to fundraisers and spent only 2.5 percent on direct cash aid.
  2. Cancer Fund of America raised $86.8 million, paid $75.4 million to for-profit solicitors, and put 1 percent into direct cash aid.
  3. Children's Wish Foundation International raised $92.7 million, spent two-thirds on solicitors, and put 10.6 percent into direct aid.
  4. Roughly 87 percent of the $53.8 million that the Firefighters Charitable Foundation raised went to solicitation costs, while only 7.4 percent became cash aid.
  5. The International Union of Police Associations, AFL-CIO dropped more than three quarters of its $66.6 million over 10 years on solicitation, compared to 0.5 percent on cash aid.
What's the Real Goal?

None of these organizations responded to requests from DailyFinance for comment. But others that did were angry about the story and the approach the reporters took. National Veterans Services Fund (formerly Vietnam Veterans Agent Orange Victims), raised $70.2 million, paying almost 53 percent to professional fundraisers and 7.8 percent into direct financial aid. Executive Director Phil Kraft says that the organization provides some one-time cash assistance to veterans who are referred to the organization from "VA caseworkers, social workers from state and local municipalities and veteran agencies."

But the fund is primarily focused on providing services, including a national hotline for veterans and their families, a repository of free information, partnerships that get services and equipment at reduced or no cost to needy families and peer counselors. To focus on cash aid is to potentially misconstrue the group.

"We do not have the resources, staff or expertise to conduct fundraising on our own," Kraft wrote about the fund, which has one full-time and three part-time employees, in addition to Kraft, whose 2011 salary was $118,800. "A small percentage of something is better than 100 percent of nothing. To blame a charity for the price charged by our fundraisers is like blaming a driver for the price of gas. I suppose that a driver could make his own gas from donated crude oil, and have a staff of volunteers to help refine it, and more volunteers to transport it to volunteer-run gas stations, but it probably wouldn't work. "

The Committee for Missing Children spent $23.5 million on fundraisers to bring in $26.6 million , with only 0.8 percent of funds going to direct cash aid. CEO David Thelen, his wife and a director in Germany received a combined $144,851 in 2011 as the three paid employees, and the German director has just been put on a volunteer basis.

Thelen agrees that telemarketing is an inefficient way to raise money, but for smaller and less popular charities, it may be the only choice. His organization has had no luck with getting grants and "addressing child abduction is not something corporate America will step up and support." Unlike the better-known National Center for Missing and Exploited Children, which receives funding from the federal government, the Committee for Missing Children has no such income streams and doesn't have the high profile to help attract donors. That leaves expensive methods like telemarketing and direct mail.

Is Anyone Getting Rich?

And it's not as though the telemarketers are pocketing vast sums, because fielding calls is expensive. Thelen was told by his telemarketer -- which actually filed for bankruptcy last year -- that its profit margin was 3 percent.

He was also angry that the article focused on cash paid out, rather than services offered. "My job is to counsel parents and lead them through a broken system to get their children back home," he said, which can involve taking calls at 2 a.m. "Where do you put that in a budget?"

Not all the charities on the list are innocent organizations, as some note. "Many of the charities cited in the article display blatant misuse of funds, such as exorbitant salaries, creating related companies for the financial benefit of the founders, etc.," Kristina Vincent, membership and benefits administrator for the American Association of State Troopers, told DailyFinance.

The group spent $38.6 million to bring in $48.1 million, and 8.9 percent went to direct cash aid. But Vincent said that the organization runs lean. "All officers and board members of AAST are unpaid volunteers," she wrote. "AAST has no company vehicles. Our small staff and our board of directors work hard to provide quality benefits and excellent customer service, and we are appalled to be lumped into a category with charities who, according to the Worst Charities article, mishandle funds."

People who donate money to charities naturally have an interest in seeing the funds used as wisely as possible. But it takes research, and a harsh dose of reality, to understand whether a charity is "bad," or if it's struggling against significant odds to do at least some good.
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