Great Investigation On Charity Sector Misconduct

by Gary Snyder

Once again, the Tampa Bay Times has done a fantastic job in uncovering bad apples in the charitable sector. I have been honored to work with them on several of their investigations.

The Tampa Bay Times has joined the Center for Investigative Reporting used data collected by the nonprofit charity tracker GuideStar USA to narrow the pool to the 5,800 charities nationwide that report paying professional solicitation companies to raise donations. 

Over the past six months, the Times and CIR called or mailed certified letters to the leaders of 50 charities that have paid the most to solicitors. Nearly half declined to answer questions about their programs or would speak only through an attorney. Charity operators who would talk defended their work, saying raising money is expensive especially in tough economic times.

Collectively the 50 worst charities raised more than $1.3 billion over the past decade and paid nearly $1 billion of that directly to the companies that raise their donations. About 80 percent of what's donated each year goes directly to solicitation companies.

The Times/CIR list of worst charities, meanwhile, is littered with organizations that exhibit red flags for fraud, waste and mismanagement.

Thirty-nine have been disciplined by state regulators, some as many as seven times.

Eight of the charities have been banned in one state.

One was shut down by regulators but reopened under a new name.

A third of the charities' founders and executives have put relatives on the payroll or the board of directors.

The nation's worst charities are large and small. Some are one-person outfits operating from run-down apartments. Others claim hundreds of employees and a half-dozen locations around the country. One lists a UPS mailbox as its headquarters address.

Several play off the names of well-known organizations, confusing donors.

Callers leave out the fact that most of the charity's good deeds involve handing out gift cards to hospitalized children and donated coloring books and board games to healthy kids around the country. And they don't mention the millions of dollars spent on salaries and fundraising every year.

Among the findings:

• The 50 worst charities in America devote less than 4 percent of donations raised to direct cash aid. Some charities give even less. Over a decade, one diabetes charity raised nearly $14 million and gave about $10,000 to patients. Six spent nothing at all on direct cash aid.

• Even as they plead for financial support, operators at many of the 50 worst charities have lied to donors about where their money goes, taken multiple salaries, secretly paid themselves consulting fees or arranged fundraising contracts with friends. One cancer charity paid a company owned by the president's son nearly $18 million over eight years to solicit funds. A medical charity paid its biggest research grant to its president's own for-profit company.

• Some nonprofits are little more than fronts for fundraising companies, which bankroll their startup costs, lock them into exclusive contracts at exorbitant rates and even drive the charities into debt. Project Cure has raised more than $65 million since 1998, but every year has wound up owing its fundraiser more than what was raised. According to its latest financial filing, the nonprofit is $3 million in debt.

• To disguise the meager amount of money that reaches those in need, charities use accounting tricks and inflate the value of donated dollar-store cast-offs — snack cakes and air fresheners — that they give to dying cancer patients and homeless veterans.

Other charity mismanagement, including all types of fraud, amounts to over $51 billion taken from those to which it was intended.

Despite the aforementioned there are denials by the leadership of the charitable sector. They fail to acknowledge that there is a problem. They continue to believe that self-regulation is the answer.

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)