Updated: July 18, 2013 6:06AM
The “worst charity in America” is the Kids Wish Network, according to the Center for Investigative Reporting.
The Florida-based charity raises millions of dollars in donations in the name of dying children and their families, yet spends less than three cents on every dollar to actually help kids each year, according to a Tampa Bay Times investigative story that caught my eye last week.
“Most of the rest gets diverted to enrich the charity’s operators and the for-profit companies Kids Wish hires to drum up donations,” the story stated. “In the past decade alone, Kids Wish has channeled nearly $110 million donated for sick children to its corporate solicitors. An additional $4.8 million has gone to pay the charity’s founder and his own consulting firms.”
I found this to be staggering news, considering that most charities tug on our heart strings but none more than a charity in the name of dying children. A yearlong investigation by that newspaper and center found that Kids Wish is not an isolated case.
In fact, nearly 6,000 charities pay for-profit companies to help raise donations, with the 50 worst ones paying their solicitors nearly $1 billion over the past 10 years. This is money that could have been earmarked for those in need, not those in greed.
Among the investigation’s finding, “the 50 worst charities in America devote less than 4 percent of donations raised to direct cash aid. Some charities give even less. Six spent nothing at all on direct cash aid,” the investigation stated.
In the complex world of nonprofits, if a charity is spending more than one third of its total budget on overhead, the agency is not meeting its mission, I’m told. So I contacted two local sources for insights regarding this issue and here is what they told me.
“I counsel folks with the following thought process: Think of your charitable contribution as an investment,” said Harry J. Vande Velde III, CEO and president of the Merrillville-based Legacy Foundation. “If you are going to share your hard-earned assets with a 501c3 organization, do your homework.”
Contact the Better Business Bureau, search online at Guidestar.org, pull up the organization’s website and look for an annual report and its 990 forms to the IRS, or call your community foundation office, he advises.
“A couple of quick searches and calls will reveal whether the organization is truly creating mission impact,” he said. “The charitable investment seeks mission impact — that is, the return the donor is searching for.”
Also, trust your instincts. Does the solicitation seem a bit off, a bit too perfect? Does it seek specific personal information to complete the donation? Does the organization have a name very similar to other more familiar groups? Hmmmm.
“If the caller sounds like they are in a boiler room, or if the solicitation is taking place on your front porch, trust your instincts. Say, ‘Not now,’ and that you would like to look into the cause a bit deeper,” Vande Velde suggests. “A charitable solicitation is not a sales pitch. If it has the sales feel, say you want to look into the organization a bit more.”
Sharon Kish, president of the United Way of Porter County, said donors have several resources at their disposal.
“The first resource is your own experience. Give to organizations you know and see in your community, where you have volunteered,” Kish said.
Check out their websites. See who funds them, and who comprises their board members. Ask questions, lots of them, including for reports of who they serve and the impact they made. For starters, are they a 501(c)3 charity?
“There are many nonprofit organizations, but not all nonprofits qualify for charitable deductions according to the IRS code,” Kish said. “Most nonprofits want to build a relationship with their donors and want to give them as much information as possible about the organization and those they serve.”
Donors can also check the annual filing of 990s with the IRS, where an organization’s income, fundraising and administrative costs are detailed. Nonprofits are required to file these reports annually, and 990s are posted on the IRS website, www.irs.gov.
“Just this past year, the IRS removed a number of nonprofits for noncompliance,” Kish said. “Organizations that use paid telephone solicitors are required to register and report with the Attorney General.”
There is a lot of discussion about “administrative costs” and “overhead,” which are often misunderstood by the general public. Administration or overhead costs are necessary to solid organizations, as administrative costs support the costs of audits, facilities, management and more, Kish said.
“The real question is, ‘How much is the organization accomplishing in terms of outcomes and impact in the community’?” she said.
“Certain small or newer organizations may have higher overhead than others. And certain organizations may be required to list certain types of costs as ‘admin’ because their funding sources, especially federal grants, do not allow certain costs to be paid out of program funds.”
Yes, it gets complicated but your decision to be a generous donor to a charity shouldn’t get bogged down by such complexities. Instead, let experts such as Kish, Vande Velde, and their staffs do the heavy lifting for you.
When people donate money to, say, United Way, they can trust that the organizations and programs supported by the agency are reviewed and they meet certain criteria, Kish noted. But if you have a question about the validity of an outside organization, call your local United Way for guidance.
“We would be happy to help them,” Kish said.
In Porter County, call 464-3583. In Lake County, call 923-2302. Call the Legacy Foundation at 736-1800.
Go online and do your own research at www.charitynavigator.org or Guidestar.org. Or for background on what percentage of donations go to charity, check out this story: http://charity.lovetoknow.com/What_Percentage_of_Donations_Go_to_Charity.
Let me know if you find any red flags with your favorite charity and I’ll address it in a future column.
Connect with Jerry via email, at email@example.com, voice mail, at 713-7237, or Facebook, Twitter, and his blog, at jerrydavich.wordpress.com.