For example, I am willing to bet folding money that the number of predatory and fraudulent veteran's charities outnumbers those that are credible and effective.
I've developed fairly high-gain bullshit radar for uncharitable charities – especially animal and public safety/SAR charities, which is the world in which I typically move. By bullshit charities, I have always meant people who don't do what they say they do, don't stand for what they say they stand for, and aren't who they claim to be.
Some notable offenders have been the Bear Search and RescueFoundation, People for the ethical (sic) Treatment of Animals, and an assortment of fake, fraudulent, confabulous, evil and felonious SAR poobahs and dog handlers. New cynical schemes involving animals – a popular one now is “service dogs” for disabled(often autistic, diabetic, or seizing) young children, another is “horse rescue” that is merely a meatman's ransom scam – pop up all the time, and are transparent to the trustworthy subject-matter experts in my circles.
Learn enough field marks for the new species, and even a relative neophyte can spot them. Wherever popular sentiment (or the strong loyalties of some discrete minority or interest group) rests, reason and skepticism flee, and shysters see the cavitation and rush in.
But bad intentions and incompetence at performing the stated mission are not the only, nor even the primary, mode of charitable failure.
When you are thinking about giving – money, time, your own reputation – to a charitable cause, part of due diligence is ensuring that what you give will be spent honestly, effectively, and sensibly.
When in doubt, check it out.
When you are sure, check it out anyway.
Disclaimer: Blogger is being a real douche about properly formatting this piece. It is choosing spacing, line breaks, fonts, sizes and styles as it wishes and contrary to my instructions. I give up. I think the links are working now.
A Cynic's Guide To Reading Nonprofit (501©3) IRS 990 FormsBy Rob McMillin
The IRS 990, And How To Find It
- Charity Navigator has 990 forms as part of their scoring system. It is a reasonable first stop in evaluating a charity, but only in the sense that if a charity has a bad rating, it is probably because the operators are too lazy to bother beautifying their IRS 990 form to score better. Charity Navigator does not claim to be comprehensive (at present, “over 6,000”, which I take to mean “less than 7,000”, and the acknowledge they do not analyze foundations or charities filing 990-EZ forms), but they will certainly cover the larger charities. (They have lately increased this number to 1.6 million, which they claim covers all 501(c)3 entities.)
- The Foundation Center's 990 finder is vastly more comprehensive, but often enough has search issues if the same charity is listed under multiple names. Often, it is necessary to do a separate Google search to find the same filing under a different name. (One example of this came up recently when I was looking for the Associated Humane Societies of New Jersey, which uses the Popcorn Park Zoo as its 501(c)3.)
- More recently, I've been using GuideStar, which seems to be at least as extensive as the Foundation Center (they claim 1.8 million organizations and 5.4 million 990's, with 3.2 million digitized). Their search seems to be a bit more flexible (they got the Associated Humane Societies of New Jersey search correct, but that's nothing like comprehensive).
What's Inside? What To Look ForThe Doggie Stylish Blog gave a useful synopsis of what to look for in 990's:
Line 12 – Total revenue. Obviously, how much they took in for this fiscal year.
Examples Of Flawed 990'sAnd while these are all important, what's most important is to read the form with a critical eye. In my own reviews of 990's, the most important issues I have encountered are
- Fundraising expenses moved into program expenses
- Excessive salaries
- Large unexplained expenses
Humane Society Of The United States
- On line 12, they claim $133,577,658 in revenue, most of which ($123M) came from grants.
- On line 15, $37,788,110 in salaries paid, and $4,343,746 in professional fundraising.
- Skipping ahead to Part IX (page 9 of the PDF), we learn there was $13,457,363 in “Other” expenses (line 11g), and $11,915,496 in advertising and promotion fees (line 13). But the real kickers are line 24: $24,137,976 for “Education material” (line 24a) and $10,116,669 for “Direct response costs” (line 24b). Adding all these expenses together with the professional fundraising – and I do not believe it is unreasonable to view these as laundered mailing list costs – it totals to $63,971,250, or about 47% of revenue dedicated to mail operations before anything else.
National Disaster Search Dog Foundation
- Self-dealing via no-bid work, so the kennel in which the dogs reside and are trained are also owned by the principal, Kate Davern.
- Trainer's fees ($203,622 in this, $210,333 from 2009), also presumably paid to herself or her friends.
- New for 2011 (relative to 2009): three-quarters of a million dollars in “ADP employee salary” ($775,393, line 24a)
- Silly amounts of rubble pile charges ($600,000 exactly, line 24b; and why is it such a shiny, zero-filled number?)
- Something called “campaign costs” (line 24d, $127,771)
- On page 11, line 24, a $3,000,000 unsecured loan – which, on page 19 (of the PDF), part X, line 2, we discover $357,469 in accrued interest. (Paid to whom or what, it does not say.) As I noted at the time, this is something like you or me taking out a payroll loan for the entire value of our annual salary.
Eyes, Ears, Nose, And PawsThis smallish charity came to light recently in the wake of a news report that one of its principals had left a dog trainee in a car to bake to death, and appears, as with NDSDF, to be more a case of a badly-run charity rather than a self-serving one. My major concern in reading their 2011 990 is that of the $128,058 in revenue, $77,000 of it – more than half – goes to the salaries of the two executive directors, Maria Ikenberry and Deb Cunningham (page 12 of the PDF). Also, in the form 4562 on page 10, there is a $2,000,000 cost of property with $500,000 of that expensed for that tax year. This to me bears more investigation; are they using this charity to launder some other personal expense, perhaps a house or a commercial property?
Worst-Case Scenario: YWCA USA
- Their CEO, Gloria Lau, earned $200,920, including a $52,000 housing allowance while she was working in Washington, D.C. (page 29).
- As a consequence of spending faster than receipts are coming in, YWCA USA actually spent $2.7 million more than it took in despite slightly increasing its investment income on $58 million of assets (page 1).
- On $2.4 million in revenue, $1,147,587 went to salaries of officers and other employees, of which it is claimed that $434,212 actually went into program expenses. That means less than half of their employee costs (and here I'm being generous and not even including things like pension contributions, benefits, and payroll taxes) are actually going toward program activities!
- In addition, there are $518,019 in accounting and legal expenses, $308,559 in investment management fees, and a huge black hole called “Other” (page 10, line 11g) to the tune of $767,123. Nearly a third of revenue goes toward unaccounted-for expenses. Even if you take their word for it that $489,487 of that figure goes to program expenses, overhead is still no less than 36%.