The Worst Charities in a Nation of Givers

American culture is unique when it comes to a belief in philanthropy. In the United States in 2012, total giving to charitable organizations was $316.23 billion (about 2% of GDP), which was an increase of 3.5% from 2011. As in previous years, the majority of that giving came from individuals (an average of 4.7% of their income — median contribution of $2,564, median income of $54,783). Specifically, individuals gave roughly $223 billion (72%); giving by bequest was $22.14 billion (7%); foundations gave $47.44 billion (15%); and corporations donated $18.97 billion (6%). Thirty-two percent of all donations went to religious organizations — much of these contributions can be attributed to people giving to their local place of worship. The next largest sector was education with 13% of all donations. [Source]

America’s middle class is far more generous than the upper classes: Households that earn $50,000 to $75,000 give an average of 7.6% of their discretionary income to charity, compared with an average of 4.2% for people who make $100,000 or more. Rich people who live in neighborhoods with many other wealthy people give a smaller share of their incomes to charity than rich people who live in more economically diverse communities.

Red states are more generous than blue states: The eight states where residents gave the highest share of income to charity vote for the Republican Party; the seven-lowest ranking states support the Democratic Party.

Religion has a big influence on giving patterns: Regions of the country that are deeply religious are more generous than those that are not. Two of the top nine states — Utah and Idaho — have high numbers of Mormon residents, who have a tradition of tithing at least 10% of their income to the church — the remaining states in the top nine are all in the Bible Belt.

When religious giving isn’t counted, the geography of giving is very different: Some states in the Northeast jump into the top 10 when secular gifts alone are counted; New York would vault from No. 18 to No. 2; and Pennsylvania would climb from No. 40 to No. 4.

The reasons for the discrepancies among states, cities, neighborhoods are rooted in part in each area’s political philosophy about the role of government versus charity. [Source]

CBS 11 News in North Texas interviewed Ken Berger, CEO and president of Charity Navigator, a website that claims to be a “national watchdog group that tracks and rates non-profit organizations.” However, if you take the time to review Part IX of a non-profit’s IRS form 990 (available for free at http://nccs.urban.org), you’ll see that Charity Navigator does not take into account the overhead when calculating the percentage of contributions that goes toward the cause (I wouldn’t be surprised if Charity Navigator is funded by the large non-profits to mislead donors, and the same goes for the other “charity watchdog,” Guidestar.org).

For example, according to Charity Navigator, the American Red Cross would apply $92 of every $100 to their mission (which is also what the Red Cross claims on their website and in press releases), but the exact opposite is true: only about $5 of every $100 goes toward the cause and the rest goes toward overhead (just check out Part IX of their IRS form 990s). Of the $3.2 billion the Red Cross received in contributions for 2011, 99% ($3.1 billion) was spent on salaries and other expenses, which left only 1% ($38 million) of contributions for the cause: helping victims of disaster relief. A private foundation is required by federal law to pay out five percent of the average market value of its net investment assets in order to avoid paying excise taxes, so the Red Cross used reserve funds to fulfill the required five percent payout ($174 million of the total $212 million that they awarded in grants in 2011 came from their endowment).

American Red Cross 2011 Total Revenue: $3.2 billion (including $56 million from the U.S. treasury, funded by taxing the income of citizens, etc.)

Revenue Paid Out in Grants for Its Cause: $212 million (1% of revenue plus 6% borrowed from reserves)

Revenue Spent on Salaries & Compensation: $1.7 billion (54.64% of revenue)

Revenue Spent on Other Expenses: $1.4 billion (44.17% of revenue)

Total Expenses: $3.3 billion ($174 million in the red)

Net Assets or Fund Balances at Year End: $1.6 billion

CEO’s salary: $591,122 plus $37,386 in “other compensation” per IRS Form 990 (Forbes reported her salary as $1,032,022)

1,359 employees receiving more than $100,000 in compensation

57 independent contractors receiving more than $100,000 in compensation

The Red Cross operated in the red in 2011 by $174 million (spending 6% more than revenue after paying administrative costs and salaries), which is why the figures above add up to more than a 100%. However, they are not broke – they ended the year with assets or fund balances of $1.6 billion. Plus, in 2011, they had a large endowment fund worth $828 million, securities worth $563 million, and land, buildings and equipment worth $1.1 billion.

On schedule I of their 990 form, the American Red Cross noted that they made disaster relief payments of $66 million in 2011 and “did not make specific financial assistance to any one individual during the fiscal year exceeding $5,000.”

http://www.redcross.org/images/MEDIA_CustomProductCatalog/m16540911_FY12_ARC_990_Filed_with_IRS.pdf

On their IRS 990 filing for 2011, the Red Cross listed the “reported compensation” for their president and CEO, Gail J. McGovern, as $591,122 plus $37,386 in “other compensation.” However, Forbes reported in 2010 that her pay at the Red Cross was $1,032,022.

Top Person: Gail J. McGovern
Top Pay: $1,032,022
Fiscal Year ending on 06/30/10

Gail J. McGovern joined the American Red Cross as president and CEO on April 8, 2008. Prior to joining the Red Cross, McGovern was a faculty member at the Harvard Business School and served as president of Fidelity Personal Investments, a unit of Fidelity Investments, responsible for half a trillion dollars of assets under management. She was also executive vice president for the Consumer Markets Division at AT&T, the $26 billion residential long-distance organization and largest business unit. She earned a Bachelor of Arts degree from Johns Hopkins University and an MBA from Columbia University, and has since been recognized as alumna of the year from both universities. McGovern is currently a member of the board of trustees of Johns Hopkins University and the board of directors of DTE Energy. In February 2013, she joined the board of directors of The Weather Company, which operates The Weather Channel, weather.com and other services. McGovern was recognized by Fortune magazine in 2000 and 2001 as one of the top 50 most powerful women in corporate America.

http://www.forbes.com/lists/2011/14/charities-11_American-National-Red-Cross_CH0013.html

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In June 2013, CNN partnered with the Tampa Bay Times and the Center for Investigative Reporting to showcase the results of their year-long investigation to identify America’s worst charities.

The following are the five worst, according to the joint investigation:

No. 1. Kids Wish Network: In the past decade alone, Kids Wish has channeled nearly $110 million donated for sick children to its corporate fund-raisers. That makes it the worst charity in the nation, according to a Times/CIR review of charities that have steered the most money to professional solicitation companies over time. Kids Wish Network says it has helped make a positive difference for thousands of children.

No. 2. Cancer Fund of America: CFA raises millions yearly and sends 82% to its for-profit fund-raisers. Over the past decade, fund-raisers have collected $98 million in donations. Patients have gotten less than $1 million in direct cash aid over those 10 years, IRS records show. The group’s founder said, “We can only help others with the funds we net whether it be 90 or 20%.”

No. 3. Children’s Wish Foundation International: This group reported spending about $600,000 granting wishes to terminally ill children in 2010 and gave them donated goods valued at $3 million. It paid professional fund-raisers nearly $6 million for their services that year. Its founder said telemarketing has helped the charity find children in need of its help.

No. 4. American Breast Cancer Foundation: One of the most wasteful charities in the nation for 13 years, this group lured donors by promising to pay for breast cancer screenings. It now says it’s using community events to raise money. In its latest tax filing, the charity reported giving a total of $100,000 to five medical facilities to help pay for breast cancer screening services for low-income women.

No. 5. Firefighters Charitable Foundation: This group says it provides financial assistance to people who have been affected by a fire or disaster. From 2002 to 2011, it raised $64 million in donations and paid $55 million of that to its solicitors. The charity spent less than 10 cents of every dollar raised on direct financial assistance to those in need. The group said in 2007 that it planned to change. That hasn’t happened.

From the 2013 report, we learn the following (click here for full version of the report)…

The worst charity in America, Kids Wish Network, operates from a metal warehouse behind a gas station in Holiday, Florida:

Every year, Kids Wish Network raises millions of dollars in donations in the name of dying children and their families. Every year, it spends less than 3 cents on the dollar helping kids. Most of the rest gets diverted to enrich the charity’s operators and the for-profit companies Kids Wish hires to drum up donations.

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.

No charity in the nation has siphoned more money away from the needy over a longer period of time.

The year-long investigation by the Tampa Bay Times and the Center for Investigative Reporting found that Kids Wish is not an isolated case:

Using state and federal records, the Times and CIR identified nearly 6,000 charities that have chosen to pay for-profit companies to raise their donations. Then reporters took an unprecedented look back to zero in on the 50 worst – based on the money they diverted to boiler room operators and other solicitors over a decade (see the chart at the end of this blog post).

These nonprofits adopt popular causes or mimic well-known charity names that fool donors. Then they rake in cash, year after year.

The nation’s 50 worst charities have paid their solicitors nearly $1 billion over the past 10 years that could have gone to charitable works.

Until today, no one had tallied the cost of this parasitic segment of the nonprofit industry or traced the long history of its worst offenders.

Among the findings:

■ The 50 worst charities in America devote less than 4% of donations raised to direct cash aid. Some charities gave even less. Over a decade, one diabetes charity raised nearly $14 million and gave about $10,000 to patients. Six spent no cash at all on their cause.

■ 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 fund-raising 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 fund-raising companies, which bankroll their startup costs, lock them into exclusive contracts at exorbitant rates and even drive the charities into debt. Florida-based 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.

The Tampa Bay Times and the Center for Investigative Reporting called or mailed certified letters to the leaders of Kids Wish Network and the 49 other charities that had paid the most to solicitors. Most declined to answer questions about their programs or would speak only through an attorney. Approached in person, one charity manager threatened to call the police and another refused to open the door. A third charity’s president took off in his truck at the sight of a reporter with a camera. Kids Wish has hired Melissa Schwartz, a crisis management specialist in New York City who previously worked for the federal government after the 2010 BP oil spill:

Schwartz said Kids Wish hires solicitors so its staff can focus on working with children, not on raising donations. According to its 2011 IRS filing, the charity has 51 employees. Schwartz also said donors who give directly to the charity instead of in response to solicitations ensure that 100% of their pledge will be spent granting wishes. She declined to answer additional questions about Kids Wish’s fund-raising operations, saying the charity “is focused on the future.”

Charity operators who would talk defended their work, saying raising money is expensive, especially in tough economic times:

“No parent has ever turned me down for assistance because we got our money from a telemarketer,” said David Thelen, who runs the Committee for Missing Children in Lawrenceville, Georgia. The charity is No. 13 on the Times/CIR list.

To identify America’s 50 worst charities (see the chart at the end of this blog post), the Tampa Bay Times and the Center for Investigative Reporting pieced together tens of thousands of pages of public records collected by the federal government and 36 states. Reporters started in California, Florida and New York, where regulators require charities to report results of individual fund-raising campaigns. The Times and CIR used those records to flag a specific kind of charity: those that pay for-profit corporations to raise the vast majority of their donations year in and year out:

The effort identified hundreds of charities that run donation drives across the country and regularly give their solicitors at least two-thirds of the take. Experts say good charities should spend about half that much – no more than 35 cents to raise a dollar.

For the worst charities, writing big checks to telemarketers isn’t an anomaly. It’s a way of life.

The Times and CIR charted each charity’s performance over the past decade and ranked them based on the total donations diverted to fundraisers, arriving at the 50 worst charities (see the chart at the end of this blog post). By this measure, Kids Wish tops the list.

Tracking donations diverted to fund-raising is just one way to rate a charity’s performance. But experts called the rating fair and said it would provide a unique resource to help donors avoid bad charities:

Doug White, one of the nation’s foremost experts on the ethics of charity fund-raising, dismisses the argument made by charities that without telemarketers they would have no money.

“When you weigh that in terms of values, of what the charity is supposed to be doing and what the donor is being told in the process, the house comes tumbling down,” said White, who teaches in Columbia University’s fund-raising management master’s degree program.

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.

If that money had gone to charity, it would have been enough to build 20,000 Habitat for Humanity homes, buy 7 million wheelchairs, or pay for mammograms for nearly 10 million uninsured women.

Instead it funded charities like Youth Development Fund.

The Youth Development Fund, which came in at No. 12, has been around for 30 years. Over the past decade it has raised nearly $30 million from donors by promising to educate children about drug abuse, health and fitness. About 80% of what’s donated each year goes directly to solicitation companies. Most of what’s left pays for one thing: scuba-diving videos starring the charity’s founder and president, Rick Bowen:

Bowen’s charity pays his own for-profit production company about $200,000 a year to make the videos. Then the charity pays to air Rick Bowen Deep-Sea Diving on a local Knoxville station. The program makes no mention of Youth Development Fund.

In its IRS tax filings, the charity reports that its programming reaches “an estimated audience of 1.3 million.” But, according to the station manager, the show attracts about 3,600 viewers a week.

Bowen, who runs the charity out of his Knoxville, Tennessee, condo, declined to be interviewed. He defended the practice of hiring his own company with the public’s donations.

“We just happened to be the low bidder,” he said.

America’s worst charities look nothing like Habitat for Humanity, Boys and Girls Clubs, or thousands of other charities that are dedicated to helping the sick and needy. Well-run charities rely on their own staff to raise money from a variety of sources. They spend most of their donations on easy-to-verify activities, whether it’s running soup kitchens, supporting cancer research, raising awareness about drunken driving, or building homes for veterans.

The Tampa Bay Times and the Center for Investigative Reporting 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 at least 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.

For example, for eight years, American Breast Cancer Foundation paid Joseph Wolf’s telemarketing company to generate donations. His mother, Phyllis Wolf, had founded the Baltimore-based charity and was its president until she was forced to resign in 2010. While she ran the charity, her son’s company, Non Profit Promotions, collected $18 million in telemarketing fees. Phyllis Wolf left the charity after the payments to her son attracted media attention in 2010. The charity has since stopped using telemarketers, including Joseph Wolf’s. Phyllis and Joseph Wolf did not respond to several calls seeking comment.

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 mail box as its headquarters address. Several play off the names of well-known organizations, confusing donors:

Among those on the Times/CIR list are Kids Wish Network, Children’s Wish Foundation International and Wishing Well Foundation. All of the names sound like the original, Make-A-Wish, which does not hire professional telemarketers. Make-A-Wish officials say they’ve spent years fielding complaints from people who were solicited by sound-a-like charities.

“While some of the donations go elsewhere, all the bad public relations that comes with telemarketing seems to come to us,” said Make-A-Wish spokesman Paul Allvin.

Donors who answer calls from the 50 worst charities (see the chart at the end of this blog post) hear professionally honed messages, designed to leverage popular causes and hide one crucial fact: Almost nothing goes to charity. When telemarketers for Kids Wish call potential donors, they open with a name you think you’ve heard before. Then they ask potential donors to “imagine the heartbreak of losing a child to a terminal illness,” according to scripts filed with North Carolina regulators in 2010:

Kids Wish, the callers say, wants to fulfill their wishes “while they are still healthy enough to enjoy them.” They 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 fund-raising every year.

The biggest difference between good charities and the nation’s worst is the bottom line. Every charity has salary, overhead and fund-raising costs. But several watchdog organizations say charities should spend no more than 35% of the money they raise on fund-raising expenses (Charity Watch advises that no more than 25% of the budget go to administrative costs):

The Make-A-Wish Foundation of Central and North Florida is one of dozens of Make-A-Wish chapters across the country. Last year, it reported raising $3.1 million cash and spent about 60% of that — $1.8 million — granting wishes. The same year, Kids Wish raised $18.6 million, its tax filing shows. It spent just $240,000 granting wishes — 1% of the cash raised.

Click here for the database compiled by the Tampa Bay Times and the Center for Investigative Reporting, which allows you to search for disciplinary history on charities. Though the website is titled “America’s Worst Charities,” that does not mean that charities with disciplinary actions in the database are bad charities. As the website says: “Most of the actions in this database involve charities that are not among the worst in America. Many of the actions are related to registration issues, including late registrations.”

To verify a non-profit’s financials, review its IRS form 990 – google “990 form” along with the charity’s name, or go to http://nccs.urban.org. On the first page of the form 990 you can ascertain total overhead (which is detailed on Part IX of the form) by subtracting the amount on line 13 from line 18. To determine percentage, divide the difference by the amount on line 18 and then multiple the result by 100.

Use a charity’s IRS 990 form to verify financials – google “990 form” along with the charity’s name, or go to http://nccs.urban.org. On the first page of the 990 you can ascertain total overhead, which is detailed on Part IX of the form, by subtracting the amount on line 13 from line 18.

The following are key questions to ask when someone is requesting a charitable donation:

• What is the full name of the charity?

• Do you work for a paid fundraiser?

• How much of my donation actually goes to charity?

• Will any local programs directly benefit? If so, how?

• What is the website address of the charity?

Unlike the charities described in the report above, 100% of the monies raised by the Eric Trump Foundation goes to St. Jude Children’s Research Hospital for terminally-ill children, according to their website (their 2009 IRS form 990 shows they raised $389,760, awarded grants of $402,000, had expenses of $24,856, ended the year with $29,171 in cash, and nobody associated with the charity received a salary):

What began as a collaborative effort between a three dedicated friends in 2006, has grown into one of the largest private charities in the country. To date, The Eric Trump Foundation has raised nearly $8 million dollars for St. Jude and recently pledged another $20 million more for the construction of The Eric Trump Foundation Surgery & ICU Center, opening at St. Jude in 2015. This new state-of-the-art medical center will dramatically increase the ability of St. Jude’s brilliant doctors, researchers and scientists to better treat the most catastrophic diseases that affect our most precious segment of society – children.

The Eric Trump Foundation prides itself on having one of the lowest expense ratios in the world. Today, far too many non-profit organizations spend their money on expensive black-tie galas, A-list performers and the overpriced salaries of their CEO’s and staff. Regrettably, the very cause they’re trying to raise money for receives a very small check, after expenses. ETF is committed to using only Trump owned and operated facilities, no paid employees – only full time volunteers – donated food & beverage product, as well as pro-bono celebrity performers, so that St. Jude receives 100% of the monies raised.

The Nephcure Foundation, the charity Teresa Giudice promotes, is another story. According to IRS form 990 filed for 2011 by the foundation, more than half (51% or $1,205,665) of their total revenue in 2011 ($2,362,971) went toward administrative costs, including management services & salaries ($416,850 to Vizion Group), fundraising events ($262,516), advertising & promotion ($81,504), office expenses ($61,670), information technology ($59,784), conferences/conventions/meetings ($45,038), occupancy ($38,993), lobbying ($28,245), insurance ($7,983), travel ($1,478), and other expenses ($201,604). The 51% in administrative costs exceeds the 33% that Charity Navigator suggests as a guideline (Charity Watch advises consumers should donate to charities that use at least 75% of donations for direct aid; i.e., no more than 25% of the budget going to administrative costs). However, they did borrow from reserve funds to award grants totaling $1.7 million, or 70% of 2011 revenue.

Concerning Autism Speaks (the nation’s largest autism advocacy organization), which the Lauritas promoted on RHONJ in conjunction with blk., employee compensation for the charity in 2008 accounted for more than a quarter of its income, according to its tax filing. In 2008, Autism Speaks took in more than $69 million (over $20 million more than it did the previous year) and provided about $28 million in grants, or 41% of revenue. The organization’s chief science officer, Geri Dawson, received $669,751 in total compensation, including $269,721 in relocation expenses to move her family from Washington to North Carolina. Dawson’s base salary was $373,360, more than any of the organization’s 257 other employees, including Autism Speaks’ president, Mark Roithmayr.

Cindy Waeltermann, founder and director of both Autism Link and the Autism Center of Pittsburgh, wrote a letter in November 2009, Autism Speaks. It’s a Living (excerpt below), to express her disgust with the organization after Autism Speaks’ posted on their website that they would be “postponing” grantmaking for 2009 due to the current economic crisis”:

Autism Speaks recently announced on their website that due to the poor economy they have to “postpone” grant making and giving for 2009. Yes, this charity that hauled in a reported $68 million in funds last year has fallen on hard times. Sad, really, on the surface. But dig deeper. I ask you to consider the following information, taken straight from this organization’s IRS 990 form on their own website:

Geraldine Dawson, Chief Science Officer – Salary: $669,751
Mark Roithmayer, President – Salary: $400,413
Peter Bell, Executive Vice President – Salary: $265,981
Glenn Tringali, Executive Vice President – Salary: $255,256
Alison Tepper Singer, Executive Vice President – Salary: $201,942
Amount Spent on Travel: $2,873,667
Credit Card and Banking Fees: $989,344
Premiums: $1,452,807
Management Fees: $2,038,024
Advertising and Promotion: $2,108,778
Temporary Help: $718,686
Income: $65,826,829
GRANTS PAID OUT: $27,593,390

Now I ask you, does this look like an organization that is suffering? It looks, to me, to be an organization that cares more about highly paid salaries, posh offices on #2 Park Avenue in New York, pricey fundraisers, and getting its name in the newspaper. They seem to exist solely to pay salaries and throw parties.

But hey, they’ve fallen on hard times. So can someone please tell me why the first thing to go is the grant making and giving — the one thing that they claim as their #1 mission? To give grants to find a cure for autism? And don’t they seem a little top heavy to you? A $700,000 salary?? Four Executive Vice Presidents?

Click here to read the full letter.

From Christine_Rogers in April 2010:

I’ve started a FB group to try and get the general public to know about Autism Speaks, please check it out, join it and share it here:

http://www.facebook.com/topic.php?topic=42359&uid=183608095328#!/group.php?gid=109130859120272&ref=ts

Here is a link to my letter that I am trying to share:

http://darwin-autismsuperherodog.blogspot.com/2010/04/low-down-and-how-low-it-is-on-autism.html

And here is a copy of the letter:

I’ve been writing a lot about Autism Speaks on facebook and twitter and starting petition campaigns to try and let the general public and, more importantly, the businesses and celebrities who are supporting Autism Speaks, so the truth of this organization (I will not call it a charity) can get out there. I am just one small voice, but there are others of us trying to spread the word; and the more of us there are, the better. I am going to keep on yelling with my one voice! I’ve had a lot of people write me and ask for more info, so I decided to post a response I wrote today here.

You probably know that some parents and many adult autistics really take issue with the ad campaign messages that Autism Speaks puts out and also on their funding research to enable prenatal genetic testing so families can choose to terminate those pregnancies. Those two issues, though, are individual’s morals and choices so for me. I want to let people know that EVEN IF THEY DON’T HAVE ANY PROBLEM WITH THOSE THINGS that they still should not support Autism Speaks, and here is why: The big thing is their financial practices.

The video below is the easiest way to get the low-down on that. All the information in the video came from Autism Speaks own website off of their financial report.

I tend to agree with a comment posted by VTMom5 Puppyface on an story by James Altucher about why he never donates to a major charity:

“There are a lot of people right in your own town or state who need help. You don’t have to give to a huge nationwide organization to be a giving/serving member of society. If we all took care of ourselves, our families and our communities (keeping it local), all of our needs would be met. And if a time comes where you yourself may need help, everyone would remember all you had done over the years and would be ready to pay it forward.”

The following are lists of the charities with the highest administrative costs and the highest paid CEOs.

The 50 Charities with the Highest Administrative Costs

On the first page of IRS 990 form filed by the charity, pay attention to total revenue on line 12, grants paid out on line 13, and total expenses on line 18, and subtract the amount on line 13 from line 18 to calculate total administrative costs, which are detailed on Part IX of the form (to locate a charity’s IRS 990 form online, simply enter the search words “990 form,” along with the charity’s name, or go to http://nccs.urban.org).

Rank	Charity name	Total raised by solicitors	Paid to solicitors	% spent on direct cash aid
1	Kids Wish Network	$127.8 million	$109.8 million	2.50%
2	Cancer Fund of America	$98.0 million	$80.4 million	0.90%
3	Children’s Wish Foundation International	$96.8 million	$63.6 million	10.80%
4	American Breast Cancer Foundation	$80.8 million	$59.8 million	5.30%
5	Firefighters Charitable Foundation	$63.8 million	$54.7 million	8.40%
6	Breast Cancer Relief Foundation	$63.9 million	$44.8 million	2.20%
7	International Union of Police Associations, AFL-CIO	$57.2 million	$41.4 million	0.50%
8	National Veterans Service Fund	$70.2 million	$36.9 million	7.80%
9	American Association of State Troopers	$45.0 million	$36.0 million	8.60%
10	Children’s Cancer Fund of America	$37.5 million	$29.2 million	5.30%
11	Children’s Cancer Recovery Foundation	$34.7 million	$27.6 million	0.60%
12	Youth Development Fund	$29.7 million	$24.5 million	0.80%
13	Committee For Missing Children	$26.9 million	$23.8 million	0.80%
14	Association for Firefighters and Paramedics	$23.2 million	$20.8 million	3.10%
15	Project Cure (Bradenton, FL)	$51.5 million	$20.4 million	0.00%
16	National Caregiving Foundation	$22.3 million	$18.1 million	3.50%
17	Operation Lookout National Center for Missing Youth	$19.6 million	$16.1 million	0.00%
18	United States Deputy Sheriffs’ Association	$23.1 million	$15.9 million	0.60%
19	Vietnow National Headquarters	$18.1 million	$15.9 million	2.90%
20	Police Protective Fund	$34.9 million	$14.8 million	0.80%
21	National Cancer Coalition	$41.5 million	$14.0 million	1.10%
22	Woman To Woman Breast Cancer Foundation	$14.5 million	$13.7 million	0.40%
23	American Foundation For Disabled Children	$16.4 million	$13.4 million	0.80%
24	The Veterans Fund	$15.7 million	$12.9 million	2.30%
25	Heart Support of America	$33.0 million	$11.0 million	3.40%
26	Veterans Assistance Foundation	$12.2 million	$11.0 million	10.50%
27	Children’s Charity Fund	$14.3 million	$10.5 million	2.30%
28	Wishing Well Foundation USA	$12.4 million	$9.8 million	4.60%
29	Defeat Diabetes Foundation	$13.8 million	$8.3 million	0.10%
30	Disabled Police Officers of America Inc.	$10.3 million	$8.1 million	2.50%
31	National Police Defense Foundation	$9.9 million	$7.8 million	5.80%
32	American Association of the Deaf & Blind	$10.3 million	$7.8 million	0.10%
33	Reserve Police Officers Association	$8.7 million	$7.7 million	1.10%
34	Optimal Medical Foundation	$7.9 million	$7.6 million	1.00%
35	Disabled Police and Sheriffs Foundation	$9.0 million	$7.6 million	1.00%
36	Disabled Police Officers Counseling Center	$8.2 million	$6.9 million	0.10%
37	Children’s Leukemia Research Association	$9.8 million	$6.8 million	11.10%
38	United Breast Cancer Foundation	$11.6 million	$6.6 million	6.30%
39	Shiloh International Ministries	$8.0 million	$6.2 million	1.30%
40	Circle of Friends For American Veterans	$7.8 million	$5.7 million	6.50%
41	Find the Children	$7.6 million	$5.0 million	5.70%
42	Survivors and Victims Empowered	$7.7 million	$4.8 million	0.00%
43	Firefighters Assistance Fund	$5.6 million	$4.6 million	3.20%
44	Caring for Our Children Foundation	$4.7 million	$4.1 million	1.60%
45	National Narcotic Officers Associations Coalition	$4.8 million	$4.0 million	0.00%
46	American Foundation for Children With AIDS	$5.2 million	$3.0 million	0.00%
47	Our American Veterans	$2.6 million	$2.3 million	2.30%
48	Roger Wyburn-Mason & Jack M Blount Foundation For Eradication of Rheumatoid Disease	$8.4 million	$1.8 million	0.00%
49	Firefighters Burn Fund	$2.0 million	$1.7 million	1.50%
50	Hope Cancer Fund	$1.9 million	$1.6 million	0.50%

Top 25 CEO Compensation Packages (from CharityWatch)

On the first page of IRS 990 form filed by the charity, check line 12 (total salaries, other compensation, and employee benefits) and line 13 (professional fees and other payments to independent contractors), which are detailed on part VII of the form (to locate a charity’s IRS 990 form online, simply enter the search words “990 form,” along with the charity’s name, or go to http://nccs.urban.org).

Name & Title	Organization	Top Salary*
Peter T. Scardino, M.D., Chairman Attending Surgery	Memorial Sloan-Kettering Cancer Center	$2,207,147
Michael Friedman, M.D., CEO	City of Hope	$1,434,148
Edward J. Benz, Jr., M.D., President/CEO	Dana-Farber Cancer Institute/Jimmy Fund	$1,406,429
Kenneth Guidera, Chief Medical Officer	Shriners Hospitals for Children	$1,374,996
Rabbi Yechiel Eckstein, President/CEO	International Fellowship of Christians and Jews	$1,203,690
Edwin J. Feulner, Jr., Past President	Heritage Foundation	$1,172,321
Steven E. Sanderson, Past President/CEO	Wildlife Conservation Society	$1,163,666
Jonathan W. Simons, M.D., President/CEO	Prostate Cancer Foundation	$1,123,097
Robert J. Beall, President/CEO	Cystic Fibrosis Foundation	$1,073,725
Brian Gallagher, President/CEO	United Way Worldwide	$1,035,347
Harry Johns, President/CEO	Alzheimer’s Association – N.O.	$996,824
Robert J. Mazzuca, Past Chief Scout Executive	Boy Scouts of America – N.O.	$987,412
Wayne LaPierre, CEO & Executive VP/Ex-Officio	National Rifle Association & Foundation, respectively	$972,000
Scott A. Blackmun, CEO	United States Olympic Committee	$965,359
William R. Brody, M.D., President	Salk Institute for Biological Studies	$946,823
William E. Evans, Director/CEO	St. Jude Children’s Research Hospital/ALSAC	$939,979
Christopher DeMuth, Past Senior Fellow	American Enterprise Institute for Public Policy Research	$925,950
M. Kathryn Cloninger, Past CEO	Girl Scouts of the USA – N.O.	$887,209
Nancy A. Brown, CEO	American Heart Association	$843,779
David Harris, Executive Director	American Jewish Committee	$842,419
John R. Seffrin, CEO	American Cancer Society	$832,355
Larry Jones, Past CEO	Feed the Children/Americans Feeding Americans	$800,000
James E. Williams, Jr., President/CEO	Easter Seals	$796,501
Rabbi Marvin Hier, President/CEO	Simon Wiesenthal Center	$790,954
Michael L. Lomax, President/CEO	UNCF/The College Fund	$773,693

Wounded Warrior Project

Readers wanted to know how the Wounded Warrior Project (WWP) was using its donations and whether the charity was spending a large portion of donations in hiring for-profit corporations to raise money. WWP uses a combination of fundraising events, corporate sponsorships, advertising and direct mail appeals to raise money. According to the Tampa Bay Times, of the $150 million raised in 2012, about $81 million was raised through professional solicitors. Wounded Warrior paid 11 percent of that money to cover its solicitors’ fees and the expense of the solicitor-run campaigns.

WWP does not provide direct financial assistance to its alumni, which is what they call those who sign up online for their member services (as of October 1, 2014, WWP has 58,034 alumni). WWP states that they “cannot direct funds to a geographic location or specific individual.” On their website they write:

“Throughout the year, we offer a wide range of events and activities around the country designed just for Alumni. These activities include sporting events, educational sessions, and social events that give individuals a chance to spend time with other injured service members. Alumni can also participate in many WWP activities and events for injured service members.”

WWP provides “programs and services” to their alumni, in addition to backpacks (“WWP packs”). According to their website:

“Warriors receive WWP packs in the hospital. They can be purchased through Under Armour and will be presented to an injured service member recuperating in a military hospital.”

“WWP provides more than 18 programs and services to injured service members and their families, in addition to numerous valuable resources. Sign up online for our WWP Alumni program. It’s free to join. Please visit our Programs page and browse all our offerings that are categorized by Mind, Body, Economic Empowerment and Engagement.”

The following are excerpts from a report on WWP published at Veterans Today on December 8, 2013.

“Sad to say, the Wounded Warrior Project is bled dry by a top heavy, greedy executive structure, and the remaining funds are disbursed to multi-tier distribution organizations with similar management structures. By the time the money actually goes to direct benefits for veterans, there is probably less than 10% that reaches them… WWP does little, if any, direct support of wounded warriors and wounded warrior programs. Rather, WWP makes grants and contributions to other 501.c.3 organizations which operate wounded warrior programs and/or serve veterans directly… While many of these organizations provide valuable services to wounded warriors, many more are suspect. As an example, I question an expenditure of $300,000 for a parade. Some organizations are known to be inefficient and not the favorite of veterans (e.g. The American Red Cross). I also question the use of funds for lobbying activities. It is true that WWP was the center of controversy involving their anti-Second Amendment position. There is no question that WWP does contribute substantial funds for the benefit of wounded warriors. Notwithstanding, it appears that a more effective use of Association funds would be to contribute directly to The Fisher House, Navy-Marine Corps Relief, The Salvation Army, and others.”

Proud Supporter Events listed on WWP’s website are not organized by WWP; rather, they are charity events hosted by other organizations to benefit myriad causes. On WWP’s website it states:

“Wounded Warrior Project^® (WWP) invites you to honor and empower Wounded Warriors by becoming a Proud Supporter and hosting your own fundraising campaign.”

“You will need to register your event each year to hold a benefit for Wounded Warrior Project® should you hold an annual benefit event. For volunteer opportunities at registered proud supporter events in your area, please visit the Proud Supporter Events Map, locate an event in your area, and contact the event organizer to inquire about volunteer needs. Please note: These volunteer opportunities are not directly with WWP. Please do not contact military bases to invite warriors. These requests should come through WWP’s event staff at events@woundedwarriorproject.org.”

It is important to note that WWP does not provide programs or services to military veterans who served before September 11, 2001. On WWP’S website it states:

“WWP began as a small, grassroots effort to provide immediate assistance when a warrior of this generation was injured. We felt we could do the most good by providing more comprehensive programs and services to the newly injured, rather than spread ourselves too thin by trying to help all veterans. We also knew there were many terrific veterans’ organizations for warriors from previous conflicts, but very few focused on serving our newest generation.”

For 2012, WWP reported that about 73 percent of its expenses went toward programs and services, but the charity is one of many that uses a commonly accepted practice to claim a portion of expenses as charitable works by lumping them under the broad category of “program service expenses.” For example, by including educational material in solicitations, charities can classify some of the expense as good deeds.

In my analysis of WWP’s 2012 IRS Form 990, “Statement of Functional Expenses (Part IX)” [see page 10 – image above], I determined that in 2012:

• 32.54% of contributions was added to WWP’s endowment fund (banked or invested)
• 59.81% of contributions was spent on programs and services, direct and indirect costs*
• 7.65% of contributions was awarded directly in grants

* Of the 59.81% spent on programs and services, 12.31% was for salaries and other compensation and 47.50% was for other expenses, including those spent on “consulting and outside services” and on overhead

The figures above contradict the claims WWP makes on their website and in their annual reports and press releases — this is because WWP uses the broad category of “program service expenses” when reporting their operating costs.

According to WWP: “Based on our fiscal year 2013 audited financial statements ending September 30, 2013, 80 percent of total expenditures went to provide services and programs for wounded service members and their families.”

2013 Expenses By Category:

Program Services: $175,009,142
Management and General: $9,199,900
Fundraising: $34,764,110

Total Expenses: $218,973,152

Total Cash Contributions: $224,063,935

However, in my analysis of WWP’s audited financial statements for 2013, I determined that 82.12 percent of the $175,009,142 in “program service expenses” was for indirect costs (overhead); therefore, in 2013 only 18 percent of total expenditures went to provide services and programs for wounded service members and their families.

WWP is one of many nonprofits that allocates operating costs (overhead) under the category “program service expenses,” giving donors the perception that this is the amount provided in grants or services.

Operating expenses are indirect costs, which include management services, salaries and other compensation, fundraising events, advertising and promotion, office expenses, information technology, conferences, conventions, meetings, occupancy (mortgage/rent, utilities, etc.), lobbying, insurance, travel, and other expenses.

Scripps Howard News Service reported in May 2012 that chief executives of nonprofit organizations sign their annual Form 990s to the IRS promising “under penalties of perjury” that the information provided is “true, correct and complete;” however, there is “great incentive to fudge the numbers” and “legal action for a false filing is extremely rare.”

“They are fudging the numbers, and there is great incentive to fudge the numbers,” said Christine Manor, a certified public accountant from Rockville, Md., who advises GuideStar and other nonprofits in how to report to the IRS. “Why does anyone think we are so stupid?”

Yet the problem has been known for many years, at least since the mid-1990s, when the IRS began compiling and publicly releasing data from the Form 990 income-tax statements that most large nonprofits are required by law to file annually.

“This has been a long-standing area of concern,” said Washington, D.C., attorney Marcus Owens who was director of the IRS’ Exempt Organizations Division for 10 years.

The Journal of Academy of Business and Economics published a study in February 2003 on the intentional misreporting of “program expenses” by nonprofit organizations. The study examined the motivation of nonprofit organizations to use IRS Form 990 to manipulate financial results by allocating indirect costs as part of the expense composition of “program services” (as opposed to costs for funding activities directly related to the organization’s mission).

Why would a nonprofit misreport “program service expenses”?

When reviewing IRS Form 990s, donors judge organizations reporting a higher proportion of total expenses classified as “program services” or “program expenses” as more likely to use donations to fund activities directly related to the mission rather than on indirect costs associated with operating the charity. 

In other words, donors likely perceive high amounts of total expenses devoted to “program services” as indicative of an organization awarding direct financial assistance to those in need.

To make matters worse, online watchdogs like Charity Navigator use a nonprofit organization’s “program expenses” to rate the charity, so the higher the “program expenses,” the better the rating. On its website under “How Do We Rate Charities’ Financial Health?,” Charity Navigator states:

Charities exist to provide programs and services. They fulfill the expectations of givers when they allocate most of their budgets to providing programs. Charities fail givers expectations when their spending on programs is insufficient. To evaluate a charity’s program expenses, we divide its program expenses by its total functional expenses. Charity Z spends $2.5 million on program expenses, compared with its overall operating budget of $3.5 million. Thus, Charity Z spends 71.4% on program expenses.

The following are excerpts from the February 2003 study, “Indirect cost allocations and the incentive to report high program service expenditures in Form 990: an examination of donors’ perceptions”:

As an overseer of the nonprofit sector, the government has sought to ensure that nonprofit organizations have not engaged in activities that have violated their tax-exempt status. To fulfill this duty, the federal government currently requires most tax-exempt nonprofit organizations (501(c)(3) organizations) to file a yearly informational return, the Form 990.

The Internet presence of Forms 990 has provided nonprofits with increased incentives to report high program service expenditures. Organizations can artificially inflate these expenditures by allocating large amounts of indirect costs to program services.

An experiment investigating donors’ perceptions regarding program services and indirect cost allocations finds that nonprofits’ attempts to mislead donors through cost allocations may succeed, even when signs of potentially manipulative allocations appear on functional expense statements. Donors possessing financial analysis skills may, however, detect these attempts, suggesting that web sites may need to emphasize a careful examination of the expense composition of program services.

Despite Form 990’s role as one of the most commonly used sources of nonprofit financial information today, many in the nonprofit field fear that the informational return may mislead donors.

One area of special concern lies in the reporting of “program service expenditures” and the use of cost allocations to artificially inflate their magnitude.

This paper discusses an experiment conducted to investigate donors’ perceptions of potentially manipulative indirect cost allocations reported in Form 990. In providing a preliminary indication of the likely success or failure of organizations’ attempts to mislead donors through cost allocations, the paper offers some practical suggestions for web sites housing Forms 990.

In its reporting of organizational expenses, Form 990 uses one of three categories to classify all expenses:

1. program services
2. management and general
3. fundraising

Because of the increased accessibility of Forms 990, nonprofit entities face incentives to disclose high “program service expenses” and low management and fundraising expenses (overhead) to ensure a donor’s favorable impression of the organization. Organizations may respond to these incentives by allocating large amounts of indirect costs to the “program service expense” classification to inflate its magnitude, a practice that, according to critics, charitable organizations have committed in the past.

While the IRS encourages organizations to allocate indirect costs among the three expense classifications (program services, management and general, and fundraising), it fails to specify an appropriate allocation method. Further, professional accounting organizations offer only limited cost allocation guidance.

One professional website dedicated to Form 990 preparation advises nonprofit organizations: “If the percentages for either fundraising or management and general appear too high, go back and make sure that your organization used appropriate guidelines when classifying expenses.”

A Statement of Functional Expenses included in Form 990 may provide assistance to donors in detecting an organization’s efforts to manipulate program service results. This statement reveals the individual expenses, both direct and indirect—comprising total program service, management and general, and fundraising—and reports, in columnar format, the manner in which an organization allocated its indirect expenses among the three expense classifications. Some have maintained that this statement is the most important financial report of a nonprofit organization, since it may disclose unusual cost allocations.

Note From Fame: The Statement of Functional Expenses was Part III of Form 990 but the IRS moved it to Part IX, essentially burying it near the end of the form—this statement reveals the actual expense composition of the totals appearing in Part I, and, in turn, how each organization allocated its major direct and indirect costs.

When evaluating the performance of nonprofit organizations, donors and public service agencies rank the ratio of total “program service expenditures” to total organizational expenditures high in importance. Donors can calculate this ratio from data appearing in Part I of Form 990—this statement reports an organization’s revenue sources and the total dollar amounts spent on program services, management and general, and fundraising. Donors likely perceive high amounts of total expenses devoted to “program services” as indicative of an organization’s use of contributions to support program service activities.

The IRS grants nonprofit organizations considerable discretion in their determination of “program service””, management and general”, and “fundraising” expenditures. It encourages these organizations to allocate its indirect costs among the three expense classifications, although it provides only limited guidance as to the allocation techniques or methods.

Regulators and oversight agencies have long considered the Statement of Functional Expenses (Part IX of IRS Form 990) of primary importance in revealing questionable cost allocations. However, evidence from this study suggests that disclosure on the functional expense statement of a nonprofit organization’s potentially manipulative use of indirect cost allocations to inflate “program service expenditures” may go undetected, implying that organizations may find it relatively easy to mislead donors using Form 990.

Related:

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• Lack of regulation and meager penalties allow worst charities to thrive
• In wake of report, charities come under increased scrutiny
• Charities With the Highest Administrative Costs
• The Highest-Paid CEOs of Poorly Rated Charities
• Center for Investigative Reporting: A failure of regulation
• The 200 Largest U.S. Charities for 2011
• The 50 worst, ranked by money blown on soliciting costs
• Wounded Warrior Project spends 58% of donations on veterans programs
• Wounded Warriors Project, A Legal Scam
• Wounded Warrior Project is a Fraud
• Tom Gresham: Don’t Support Wounded Warrior Project