Fraud in Charity?

 Posted by on 1 August 2008 at 12:00 am  Culture
Aug 012008

I was pretty floored to read this LA Times story about the huge percentage of charitable donations often going to fundraising firms, rather than the charity itself. The article begins:

For 24 years, Citizens Against Government Waste has exposed pork-barrel spenders and rallied tax critics. Its “Pig Book” and “porker” awards, meant to shame congressional leaders who exploit the public purse, have made the group a media darling and a political force. But when it comes to policing its own fundraising practices, America’s self-proclaimed “#1 taxpayer watchdog” seems to have lost its bite.

Records filed with the California attorney general’s office show that over the last decade, for-profit fundraisers for the nonprofit kept more than 94 cents of every donated dollar. …

A Times investigation found hundreds of other examples of charities that pocketed just a sliver of what commercial fundraisers collected in their names. Some didn’t get a dime or even lost money.

According to a comprehensive review of state records filed over a decade, the problem of paltry returns extends well beyond what has been reported in recent years among benevolent societies for police, firefighters and veterans. It affects charities large and small, well-known and obscure. It spans a range of causes, including child and animal welfare, health research and opposition to drunk driving. …

Among The Times’ findings:

* More than 100 charities raised $1 million or more from commercial appeals but netted less than 25 cents per dollar. Fundraisers got the rest.

* In 430 campaigns, charities got nothing: All $44 million donated went to fundraisers. In 337 of those cases, charities actually lost money, paying fees to fundraisers that exceeded the amount raised.

* In hundreds of other campaigns, charities apparently entered into contracts that limited their share of donations to 20% or less, no matter how successful the campaign.

* Groups with strong emotional or patriotic appeal — those supporting animals, children, veterans and public safety workers, for instance — often fared worst. Missing-children charities received less than 15% of more than $28 million raised on their behalf.

I found the article interesting for three reasons, in increasing order of importance:

(1) It’s a useful warning to anyone who donates to charity. Any donor should know where his money is going — and how it’s being spent.

(2) Altruism provides an all-too-handy cover for this kind of barely charitable activity. For many people, so long as they donate to some cause, even if their money is wasted, they’re “doing good.” In contrast, the egoist has every reason to care whether his money is being used to promote his values or not — because those values are his motive for donating at all.

(3) I’m strongly inclined to say that a fundraising campaign for a charity where most of the funds raised end up in the pockets of mass marketers is fraudulent. Imagine that a person is asked to donate $50 to, say the American Breast Cancer Foundation, and so he writes a check to that organization. Yet in reality, $5 is going to that charity and $45 to the marketing company. In that case, the donation is not what the donor reasonably thinks it to be. Of course, marketing companies deserve to be paid well if they do their jobs well, and government regulations are pretty well useless. So perhaps “donor beware” is the proper rule unless a charity makes specific claims about how donor funds are used. Nonetheless, donors have every right to be pissed as all heck if they discover that the charity is mostly in the business of keeping itself in business.


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