Charities and Donations

Recently, the Arizona Republic wrote a four-day series on twenty-two charities and where their money goes as a warning to all of us. In light of the new reduction of charitable tax benefits for those who make more than 250K a year, this is a blow to the efforts of fundraising and much deserved exposure of those who take advantage of the system.

Over the past couple of years, it's become clear that charity is big money and big business. The tax exemption status is an honor system put forth by the IRS because they do not have the means to audit the 1.8 million charities under their exemption umbrella. This may change, however, due to organizations that abuse that honor system.

There are two questions that have always come to mind while working in the nonprofit sector:

1. With so much money and inkind donations floating around, why is there still so much need? Why aren't issues being resolved?

2. Where does all this money go?

The first question is loaded. Issues exist, i.e. hunger, homelessness, abuse are alive because of human nature and they require more than one answer; however, it's the output of aid to those in need in comparison to the input of funds and gifts meant to feed, house, shelter, etc. that is in question. For example, the article from the Arizona Republic, "Following the Donations", shows that 8,884 pounds of medicine sat in a warehouse in the US and Canada, while the website claimed it was sent to the Philippines and Guatemala. By the end of the convoluted journey of this medicine, after being passed around on paper to several related charities in the US, it finally ended up in one faith based mission in Guatemala and one in the Philippines. The website claimed it got dispersed to clinics in the Philippines and hospitals throughout Guatemala. Makes one wonder how many instances like this happen when the public is told one thing and the charity does another.

The second question is quite easy to answer. People forget that nonprofits are still businesses. Nonprofit workers are either volunteers or they are paid staff. People who start, build and manage nonprofits full time, need to be compensated fairly. Unfortunately, as most business owners know, salaries are typically the biggest overhead. Be wary of large organizations that claim a very small percentage of money goes to salary. According to the Arizona Republic, "charities spend most on their own salaries, expenses." This is especially true with middle charities who take money and then disperse to other charities rather than donors giving the money directly to the cause they want to support.

In any nonprofit organization, there are still expenses in travel, supplies, monthly services that need to be addressed. The misperception that because you are a nonprofit, you should do and get everything for free is just not reality because it is still a business. Unfortunately, some nonprofits pay six and seven-figure salaries to their employees and take some pretty hefty sums for perks and bonuses. To get to that level, the nonprofit is mostly likely quite large and receiving tens of thousands if not millions a year.

There are many reasons why the issues of hunger, homelessness, domestic violence, etc. are unresolved, but very little excuse as to why the numbers are continuing to climb when there are so many generous people pouring funds into the nonprofit sector, expecting to bring about change. When you give to a charity, not only research their financials, but think HARD about whether you want to donate to a middle charity or to directly to the organization in need. The middle charity is not there to stem the flow of hunger or child abuse, they are there to collect money for other charities and they are not doing it as volunteers.

This type of nonprofit, such as the Combined Federal Campaign, is supposed to stem the flow of donation requests made to Federal government employees and to large billion dollar corporations. There is little if any oversight into fund disbursement by the CFC and it's very unlikely that they work as volunteers, which means a chunk of those millions are going to salaries, not to child abuse and education for the poor. Furthermore, if a middle charity claims they are watchdogs in ensuring transparency and accountability of money investments on behalf of donors, this is really unnecessary duplication because the organizations who apply for these middle charity networks already have to prove transparency. In other words, you as the donor can go directly to that charity who got the money and see the very same thing that you could from the middle charity and save millions of dollars that would otherwise go to services.

Arizona Republic: Perfectly Legal (Four day investigative report) If these links expire, please notify me and I will post them as pdf.

Excellent response to the AZ Republic article with some valuable links

CEO Salary comparison by Charity Navigator (They tell you to consider the size of the charity and the charity budget...ideally the larger the budget, the more help to people/animals rather than the higher the salary, but that isn't reality.)