An impressive investigation by the Tampa Bay Times and the Center for Investigative Reporting identified 50 charities around the country that raise millions of dollars but spend as little as one percent on their stated mission. Both outlets deserve a CJR Laurel for the effort.
Most of the money these charities raise goes to the professional fundraising companies that run telemarketing campaigns on their behalf. The year-long investigation by the Times and the Berkeley-based Center resulted in two databases that the Times and CIR posted online, offering journalists around the country a way to look up charities in their areas that have been cited by state regulatory agencies, or that have acknowledged in their federal tax filings that they spend very little of the money they raise on charitable work.
“America’s Worst Charities” found charities, professional fundraising companies, and individuals who had been fined as much as $25 million for things like using deceptive scripts, failing to file financial paperwork, and even fraud. The database of regulatory actions against charities and fundraisers is the first of its kind–even the state regulators had been unable to cross-reference what other states had done.
To compile it, Kris Hundley of the Times and Kendall Taggart of the Center gathered data from every state on regulatory actions taken against charities and professional fundraisers. They found great variation in transparency and record keeping among the states. “Twelve states were great,” Hundley said. “With 38 states, it was almost like somebody hit the laugh button. They said ‘You want what?'” In those more challenging states, Hundley and Taggart combed through press releases and news reports. They found some charities had been cited repeatedly in multiple states.
“The best thing to do, from a data perspective, is get the data, assess its cleanliness and then mine it for stories,” explained Mark Katches, the CIR editor on the investigation. “Well, in this case, there was no data. We had to build it. The reporting was a real grind.”
Even when the data did exist, the team ran into complications. Taggart found data kept by the state of California, but the early years were input into an obsolete program. “I looked around the office and we have a senior reporter who has a really old computer,” she said. “Maybe that’s not the most reasonable way to go about it, but I thought to myself, ‘I bet that guy’s computer has Microsoft Access from back then’.”
And it did.
Some states require charities to report if they’ve been cited by regulators in another state, providing the reporters with valuable leads.
The investigation also looked at ten years of tax filings for 5,800 charities identified by Guidestar, the nonprofit charity tracker, as paying professional fundraisers. The vast majority of those charities spent reasonable amounts on fundraising costs. But Hundley and Taggart were able to single out 50 charities that routinely let fundraising companies keep more than 65 percent of the money raised. In some cases, “We saw a pattern over time of letting fundraisers retain 70, 80, or even 90 percent of the money raised,” Hundley said.
The reporters said they were careful to look at a long time range to make sure they were not highlighting charities that had simply had a bad fundraising year. “We wanted to figure out a way to look at the underworld of these charities,” Taggart said. Many of the charities the investigation identified use names that sound similar to well-known and well-run charities.
Alexander Berger, of Give Well, a non-profit that does research on charities, called the project “interesting,” but cautioned that the charities that the investigation highlighted are nothing like most charities. “The kind of data they used finds the real outliers,” he said. “Paid fundraisers just shouldn’t be getting that much of the pie.”
Give Well shares the concerns of Guidestar, Charity Navigator, and the Better Business Bureau Wise Giving Alliance, which recently issued a joint letter about what they call the “overhead myth”–that charities with the lowest overhead are the most efficient at spending donor funds. “The overhead ratio can be applied in misleading ways,” Berger said. “Organizations should be able to invest in overhead to do their job. Buying computers can be overhead, but if it enables the organization to operate more efficiently, that shouldn’t be held against them.”
The Times/CIR investigation found that the 50 worst charities spent nearly $1 billion in donor money on fundraising. Berger pointed out that this is just .05 percent of all money raised for charity during that period.
One newspaper, the Desert News, had some criticism of the investigation, though its critique was not particularly persuasive. Mercedes White’s story for the Salt Lake City paper disputed the idea that high overhead costs, including the use of telemarketing firms, indicates poor charity performance. One part of the story put it this way:
In other words, it takes money to raise money. If charities did not spend money on fundraising and campaigns to increase awareness, many important problems would go unnoticed and opportunities to do something about them would be missed. For this reason, Goggins [Ann Gregory Goggins, senior director at the Bridgespan Group] argues that overhead is not the most meaningful way to judge a charity, and the ‘overhead is bad’ narrative can get in the way of more meaningful analysis. ‘At the crux of this argument is the fixation on a number that isn’t meaningful,’ she said. Different charities require different levels of overhead to achieve their objectives, she said.
But the Times/CIR investigation did not argue that all high overhead is bad. And the Deseret News piece ignored the fact that the Times/CIR investigation found that a number of the charities identified as paying the most to fundraisers had also been cited by state regulators for violations ranging from deceptive telemarketing to fraud. White did not respond to interview requests. She also did not ask the two reporters on the project for a response to the criticism she raised. CJR did, and Taggart replied in an email:
Every charity has salary, overhead and fundraising costs. Our investigation focused on organizations that have made high-cost fundraising a way of life. We looked at 10 years worth of data. One or two costly fundraising campaigns were not enough to make the list. We vetted our methodology for how we identified the charities with several experts in advance of publication.
CNN also collaborated in the Times/CIR investigation, contributing reporting on charities that inflate the value of gifts made to other charities–gifts that have included things like 11,000 bags of coconut M&Ms shipped to a homeless veterans’ shelter and $2,600 worth of pet medicine valued at more than $816,000 on the charity’s tax filings.
The Times/CIR investigation did not mention a recent charity scandal that cost Florida’s lieutenant governor her job. Jennifer Carroll resigned as lieutenant governor shortly after nearly 60 people associated with Allied Veterans of the World were arrested on illegal gambling, racketeering, and money laundering charges. Carroll had done public relations work for the Florida non-profit, which was using internet sweepstakes cafes to raise money. Hundley said Allied Veterans was not included in the investigation because the organization wasn’t paying a professional fundraiser. “We didn’t catch all the bad charities out there,” she said. “This is just one way to look at questionable charities.”
Since the investigation was first published, CIR has begun to tweak the database to make it searchable by state, after a newspaper reporter requested that. “For the Center for Investigative Reporting, there’s always an interest in creating tools that other reporters can use,” Taggart said. She gave a presentation at the national conference of Investigative Reporters and Editors recently on the project, and has posted a guide to the databases online as well as a tip sheet.
Correction: This story originally misidentified the signatories of a joint letter about the “overhead myth.” The letter was signed by Guidestar, Charity Navigator, and the
Better Business Bureau Wise Giving Alliance. The relevant sentence has been corrected. CJR regrets the error.
Joel Campbell contributed reporting to this story, on the Deseret News.
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Susannah Nesmith is CJR’s correspondent for Florida, Georgia, and Alabama. She is a freelance writer based in Miami with more than 25 years working for regional and national outlets. Follow her on Twitter @susannahnesmith.