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.