American Institute of Philanthropy Gives Charities Failing Grade

WASHINGTON -- A new charity rating guide by the watchdog American Institute of Philanthropy (AIP), has handed out 'F' grades to dozens of poorly run or shady organizations whom it says donors should steer clear of if they want more bang for their charitable buck.

"A lot of donors assume that if a charity files with the IRS then that means the charity is legitimate," said AIP analyst Laurie Styron. "But that doesn't mean someone has rigorously checked out the charity and determined your donation will be spent the way you intend."

Most charities are regulated at the state level. There are no minimums on what they must spend on programs nor legal limits on how much they may spend to raise money.

A 2003 Supreme Court ruling said the First Amendment prevents states from putting limits on the amount of fees fundraisers can charge charities. Vietnow, the veterans group cited in the case for using a telemarketing firm that kept 85 percent of what it raised, was given a failing grade in AIP's latest report for eating up $89 of every $100 it took in on fundraising costs.

With no "federal watchdog, no investors who will sue if given false information, and loose reporting rules, the nonprofit sector has little oversight and much room for financial manipulation," AIP said in its report.

The group uses a simple rating formula based on the percent a charity spends on program services and the cost to raise $100.

AIP's target for a "satisfactory" amount of money going to programs is 60 percent, though the most efficient and best charities spend 75 percent or more on carrying out their mission. It considers spending $35 or less for every $100 raised as a reasonable fundraising cost. Groups that spend a small percentage on programs and devote the majority of dollars to raising more dollars get low marks.

But some groups that claim to spend a hefty chunk on "programs" may use a different definition than donors. Those pre-printed address labels and note cards that regularly come in the mail to play on your guilt to send back a check? If the fundraising pitch contains a reminder to get a breast exam or gives a statistic about homeless veterans, the group could call that part of its "educational program," Styron noted.

"Most donors would be shocked if they knew that the same charity telling you we spend 90 percent on programs was really using most of your money just to send more direct mail to you," she said.

While some charities get low marks because they are inefficiently managed, others are merely vehicles for "non-profit entrepreneurs" to rake in hefty salaries and perks. Federal and state officials cracked down two years ago, targeting sham nonprofits and fraudulent telemarketers claiming to help police, firefighters and veterans. Yet many poorly run charities continue to live on.

The Christian relief group Feed the Children has been called by AIP "the most outrageous charity in America." It has earned F grades for more than a decade for everything from forged audits to inflating the value of medicines it distributes in developing countries.

Charities that "tug at the heartstrings" with appeals to help children with cancer, missing children, veterans and first responders tend to perform worse in the AIP rankings. Nearly half -- 19 of 42 -- of cancer charities rated got Ds and Fs. Among them: Children's Cancer Fund of America, National Cancer Coalition and the National Children's Leukemia Foundation.

Of 20 charities in the crime and fire protection category, 14 failed to meet AIP standards. The American Association of State Troopers Scholarship Foundation is among the organizations AIP said uses "semantics or creative accounting" to claim it spends nearly 100 percent of its donations on programs.

Then there are the charities that sound like highly rated organizations. "Donors need to be really careful because names can be very similar," Styron said.

The F-rated Breast Cancer Relief Foundation spends as little as 5 percent of its money on programs while allotting up to $86 out of every $100 to raise funds. How many donors who give to it really thought they were donating to the Breast Cancer Research Foundation, which gets an A+ for spending 92 percent on programs and a mere $5 for every $100 raised?

The website of the Parkinson Research Foundation advertises an "educational cruise" featuring "deluxe ocean view staterooms." It chews up $73 out of every $100 it brings in and spends just 25 percent on programs. Compare that to the Parkinson's Disease Foundation, which earns an A for spending 81 percent on programs while its cost to raise $100 is just $11.

Then there is SPCA International, a dog of a charity that is in no way affiliated with the better-known ASPCA, which earned a middling C+ from AIP.

The AIP report isn't all bad news. Charities that focus on the environment, human rights, homelessness and mental health generally earn As and Bs. Also getting high marks: charitable organizations dealing with controversial issues like abortion, guns and gay rights who have a reliable base of donors they can cheaply tap.

Comments

[Stanley Quan]

06:45 PM on 08/03/2011

I recently took a college course called Strategic Philanthropy and learned all about effective giving. There are so many non-profits out there, many doing very similar work. It actually takes a lot of time to research and find ones that have been making the most of your money. But it's definitely worth it in the end if your goal is to make the most impact.

[proudtohaveserved]

08:05 AM on 07/29/2011

MY MONEY GOES TO UNICEF WITH SUGESTIONS TO BE SPENT ON THE STARVING CHILDREN OF THE WORLD, SPECIALLY AFRICA AND HAITI. THIS BEING A CAPITALISTIC SOCIETY I KNEW RIGHT AWAY ABOUT AMERICAN CHARITIES AND NEVER CONTRIBUTED TO THEM OR ORGANIOZED FRELIGION. THEU ARE ALL C #R@O&&OKS

[bmcombs]

02:03 PM on 07/30/2011

You are aware that the US branch of UNICEF is a US 501(c)3 "American Charity" and simply required to follow the same rules and guidelines as every other nonprofit? The fact they they have an international call from the UN really doesn't mean anything.

As far as other charities being "crooks" is clearly disputed by websites like these that talk about how well some organizations are at programming and managing funds responsibly.

[DanInAustin]

02:22 PM on 08/02/2011

I donate to a charity that provides working keyboards to those whose caps lock keys have broken. Take a look here: http://20b.org/

[bgofca]

03:22 AM on 07/29/2011

i went to their website to try to find the list of good and bad charities and found that they only give the list to people who donate to them.

[Lizaclu]

12:22 AM on 07/29/2011

All charities need to be held to a higher standard. It's good that AIP is exposing fraud in the sector - but the program vs. administration ratio alone can be misleading as well. I would argue that the only criteria that matters is the impact per dollar an organization is making toward their mission. I don't care if a nonprofit spends 99% of their donations on program - if what they're doing isn't working - today, next month, next year or five years down the road, we shouldn't support them. In fact, they're doing more harm than good because they're taking money that could have gone to a nonprofit that makes more of an impact per dollar. Monitoring and evaluation is the solution. Nonprofits are scared to do it because it might show that they're not making the impact the claim. But that's okay - as long as they learn from it and fix their program. If they won't do this, then they need to get out of the way - because, it's cliché but it's true, children really are starving in this world. Nonprofits say it's too expensive or too difficult to measure their impact - but the only way it's going to get easier or cheaper is if they all start doing it. And the only way they'll start doing it is if the big watchdog groups - AIP, Charity Navigator, BBBWise, Guidestar, etc., start requiring them to.

[patfrederickson]

11:53 AM on 07/28/2011

I've said it before and I'll say it again and again. Donate to your local nonprofit animal shelter and not to big businesses like HSUS.org, which lines Wayne Pacelle's pockets with platinum, puts diamonds on the soles of his shoes, and pays Michael Vick to make 5 minute appearances once a month (his so-called community service).

[FancyAmerican]

11:42 AM on 07/28/2011

"The Christian relief group Feed the Children has been called by AIP 'the most outrageous charity in America.' It has earned F grades for more than a decade for everything from forged audits to inflating the value of medicines it distributes in developing countries."

Yeah, I've always known this and I hate that people still send them money. Just because it says Christian in it doesn't mean that the organization stands for the religion's values. It's a guise and many fall for it time and time again simply because of the word "Christian."

Do RESEARCH before you donate even a dollar to ANY organization.

People start up nonprofits because it LOOKS GOOD, and because it sounds like they aren't making money off of it but here's a reality check: WITHOUT A PROFIT THEY CANNOT SUSTAIN THEMSELVES.

The profits that nonprofits make must be reinvested into the organization. Administrative costs should NEVER be more than 10% of the organization's budget.

[PrairieGayCompanion]

09:23 PM on 07/27/2011

This is a very helpful guide to giving. Likewise, the United Way and Combined Federal Campaign also list the overhead of each organization in its plan, with a cutoff of overhead percentage on what they will list. I just wish Congress would allow non-profits to be included in no-call lists so that hapless victims are not pressured into contributing to organizations with good sounding names but that they know nothing about. At least with a mail solicitation you can research it.

[bmcombs]

07:00 PM on 07/27/2011

A+ to AIP for helping keep charities honest. As nonprofit professionals we need to continue raising the bar to improve the image and the performance of the nonprofit community.