Coauthored by Jonathan Stone
As the year races toward its end, many of us find ourselves in a much-needed festive mood as we busily make the rounds of shops and malls to purchase gifts for loved ones and friends. At the same time, we should also be thinking about those year-end donations to our favorite nonprofits and public charities, not to mention the year-end tax write-offs that come with them. But are we as careful when making our donations as we are when we're shopping for the best holiday deal?
To aid us in making more informed choices when we donate, there is an unusual site called Charity Navigator, which is a nonprofit of its own, that tracks other nonprofits and reveals in excruciating detail whether these organizations are "nice" or "naughty" -- in short, are they running scams, embezzling and outright stealing from us when we make those donations? This site currently tracks more than 6,200 nonprofits, out of the over 1.4 million registered with the I.R.S. in 2013. Indeed, they hope to expand their coverage and ratings to 10,000 nonprofits by 2016 as more donations flow into their coffers -- they do not charge for this public service they provide. Last year, 4.5 million people visited their site, so there are definitely some -- but not enough -- savvy donors out there who make sure their charity of choice is on the up-and-up before writing a check or charging their donation. $1.4 million in donations were made directly to charities featured on the Charity Navigator site.
When pilfering from a nonprofit organization takes place, both the donating public and the government take a hit. In an in-depth Washington Post analysis of the tax returns of nonprofits between 2008 and 2012, it was discovered that more than 1,000 of these organizations suffered "significant diversions" of assets "...attributed to theft, investment fraud, embezzlement and other unauthorized uses of funds." The estimated losses were in the hundreds of millions, with upwards of $500 million being lost by just 10 of the largest nonprofits during that period. Shockingly, it wasn't until 2009 that reporting of these so-called "diversions" was even required by the I.R.S., and even then only by larger nonprofit organizations, with private charities and smaller groups being able to skirt the reporting requirement by filing "...alternative forms or no forms at all." It is noteworthy that nonprofits and their donors receive upwards of $100 billion annually in tax benefits from the U.S. government, so this is not just some overgrown "cottage industry," it's a big-time business that employed more than 10.7 million Americans in 2010, third only behind retail and manufacturing in the U.S.
On Charity Navigator, they break down various categories of charities and nonprofits into groups of "Top Tens," such as the 10 most followed charities; top ten celebrity-related charities; ten most frequently viewed charities on the internet; top 10 super-sized charities; 10 consistently low-rated charities -- they rate up to four stars; 10 charities overpaying their for-profit fundraisers; 10 highly-rated charities with low-paid CEOs; and 10 charities with the most consecutive four-star ratings. Charities with consecutive four-star ratings include The Carnegie Institution for Science, The Children's Aid Society, The American Endowment Foundation, Energy Outreach Colorado, Catholic Charities of the Archdiocese of Galveston-Houston and The Harlem Children's Zone.
Some of the top-rated charities also pay fairly low salaries to their leaders, in the range of $48,463 to $60,083, while on the other end some eye-popping annual salaries are paid to non-profit CEO's and other leaders, such as the $591,122 paid to the head of The Red Cross and the $421,000 paid to Franklin Graham -- son of Billy -- for heading up Samaritan's Purse, which has assets of over $230 million. What are they doing with that money, and in particular, why in many cases are they sitting on it instead of using it for their programs? Also noteworthy is the salary of the head of the Wounded Warriors Project, who receives $391,000 annually. This organization also spends 36.3 percent of its funds on TV and fundraising, and received low ratings on more than one site. It is notable that two of the CEO salaries mentioned above -- along with many more, no doubt -- are larger than the salary of the president of the United States, although one could argue that some extra perks come with being president.
Some other well-paid CEOs run some of the lowest-rated charities, and despite their high salaries, these organizations devote less than 60 percent of the money they raise to their programs and services. Here are those low-performing organizations, and the salaries of their so-called "leaders:"
The Philadelphia Orchestra - $597,556
Young America's Foundation - $525,961
The American College of Obstetricians and Gynecologists - $455,584
Catholic League for Religious and Civil Rights - $407, 000
All Children's Hospital Foundation - $390,018
The Chapin School - $383,508
Detroit Symphony Orchestra - $379,868
Tiger Missing Link Foundation - $375,951
New Orleans Museum of Art - $364,016
Coalition to Salute America's Heroes - $362,500
Other factors not to be overlooked when deciding where to make a donation are the expenses of the organization in terms of staff salaries, number of employees, advertising costs, fundraising, percentage of donations that actually go to programs, and office overhead. If less than 70 percent of the money is actually going to programs and services, I would pass them by. I, personally, have donated to the nonprofit public advocacy organization Public Citizen for several years now, and each year I check their financial report -- which they make publicly available -- and the salary of its president, Robert Weissman. I am satisfied with his $127,000 in annual salary for running an organization that raised more than $9 million last year. They have a successful track record more than 40 years, and more than 79 percent of the money they raise goes directly to fund their programs.
In December 2012, the top 10 charities received between 60.1 percent and 80.8 percent of their donations for the year. On average, 40 percent of all donations are received at year's end. The top charities receiving donations were:
Teach for America
World Wildlife Fund
Catholic Charities USA
Save the Children
Doctors Without Borders
All Hands Volunteers
City Harvest
United States Fund for UNICEF
National Military Family Association
International Rescue Committee
I hope Charity Navigator -- as well as other nonprofit watchdogs such as GuideStar and The American Institute of Philanthropy's CharityWatch -- will come up with a rating system for all of those political-advocacy PAC's out there as well. The need is great, as accountability and reporting to the public is woefully lacking in this area. What these organizations are taking in, what is going out, and what they are spending it on remain the great unknowns of this new and thriving sector of the non-profit industry. And who is really benefiting from their activities -- other than the Koch Brothers and Sheldon Adelsons of the world?
With each new crisis, many of these political action groups and organizations are hitting us up for another $3 contribution -- the solicitations come on what seems like a daily basis in some cases. I think they owe it to their donors to have as much information in full view on their sites as possible about what they are doing with our donations. They often advocate for accountability in politics, so shouldn't they have it within their ranks as well? Not too much to expect, I think. One organization I would really like to see a financial report on is MoveOn, notably the money it presumably harvests from its 8 million members. Another would be the Progressive Change Campaign Committee, one of the most aggressive groups out there in raising funds.
But to avoid sounding too much like a Grinch, let's also be aware that so many of these organizations do tremendous work and serve some real needs. It's just that in this time of giving, isn't it also time for us to expect a little more from those to whom we donate our hard-earned money?