Our latest investigation in collaboration with the Tampa Bay Times and CNN found that America’s 50 worst charities have raised more than $1 billion in the past 10 years, but only a fraction went to anyone other than the charities’ operators and professional solicitors.
Bad charities get away with it because state regulatory systems are a mess. Often, bad charities caught in one state legally can set up a new shop in another state.
Search our interactive database, where you can see data we pulled from 990 forms charities filed with the IRS to outline total cash raised, how much was paid to solicitors and how much made it to the charity.
In our monthly Dialed In conference call with CIR members, CIR Managing Editor Bob Salladay spoke with CIR data reporter Kendall Taggart and Kris Hundley of the Tampa Bay Times for a deeper dive into the investigation.
You can listen to the call here and read some highlights from the interview below. Answers have been edited for length and clarity.
The investigation started as a “fortuitous” collaboration between CIR and the Tampa Bay Times:
Kris Hundley: We started wondering, well, what else is out there and what do you have to do to prove that you’re real to start a charity. And we discovered you don’t even have to give a Social Security number to … start a charity. Then we started looking at what kind of red flags would you look for to try to tip you off that a charity was less than legitimate.
One thing we kept coming up against was this whole issue of using professional telemarketers, direct mail houses and excessive costs that way. We were also looking at what states do in terms of discipline … (and) found that basically, states will take a disciplinary action, but never keep a record of it.
What criteria was used to select the 50 worst charities?
Kendall Taggart: Kris and I are both very sensitive to the fact that every charity has fundraising costs, and that’s something that donors need to be aware of. But we wanted to take a look at a small but parasitic segment of that industry, that for the last 10 years has given the vast majority of money raised to for-profit fundraisers. … We wanted to make sure we were looking at organizations where this was a pattern. …
And we also wanted to make sure we were looking at organizations that get at least half of their revenue from these sources. So, they’re highly dependent on this high-cost fundraising. That’s ultimately how we winnowed down the universe of nonprofits that we were looking at – from the 6,000 ones that used outside companies to the 50 that we named in our story.
Who are the real victims in this story? The donors? The charities?
Hundley: I think there are several different types of victims in this story, and I think that’s important to remember.
They’re the people who answer the phone and unwittingly give just out of the goodness of their hearts to what seems like a valid request and an honorable cause. I spoke to a woman who … discovered that her mother-in-law, who was suffering from Alzheimer’s, had spent $15,000 over four years giving to these kinds of charities. Here was a woman, who clearly, the daughter-in-law said, was losing her faculties. But she was being called almost daily by one of these solicitors. She would give $10, $20 – in some cases, she would give a hundred dollars. Often, it was taken right from her credit card. So she certainly was a victim.
There are victims like the woman I spoke to in Knoxville, who when her husband got lung cancer received a patient assistance kit from Cancer Fund of America, and it included paper plates, paper cups, kids’ toys. She said he felt like it was a slap in the face. He said, “What in the Sam’s hell am I supposed to do with this?” This is the reason Cancer Fund of America goes out to the public and asks for donations. And what they give cancer patients is a little more than an insult.
But on a bigger level, I think everybody is a victim. … People think that this is just a $10 or $15 donation – who cares, it’s little old ladies who were too stupid to hang up the phone. In fact, we found it was $1.35 billion from these charities alone in over a decade, and a billion dollars of that was kept by the fundraisers. That’s enough to build 20,000 Habitat for Humanity homes, purchase 7 million wheelchairs and 10 million mammograms. So I think we all suffer when people don’t speak out about this.
Why is the regulatory industry so bad at holding charities accountable?
Taggart: Once a charity or a nonprofit has its exempt status from the IRS, oversight is really left largely to state regulators who are incredibly resource-strapped and fragmented – it’s a patchwork system. Kris and I found dozens of examples where an organization was banned in one state but continued to operate elsewhere. Presumably, if a donor is being lied to in Iowa, it’s still a concern to a resident in California. But the way the regulatory system is set up, there’s nothing to stop a bad actor from moving their fundraising efforts from one state to another.
Another thing we found was … charities are required to submit almost identical paperwork to every state they want to fundraise in. That’s incredibly time-consuming for good nonprofit organizations. It also means that state regulatory offices, rather than focusing on enforcement, are sometimes just drowning in paperwork and have to dedicate most of their resources to getting out from under it.
What’s the deal with in-kind donations? How do they benefit charities?
Taggart: In-kind donations have come under a lot of scrutiny from regulators recently, and they can be a wide variety of things. A common one is medical supplies donated abroad. Part of why they are a problem is there’s very little transparency about what is actually being sent. And the criticism about looking at overhead costs for a charity in some ways has encouraged groups to try and make their program ratios look better. So what I mean is make what you send to programs as high as you can, and make what you spend on salaries and other overhead costs as low as you can. In-kind donations help with that. They make it look like you’re getting in a million dollars’ worth of goods and sending out a million dollars’ worth of goods to Haiti. In reality, that could be worth a hundred dollars, a thousand dollars, but as a donor, you really have no way of knowing how many … anti-malaria pills did they send.
What has the reaction been when you told these charities they were one of America’s worst charities?
Hundley: In January, we started making phone calls to these charities, and we were dealing with a much larger list as we were winnowing things down. A large percentage of them just referred us to their lawyer or would only take questions via email. In April, we sent out certified letters to people who had declined to respond, making sure they were aware that we were naming them, that they were involved in this story.
Kendall and I visited a number of them ourselves with limited success. In one case, I went with a photographer to one of the charities’ offices near our office, and the guys threatened to call the police if we didn’t leave immediately. Finally, by the end of May, shortly before publication, we sent all of the charities an email alerting them that they were going to be named one of the worst charities in America, asking for any kind of comment.
Taggart: We’ve heard from a lot of people since this story’s come out. We’ve received about 250 requests for what charities we should investigate next. Those complaints range from everything to “I got a suspicious phone call” to “I was a former employee of one of those charities on your worst list, and I want to talk to you about the details of the operation … .” They’ve been incredibly helpful.
Got a tip on a bad charity? Submit it to us here.