Those of you who visit this space know I sometimes write about charities trolling for donations in the Seattle area that don’t pass the New To Seattle sniff test. The usual problem is that very little of the money raised was spent for any legitimate charitable use, with the bulk going to executive salaries, overhead costs and fundraising expenses–especially fundraising. Legal accounting tricks and lax regulation help such charities hide the bad stuff from would-be donors.
More than a year ago, I wrote about the m.o. of the Cancer Fund of America. This is a Knoxville, Tenn.-based charity that managed to stay in business even though by my reckoning it spent on charity only 40 cents of every $100 raised in cash donations–0.4%, or less than 1/2 of 1%. Yet several accounting ploys coupled with sleepy Washington State regulators allowed Cancer Fund to report that its charitable commitment–the percentage of all expenses spent on charity as opposed to fundraising and certain overhead–was 73%, above the 65% threshold set by many charity watchdogs. I just looked at the Washington State Secretary of State’s website, and, using a later year’s data, the charitable commitment is up to 77%.
This morning, as part of an investigative series on scammy charities, Florida’s largest newspaper, the Tampa Bay Times (f/k/a St. Petersburg Times), figured Cancer Fund over the years spent “less than 2 cents of every dollar raised” on direct cash aid to cancer patients and their families.
The paper ranked the Cancer Fund as No. 2 on its brand new list of “America’s worst charities.” No. 1 was Kids Wish Network, which I also described here last year in less than rosy terms. Children’s Cancer Recovery Foundation, another charity I have written up here and here, was ranked No. 11. The Times list of 50 was based on, in the paper’s words, “money blown on soliciting costs” over 10 years.
Allow me to take a small bow.
The lengthy story in the Times, which also credited CNN and The Center for Investigative Reporting, identified the same two accounting gimmicks I did in March 2012. The first was use of an affiliate, Cancer Support Services, of Dearborn, Mich. Cancer Support did a lot of the telemarketing fundraising for Cancer Fund. As I wrote, Cancer Support raised $9 million in cash, spent $6 million in fundraising costs and sent most of what was left, about $2 million, over to Cancer Fund. Cancer Fund, however, booked that money as a donation received without also recording on its books the associated $6 million fundraising expense. That made Cancer Fund look a lot more financially efficient that it really was.
The other trick was use of donated goods, called gift-in-kind or GIK, which charities can acquire with virtually no fundraising cost but can count as contributions received. This also dramatically enhances reported financial efficiencies. In my story, I said more than half the $24 million Cancer Fund received was GIK that didn’t seem especially focused on cancer treatment and was sent overseas, where, perhaps, it was harder to track.
Today’s Times story depicted Cancer Fund as part of a network of charities run by the family of James T. Reynolds Sr. He is a one-time American Cancer Society fundraiser in Tennessee who resigned under pressure in 1984 after, the story said, “he was accused of sloppy bookkeeping, irregular hours and taking title to a 1968 Mustang meant to be auctioned for the charity.” In the paper’s retelling, he started a cancer charity “mimicking” the American Cancer Society name and even used a mail drop with a similar address.
For his latest efforts, Reynolds, 70, was paid $237,000 in 2011, the last year with data.
As always, I invite anyone interested in this story to comment below. I especially would love to hear a defense by the Washington State Secretary of State’s Office of what it calls the “useful information” concerning charities it posts on its website. In many instances, I’d say, it’s about as useful as sunscreen in Seattle.
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