The cold caller to the New To Seattle world headquarters said she was soliciting funds for Southwest Indian Relief Council, which she described as providing needed food and other goods to the Navajo Indian reservation in Arizona and New Mexico. I asked if the organization was a stand-alone charity in its own right or just a trade name used by another nonprofit.
Stand-alone, she replied.
I asked her for the charity’s tax identification number, which makes it easier to track down information. After a long wait, she provided the number. Meanwhile, the telephone connection was so bad I asked where on the sprawling reservation she was calling from.
“Manila,” she replied.
Having lived near the reservation for 12 years, I told her I was not familiar with that place within the Navajo Nation.
The caller said she was in The Philippines.
“Oh,” I said.
Given that revelation, I was not surprised to learn after subsequent research that the Southwest Indian Research Council is not a stand-alone organization. Or that the parent charity has been enmeshed in a lingering scandal. Or that most of the cash raised didn’t seem to reach needy Indians in the form of tangible aid.
As the now-deceased radio legend Paul Harvey used to say, here’s the rest of the story.
The Southwest Indian Research Council is a name used by a nonprofit called National Relief Charities, now based in Sherman, Tex. According to its latest federal tax filing under that tax ID number I was given, it used a lot of other names, too: American Indian Relief Council, Council of Indian Nations, American Indian Education Foundation, Sioux Nation Relief Fund, Navajo Relief Fund, Native American Aid and Rescue Operations for Animals on the Reservation.
Former NRC president Brian J. Brown is under federal indictment in Oregon, where he lives, on charges of conspiring to defraud NRC of $4 million from 2006 to 2009. According to an October 21, 2013, press release from the U.S. Attorney’s office in Portland, Brown stepped down as NRC president in 2005 and created a nonprofit company called Charity One, doing business as American Indian Education Endowment Fund. He then convinced the NRC board to provide funding, whereupon, the statement said, “Brown and unnamed co-conspirators allegedly used the entire $4 million for their personal benefit.”
Prosecutors said that personal benefit included purchase of a condo in Thailand.
Brown, who also faces wire fraud and money laundering charges, pleaded not guilty and awaits a criminal trial now set for September. NRC was not charged, and the Brown indictment somewhat paints it as a victim, saying Brown ginned up false financial statements showing Charity One was properly using the money. An NRC statement at the time of the indictment says it blew the whistle on Brown and is suing to get back the $4 million, adding “We greatly regret that these funds were not used as intended.”
Since Southwest Indian Relief Council is one of eight trade names used by NRC, I can’t figure out exactly what percentage of the cash solicited in that name reached the Navajo people. But looking at NRC’s tax filing and audited financial statement for the year ending December 31, 2012 (downloadable from this page), I’d say not all that much.
As I read the documents, NRC overall raised $26 million in cash, but only spent $9 million of that in anything I would call charitable. The rest went out for fundraising, direct mail, management and certain overhead. I calculate that the true cash fundraising efficiency ratio–the amount of cash donations left after the cost of fundraising and related expenses–was 33%. Put another way, 67 cents of every dollar raised in cash went right out the door to recipients like my paid telemarketing caller in Manilla. On a cash basis, the charitable commitment ratio–expenses in direct furtherance of the charitable mission as a percent of all expenses–also was only 33%.
Note that I calculated the numbers above on a cash basis. That’s because NRC records a large amount of donated goods, called gift-in-kind, or GIK. GIK is a valid form of donation. But because the gifts come from relatively few donors and in large amounts, they costs little to procure and are prone to valuation exaggeration, making financial efficiency ratios look a lot better. Thanks to the reported $18 million in GIK (and accounting rules that allow some of the direct mail costs to be classified as part of the charitable mission), the Washington State Secretary of State’s office lists NRC’s charitable commitment ratio as 72%, above the Better Business Bureau Wise Giving Alliance minimum threshold of 65%, the same percentage floor set for fundraising efficiency.
Visitors to this space know I have encountered charities with charitable commitment ratios of 0%, and fundraising efficiencies in the neighborhood of 10%. The NRC at least is above that.
As always, I invite comments below from any person or entity mentioned in this post, including the lady in Manila. Channeling Paul Harvey again, now you know the rest of the story.