This was the shortest telephone cold call from a charity ever to come into the New To Seattle world headquarters. Despite the call’s brevity, I’m pretty sure Collins was a computer-generated interactive voice ready to make an ask. He/it likely was controlled by some human telemarketer who was monitoring but somehow couldn’t hit the correct computer keys in time to keep the conversation going and get to the pitch.
‘Tis a pity for me, because I had sooooooo many questions. Quick research showed Injured American Veterans Foundation is a trade name of Healing Heroes Network, an eight-year-old Palm Harbor, Fla. “charity.” There’s a reason I use quote marks. My review of HHN’s most recent financial filing, for the year ending December 31, 2014, suggests only about 2% of the $3 million spent went directly to its stated purpose of “providing financial assistance for quality care to military personnel injured in the line of duty in Iraq or Afghanistan since September 11, 2001.”
In fact, the overwhelming bulk of the money was spent on promotion, marketing, advertising, printed materials, management, overhead and fundraising. Indeed, the largest single recipient was, believe it or not, Facebook, paid $905,711 for what was described as “community outreach.”
I invite you to follow along my financial analysis by downloading HHN’s own tax filing at this link on the Foundation Center website. The information is terribly illuminating.
According to the IRS Form 990, HHN received $2.1 million in cash donations (I am rounding some of the numbers), plus another $500,000 in net inventory sales, for total income of $2.6 million.
Running a deficit, a total of $3 million was spent. How much went to charity? Peanuts. Exactly $69,403 was made in grants–$33,491 for “food, clothing, utilities, rent, gift cards, tickets,” $25,804 for “medical assistance” and $10,108 for computer “tablets for heroes.”
That was pretty much it on the direct charity front. Do the math: $69,403 is only 2% of $3 million. And according to the return, that largess went to just 587 recipients, for an average grant of only $118.23.
Including that $69,403, the tax return claimed a total of $743,000 was spent in direct furtherance of that stated mission of “providing financial assistance for quality care.” Using HHN’s own accounting, the charitable commitment ratio–amount of all expenses spent directly on the stated mission–was 25%. That’s lousy; charity watchdogs consider anything below 65% unacceptable.
It’s small wonder, then, that HHN recently made the annual “Scrooge List” of charities issued by the South Carolina Secretary of State’s Office.
Why the difference between HHN’s bad-enough 25% and my even-worse 2%? Some $470,000 of what HHN called direct charity was part of a “combined educational campaign and fundraising solicitation.” Accounting rules allow partial inclusion of such joint costs as charitable purpose, but the average donor might not think much of the practice, which has the effect of reducing stated fundraising expense and making things seem more financially efficient. The balance of the $743,000 was mainly for payroll, overhead and–the fourth-largest expense category–“other.”
Then there was the remaining $2.3 million spent. It went primarily for fundraising, with some management and overhead. The tax return listed fundraising expense of $1.6 million. That produced a fundraising efficiency ratio (the percent of gifts remaining after subtracting the cost of generating them) of 24%. This was way below the 65% threshold that charity watchdogs also consider the minimum acceptable. In effect, three of every four dollars donated to HHN went to fundraising, not charity. (One listed telemarketer, Outreach Calling of Reno, kept 90% of the donations it generated.) But if all of the “combined educational campaign and fundraising solicitation” was classified as fundraising–which to my mind it really was–the fundraising efficiency would have dropped to 0%.
This was all a far cry from the formal document that HHN submitted under penalty of perjury to the Internal Revenue Service in late 2008 to obtain tax-exempt status. (That document, Form 1023 Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, can be download from this page on the New York Attorney General’s website by clicking on the link for “IRS Tax-exempt application.”) The projected budget called for a fundraising efficiency of 95%–not 24%. In my experience, the IRS does little follow-up checking, and charities know that.
According to a 2013 article in the Tampa Bay Times, HHN was started by Alvin Spiegel, a doctor in the field of hyperbaric oxygen therapy, touted as a treatment for some military injuries. In its early years, HHN actually paid Spiegel to provide the therapy. HHN’s tax return for 2014 showed no such payments. But the charity remained something of a family cash cow. While Spiegel was the unpaid president, his wife, Stacey Spiegel, received $106,163 (more than all the grants!) as executive director. A third family member, son Neal Spiegel, was paid $49,549 as an employee with unspecified duties. The charity listed just nine employees.
According to the Times, Alvin Spiegel launched HHN while serving on the board of Kids Wish Network. If that organization sounds familiar, it might be because I wrote it up right here in 2012 as yet another iffy charity that spent little on charity. A year later, the Times made Kids Wish Network No. 1 on its widely noted list of “America’s Worst Charities,” based on the huge amount of donated money that went to paid fundraisers. I took a modest bow.
In response to my emailed request for comment, a HHN employee called to dispute my analysis. The worker said HHN served a good purpose, helped a lot of folks and that 70% of the money spent in 2014 was on charity. That was nearly triple the 25% I calculated by using HHN’s own written view of its numbers and off-the-charts higher than my 2% reckoning.
I’d say we agreed to disagree. But at least the conversation lasted a lot longer than the one the non-human “Joel Collins” started and so quickly ended.