Many people wish to do good works, and make the world, or at least a part of it, a better place.
Organizations exist, ostensibly, to do just that.
They are not for profit organizations, and many of these are granted what is called ‘exempt’ status pursuant to the Internal Revenue Code.
Contributions to these exempt organizations may be deductible by the donor, and they are not taxed to the organization as income, provided they stay within IRS rules.
But like the old saying goes all that glistens isn’t gold, and when it comes to the receipt and use of the gold some exempt organizations receive. That is, their disbursal of those receipts may not always glisten.
There is an abundance of organizations whose goals are to make the world a better place for dogs and cats, whales, elephants, veterans, and other categories of intended beneficiaries. Many of them do just that, but some of them at certain times, stray from the proper path. They engage in self-dealing and overcompensation of the chaps who run the charitable organization.
When reading this article, it’s important to recognize that a charity may run afoul of its intended purposes in one or more years. Only to be later set right by the hiring of better people, or by better administration, and returning to the straight path.
Let’s take a look at some examples.
Now here’s a horse of a different color. Charity Watch, an organization devoted to doing just that, on its ‘worst’ list. It listed Front Range Equine Rescue, based in Florida as spending only 39% of the expenses it incurred on its programs in 2022.
It stated there could be a sufficiently long lag time between the receipt of funds by the charity, and it’s use — for whatever purpose. (Remember, that was 2022, and may not be the situation with this charity as of the writing of this article.)[1]
Here’s one for the kids. Children’s Cancer Research Fund, based in Minnesota, spent only 47% of its expenses on the programs that were related to its purposes in 2022. It had administrative costs of $45.00 for every $100.00 it raised, as reported by Charity Watch.
Again, this is early 2025, and the situation may have changed for the better — or worse.[2]
How about our veterans. There are a number of charities that were concerned with their benefit, one of which was Wounded Warrior Project. This charity, which apparently at this time is highly rated, had some controversy around eight or nine years ago.
In 2017, the findings of a Senate investigation into the doings of the charity concluded, ‘The Senate Judiciary Committee said the charity “inaccurately” reported the money it spent on veterans’ programs by using “inflated” numbers and “misleading” advertisements. The committee found “excessive amounts of donor contributions that were misused” by WWP’s former leadership.”’[3]
Fortunately, due to replacing the charity leadership after these facts came to light, Wounded Warrior Project enjoys an excellent rating as a charity today. (It goes to show that the government and the press can sometimes actually do good works by accurate investigating and reporting, which is what they’re actually supposed to do all the time.)
St. Jude, besides being the patron saint of impossible cases, is the patron saint of hospitals. St. Jude, the largest charity in the country related to health care, in the past was engaged in certain financial activities that might not have been entirely saintly.
Missouri Medicine, reported at the end of 2022 that:
‘Since 2017, only about half of the $7.3 billion dollars St. Jude has received in contributions went to the hospital’s patient care and research. Of the remainder, 30% was spent on fundraising and 20% to its reserve fund. It should be noted that although St. Jude advertises that care is free for those who cannot afford treatment, much of the cost of treatment is paid by the families’ private insurance or by Medicaid.’[4]
The charity might not be a bad place to work, because it was also reported that ‘the fundraising and investment arm of St. Jude known as ALSAC has 2,188 employees. More than 400 of its employees are paid over $100,000 annually.’[5]
One of the guidelines to determine if a charity is on the up and up, according to Stephanie Kalivas an analyst at Charity Watch is ‘Charities that are A-rated generally spend at least 75 percent or more on their programs, so more of your money goes to causes you want to support.’[6]
Laurie Stryon, Executive Director of Charity Watch, regarding fund raising by charities said, ‘Charities should honor donors' intentions by keeping their overhead costs reasonable. A charity can legitimately use a for-profit professional fundraising company to supplement its other fundraising efforts or to build up its member base when it's first getting started.’
But she also noted that if over time, more efficient means of fundraising are not engaged in, ‘Donors are essentially just funding more fundraising and nothing else when they make a donation.’[7]
Why You Should Care
Many of us are bombarded by charitable solicitations during the year, and more often in the holiday season. Sorrowful looking puppies, starving kids in some third world country, paraplegic veterans and other sad cases are paraded before our eyes in order to have our hands reach in our pockets to contribute to the worthy cause being promoted.
That’s not a bad thing when most of the money raised from our contributions actually goes to benefit the intended recipients. It’s a very bad thing however, if much of that money is spent on no-bid contracts farmed out to for-profit companies with ties to the directors of the charity, and when officer and director salaries of the charitable organization are far in excess of the norm.
(Their compensation has to be reasonable, a term which is not clearly defined by the IRS, of course, but they do provide factors by which a determination can be made, which is outside the scope of the present article.)
You have heard the slogan many times, ‘Investigate before you invest,’ and this also holds true in situations where you are contemplating giving your money to a charitable organization, to make sure the best of the best are selected.
One item to review is the IRS 990 form of the organization, which is public record and can often be found on the internet, at the IRS site located at https://apps.irs.gov/app/eos/.
So be careful when your heart says yes to a charity — use your head first before you donate.
[1] Some of the Worst Charities in America 2024 12/10/24 CHARITY WATCH https://blog.charitywatch.org/some-of-the-worst-charities-in-america-2024/
[2] CHARITY WATCH op.cit.
[3] Senate releases report criticizing Wounded Warrior Project's past spending NEWS4JAX 5/24/2017 https://www.news4jax.com/news/2017/05/25/senate-releases-report-criticizing-wounded-warrior-projects-past-spending/
[4] MISSOURI MEDICINE https://pmc.ncbi.nlm.nih.gov/articles/PMC9762212/#:~:text=Since%202017%2C%20only%20about%20half,20%25%20to%20its%20reserve%20fund
[5] MISSOURI MEDICINE op.cit.
[6] Best and Worst Charities for Your Donations CONSUMER REPORTS 11/22/2019 https://www.consumerreports.org/money/charities/best-charities-for-your-donations-a4066579102/
[7] The WORST charities in America? DAILY MAIL 6/25/2023 https://www.dailymail.co.uk/news/article-12219603/The-WORST-charities-America-organizations-giving-CEOs-millions-ignoring-causes.html