Grinch of the Year 2006: What does your favorite charity do with your money?

kw: opinion, investigative reporting, charities, fund raising

I am on every "Don't Call" list I've been able to find. Of course, registered charities don't have to abide by such lists, so I still get a few calls. Typically, I interrupt the caller's opening remarks by saying, "I don't do phone charities", and I hang up. In mid-December, I took the time to listen to the spiel on behalf of National Association of Disabled Police Officers, which began with, "Thank you for contributing last year; can we count on you this year?" Although I didn't remember contributing to them, I agreed to let them send me a pledge form, with tentative agreement to send them $50.

When I got the pledge form, I still couldn't remember, and figured the caller was lying (most do), so I checked them out. I went to GuideStar and looked them up. I recommend you register with GuideStar. The free registration gives you access to everything most of us need, including recent Form 990 submissions for many of them. What is a Form 990? It is analagous to the Form 1040 most of us send to the IRS every year; it is the "tax form" for charities. Of its 18 pages (and there are often other attachments), only the first two typically concern us, and page 2 is of most interest to me.

What did I find on the NADPO's Form 990? The last few lines of page 1 were a big red flag:

• Line 12, total revenue: $546,357
• Line 15, fundraising: $464,405 -- that's 85% folks!

Page 2 has a bigger red flag. Of the $81,952 that didn't go to fundraising, guess how much actually got to disabled policemen?

• Line 22, grants and allocations: $1,000 (a cash grant).
• The rest went to various forms of management and operating expenses.

And, I am not sure the $1,000 actually got to anybody, because "assistance to individuals" is Line 23!

So, a half-million-dollar budget, of which 85% is passed on directly to three professional fundraising phone banks, and only 0.18% actually gets used for the organization's stated purpose! You get right down to it, this is a couple guys in a garage, feeling good about passing close to half a million a year to phone banks, taking in about $33,000 between them, and frittering the rest away in a couple dozen kinds of operating expense...oh, yeah, they gave somebody $1,000 in cash, probably another, similar organization.

The National Association of Disabled Police Officers gets my Grinch of the Year award.

On the more general subject of charities, the best ones are pretty transparent, and their Form 990's are easy to follow.

The very best, in my view, is the Salvation Army. Their Form 990 for 2004 shows us the following:

• Total revenue: $12,179,596
• Total management expenses: $319,819 (2.6%; $197,394 was salaries and benefits)
• Total program services: $12,426,943 (they overspent by a half million, and took it from assets of around $7 million)
• Salaries & benefits in program services: $953,074 (7.8%)
• Grants and Assistance (Lines 22 & 23): $8,667,284 (71%)
  

Lots of the rest went to conventions and educational programs. Look it up for yourself. They are a model of a well-run charity that doesn't pay anyone a huge salary to "manage" it, and they didn't pay anyone else a penny for "professional fundraising". In fact, they claim zero total expense for fundraising, though some of their overhead is for advertising (you see or hear rare media ads).

The bottom line: Of $12.4 million spent, 9% went to salaries and benefits for officers and others, 20% to other overhead, and 71% to the stated purpose of the group.

Here's how a couple of big non-religious charities stack up.

The American Heart Association in FY 2004 received $593 million and spent $519 million. Of the amount spent, $156 million (30%) went to salaries and benefits, $80 million (15%) to fundraising, and $285 million (55%, and half of that in the form of research grants) to other program services. They state $399 million (77%) as total program services, but a third of that is salaries & benefits included above. They are "pretty good".

The National Home Office of the American Cancer Society in FY 2004 received $360 million and spent $298 million. Of that amount, $64 million (22%) went to salaries and benefits, $38 million (13%) to fundraising, and $196 million (65%, and well over half that went to fund research) to other program services. They are better than AHA. FYI, for the past six years, I've walked the "survivor walk" at several ACS "Relay For Life" events, and usually stayed there most of the night to chaperone the students hosting the walk.

It takes a bit of work on page 2 to total up the salaries and benefits (lines 26-29, columns B and C). Less than 25% of total spending for the year is good. Less than 10% (like Salvation Army) is excellent...as long as fundraising is also low! It ought to be less than the salary+benefit figure.

A number of years ago, I expressed my admiration for Billy Graham to my dad, who was a Methodist elder at the time. He retorted that the Billy Graham organization and the United Methodist churches of the U.S. had similar budgets, about $60 million that year. He said that the UM church supported a couple thousand pastors and hundreds of hospitals and retirement homes, plus foreign missions. He said, "Compared to all that, what does Billy Graham do?" Good question.

It would be arduous to compile the Methodist church's finances, for there are nearly 3,000 tax-exempt organizations with "United Methodist" in their name or affiliation. However, the Billy Graham Evangelistic Association is a single entity, with a single Form 990. Their income in FY 2003 was $110 million. I downloaded the entire 990 to check detail; some items on Page 2 refer to attached schedules. Out of those millions, there were grants of about $1 million. However, the analysis comparable to ACS and AHA above is: $38 million (34%) to salaries & benefits, $4.6 million (4%) to fundraising (none by "professional" contractors), and the remaining $67 million (62%) to other program services. Not bad, though that's a hefty salary budget.

Here is where the added information comes in handy. The top five officers earned between $145,600 and $150,300, and with expense accounts and benefits, the top compensation was $235,000. A little one-line note indicates that 258 employees earned $50,000 or more. One appended schedule lists the fourteen organizations that received the $1 million in grants. In the next-to-last schedule we find the salaries of all the "Directors and Key Employees", including Billy Graham himself, who was paid $199,561 that year, and received $38,861 (pretty ordinary) in benefits, and also had $181,842 expense account. While that sounds like a lot, it is tiny compared to the CEO of nearly any $100 million commercial corporation. However, I live very comfortably on a quarter of Dr. Graham's cash flow!

My bottom line: the reporting is at least straightforward, and I still think Dr. Graham preaches the purest gospel of the "public" evangelists.

Most churches and religious organizations are not so forthcoming. I perused the Form 990's for several church congregations of the Methodist, Baptist, and Presbyterian denominations. Although the "Compensation of officers" and "Other salaries" items are typically half of a church's budget (with wide variation!), in only one case did the "attached schedules" or other items provide the actual salaries! Rather, the form preparer entered zero next to the name of everyone listed. The sole exception is a large congregation in Georgia, with a $4 million budget, which paid its pastor $151,000, but lists over $1 million in total salaries, otherwise unaccounted for. The IRS must not read most of the 990's it receives...

Back to police organizations. I decided to see if any of these are worth supporting. Eight thousand "hits" come back from a GuideStar search on the word "Police". Places like Athletic Leagues, Widow & Orphan Benefit funds, and Boys' or Girls' Clubs, usually have a Form 990 on file, and it is pretty ordinary. They pay a director and a couple other employees, maybe manage a facility, and disburse funds in a pretty (to Very!) respectable way. For example, the New York Police and Fire Widows' & Children's Benefit Fund" does even better than the Salvation Army, percentage-wise: 98% of their cash flow goes right to the widows and children (2004 Form 990).

But the one I usually get calls from is one or another "Fraternal Order of Police". You know the guys that offer you a sticker for a contribution, and hint that police are less likely to ticket a vehicle with such a sticker. Red flag! However, on checking a couple of Form 990's for local FOP lodges, I found that at least they don't pay any salaries. One spends half its budget on legal fees, and both spend quite a bit on "Conferences, conventions, etc.", and "various programs", whatever that is. Don't bother supporting FOP; they're just spinning their wheels.

If you want to support police, support a Widow & Orphan fund, or send the station house a cash donation, with instructions to distribute it equally. If you don't trust them to do so, don't bother.