The Third Sector Report By Jeffrey Wilcox

America’s Worst Charities: The Truth About Bad Apples Jeffrey Wilcox - The Third Sector Report

June 18th, 2013 – Unprecedented history was made in the nonprofit sector last week when the Center for Investigative Reporting released “America’s Worst Charities.” And, with names like CNN standing behind the most aggressive journalistic effort ever undertaken to uncover unsavory charitable practices in America, the results have hit the media and their readers like a tsunami.

The compiled statistics, published lists and headline stories that have resulted from this effort are among the most sobering tales of taking advantage of human generosity ever assembled. The effort has created a lasting impression about just how far people and organizations can go to in the name of charity to distort social responsibility for personal gain.

The bottom line of the report: The 50 worst-run charities in the country have raised $1.3 billion and paid nearly $1 billion of that directly to the companies that raise contributions for them. Combined, these organizations reported only $49.1 million of the $1.3 billion actually went to providing aid and $380 million went into charity coffers, usually the back pockets of their leaders.

The Tampa Bay Times pointed out that $1 billion could have funded 20,000 Habitat for Humanity homes, bought 7 million wheelchairs or paid for mammograms for nearly 10 million uninsured women.

The Tampa newspaper joined forces with the Center when it became clear that the charity that would top the list of “America’s Worst” is headquartered right down the street in Holiday, Florida, and operates under the name “Kids Wish Network.” During the past 10 years, the organization has channeled nearly $100 million contributed to benefit sick kids to its solicitors and another $4.8 million to pay the charity’s founder. Less than three cents on the donated dollar actually helps kids.

Not only does this operation distort the meaning of charity, illustrate capitalism run amuck under the disguise of social benefit, and serve as the poster child for exploitation of children with health issues; it also is an example of predatory marketing practices that acts as a parasite on, and is a direct threat to, excellent nonprofit organizations that are among America’s best charities like the Make A Wish Foundation.

In addition to name similarity to well-known and branded nonprofits in the areas of children and health (especially cancer, diabetes and disabilities), another commonality are references to supporting the men and women who devote their lives to public safety and service such as firefighters, sheriffs, police officers, state troopers and veterans.

The primary ways these organizations raise funds are by hiring independent third-party fundraisers who rely on telephone solicitation and splashy direct mail appeals. What happens to the take from there is a unique series of shell-games aimed at hiding the results, paying off the solicitors, disregarding fundraising ethics detailed by the Association of Fundraising Professionals and distorting any reasonable person’s idea of conflict of interest.

The report also pointed out that “sector watchdogs” say that no reasonable charity should have more than 35 percent of its donations going towards fundraising costs. In my experience, that number is far outside the norm. The latitude that was given to these organizations by the reporters to serve their causes and missions were at levels that extend far beyond what is generally considered reasonable.

Unfortunately, once the Internal Revenue Service has determined that an organization qualifies as a nonprofit, the rest is left up to the state. And states, by and large, haven’t spent much time worrying about charity. Even when states do take action, the penalties are small. California’s Nonprofit Integrity Act is one of the most innovative approaches to making sure organizations of any kind that solicit for charitable resources is registered with the state and potential contributors can check up on a charity. There are other resources available as well, including the online services of Charity Navigator and Guide Star.

A report of this magnitude and shock value reinforces a timeless reminder: Don’t let a few bad apples spoil an entire crop. It also reinforces a simple truth for those of us who proudly raise funds for worthy causes: Wise giving is the result of wise givers.

The full report can be found at the Center for Investigative Reporting, a nonprofit organization itself, at: cironline.org/americasworstcharities.

(Jeffrey R. Wilcox, CFRE, is president and chief executive officer of The Third Sector Company, Inc. Join in on the conversation about this article on Facebook or drop us a line at jwilcox@thirdsectorcompany.com)