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Charities find gifts aren't a given

On average, for-profit fundraisers keep 54 cents of every $1 they collect. In some cases, nonprofits get nothing.

July 06, 2008|Charles Piller and Doug Smith | Times Staff Writers

For 24 years, Citizens Against Government Waste has exposed pork-barrel spenders and rallied tax critics.

Its "Pig Book" and "porker" awards, meant to shame congressional leaders who exploit the public purse, have made the group a media darling and a political force.

But when it comes to policing its own fundraising practices, America's self-proclaimed "#1 taxpayer watchdog" seems to have lost its bite.

Records filed with the California attorney general's office show that over the last decade, for-profit fundraisers for the nonprofit kept more than 94 cents of every donated dollar. Yet donors could write off the full contribution on their tax returns.

"It's a rip-off of the taxpayer," said Pablo Eisenberg, senior fellow at Georgetown Public Policy Institute and a philanthropy scholar.

A Times investigation found hundreds of other examples of charities that pocketed just a sliver of what commercial fundraisers collected in their names. Some didn't get a dime or even lost money.

According to a comprehensive review of state records filed over a decade, the problem of paltry returns extends well beyond what has been reported in recent years among benevolent societies for police, firefighters and veterans. It affects charities large and small, well-known and obscure. It spans a range of causes, including child and animal welfare, health research and opposition to drunk driving.

In more than 5,800 campaigns on behalf of charities that were registered with the state attorney general from 1997 to 2006, the fundraisers reported taking in $2.6 billion. They kept nearly $1.4 billion -- about 54 cents of every dollar raised.

These numbers reflect only part of the problem. Though commercial fundraisers are required to file detailed fundraising reports with the state, many do not, and the law is not aggressively enforced because of limited staffing.

For-profit campaigns, which often employ telemarketing, mass mailings or one-time events, account for a small fraction of $223 billion in charitable giving each year in the United States. But they collect significant sums and help shape public perceptions of charities. Pairing computer-controlled dialing systems with low-wage workers, such firms can reach a large number of people in a short time.

"If I could forget about what percentage was going where," said Dan Halfeldt, former sales manager at one Phoenix-based telemarketer for nonprofits, "I could really say, 'Wow, I'm raising money for something good.' "

The firm, Midwest Publishing Inc., consistently offered among the lowest returns by large fundraisers. It did not respond to written questions about its operations.

The fundraising business is growing. More than 300 fundraisers have registered in California. Since 2000, the number of campaigns and amounts raised by for-profit firms has risen by about two-thirds.

Among the charities that netted little from such campaigns were the Humane Society of the United States, the American Breast Cancer Foundation, the Christian social-action group Concerned Women for America, the National Right to Life Committee and Students Against Destructive Decisions.

Among The Times' findings:

More than 100 charities raised $1 million or more from commercial appeals but netted less than 25 cents per dollar. Fundraisers got the rest.

In 430 campaigns, charities got nothing: All $44 million donated went to fundraisers. In 337 of those cases, charities actually lost money, paying fees to fundraisers that exceeded the amount raised.

In hundreds of other campaigns, charities apparently entered into contracts that limited their share of donations to 20% or less, no matter how successful the campaign.

Groups with strong emotional or patriotic appeal -- those supporting animals, children, veterans and public safety workers, for instance -- often fared worst. Missing-children charities received less than 15% of more than $28 million raised on their behalf.

Many nonprofits rely heavily on set-rate contracts and aim their campaigns toward a mass audience, which is less efficient than targeting a defined set of donors.

In general, charities argue that it takes money to make money and that the benefits of commercially run campaigns may not show in state filings.

For instance, Citizens Against Government Waste said that its telemarketing was meant to find donors who would give regularly, not necessarily to raise a large sum in a single campaign.

To critics, that argument often excuses wastefulness or profiteering -- and every charity pays for that.

Some charities "take advantage of American generosity," said Bennett Weiner, an executive with the Better Business Bureau research program Wise Giving Alliance. They "accomplish very little, siphon off good money from the community and tarnish the well for more legitimate nonprofits."

By donating to inefficient charities, said Daniel Borochoff, president of the American Institute of Philanthropy, "you are taking money out of the mouth of a hungry kid."

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