Charity watch groups help givers beware.

Byline: Susan Palmer The Register-Guard

The United Way, the American Red Cross, the Salvation Army. It's the time of year when the nation's best-known charities ask for donations.

But givers beware. Many organizations do a great job of helping those in need, but there are more than a million nonprofit groups in this country, and government oversight is lax. To complicate matters, many have names that sound familiar and trustworthy but get failing grades when it comes to managing donor money.

The amount of money changing hands is considerable. Charitable giving in 2003 totaled $241 billion, according to Michael Solomon, spokesman for the Chronicle of Philanthropy, and observers expect even more donations this year as the economy improves.

A charity watchdog group has just released its latest guide to national nonprofits, giving 100 of them F's for inefficient use of donor funds.

Think you'd like to give to the American Breast Cancer Foundation, the Association for Firefighters and Paramedics or the Childhood Leukemia Foundation?

The American Institute of Philanthropy failed those groups for spending too much on fund raising and not enough actually helping people.

Here in Oregon, the Department of Justice on Monday will release a list of the 20 charities that generated the most calls from concerned donors in the past year.

Feel like giving to the Kids Wish Network, the American Association of State Troopers or the Cancer Fund of America Support Services?

Those three groups all caught the attention of the Department of Justice staff members for hiring telemarketing firms that returned only a small percentage of the funds raised to the organizations, said Victoria Cox, spokeswoman for the Department of Justice's charitable activities section.

Kids Wish Network Inc., a Florida nonprofit organization that grants the wishes of terminally ill children, uses professional telemarketers who make an emotional appeal to potential donors over the phone.

Here's part of the script they used to talk potential donors into giving: "It's hard to admit that a child is really going to die and that's why these wishes require immediate action."

But here's the problem: Of the $8 million that Kids Wish Network raised during its most recent fiscal year, only about 10 percent - $813,000 - actually was spent on children.

The telemarketers kept 88 percent of the money they raised, records show.

There's nothing illegal about the practice, Cox said.

"This organization is very well-represented legally to make sure that they follow the letter of the law," she said.

The Oldsmar, Fla., nonprofit gets an F grade from the American Institute of Philanthropy.

But those snap judgments don't tell the whole story, according to groups that have received poor grades.

Kids Wish Network defends its practice of using telemarketers because it's a young organization that doesn't have a large donor base to draw from, said Patrick Meehan, manager of development for the 5-year-old nonprofit group.

Meehan says The American Institute of Philanthropy is more interested in seeing established charities succeed than in supporting new groups.

He acknowledges that only 12 percent of the funds raised by telemarketers come back to Kids Wish Network, but said that's a fact of life for a start-up. "There's just not a way to launch a charity, otherwise," Meehan said.

Telemarketers also help his agency identify terminally ill children by asking potential donors if they know of a child who needs their services, Meehan.

Children reached that way might not otherwise receive the help Kids Wish Network provides, he said.

But Cox points out that such a query allows charities to characterize fund-raising costs as program expenses.

The American Association of State Troopers, which also calls itself the Oregon Trooper Lodge, also gets a thumbs down from the Department of Justice and the American Institute of Philanthropy.

The association charges state troopers a membership fee and provides benefits to them such as better deals on term life and accidental death insurance, professional training and scholarship funds for their children. While it is a nonprofit, donations to it aren't tax deductible and it has little connection with Oregon, Cox said.

"They represent themselves as the Oregon Trooper Lodge. But there is no Oregon Trooper Lodge. There is no building, no entity. It is nonexistent. And its not affiliated with any law enforcement agency," she said.

According to the association's financial records, of the $6 million it took in last year, $5 million - or about 81 percent - was spent on fund-raising. Cox believes that of the $53,000 actually going to state troopers or their children, only $6,000 made it to Oregon.

Al Pasini, executive director of the national trooper organization, rejects the negative evaluations.

His organization has negotiated a better rate than most on its telemarketing contracts, receiving 20 percent of the funds raised rather than the 12 to 15 percent most groups receive, he said.

"I'm proud to do the work we do, and it's the best way we can do it," he said.

People interested in his organization would be better served by looking beyond the fund-raising numbers to the scope of the services provided to its members, he said. Troopers pay $24 a year to belong and receive services valued between $300 and $400 a year, Pacini said.

For consumers who want to learn about charities, the Internet has made life very easy.

The American Institute of Philanthropy lists the charities they've given A and B grades to for free on their Web site. For a $3 fee, they'll send the entire list that includes A through F grades to concerned donors.

The Better Business Bureau has a Web site that offers a checklist of good charitable practices, lists hundreds of national charities, and indicates how well those groups conform to the guidelines.

Guidestar may be the most useful site for Oregonians. The Web site lists more than a million agencies, including many local ones such as St. Vincent de Paul of Lane County and the Relief Nursery, which aren't rated by the Better Business Bureau or the American Institute of Philanthropy.

Guidestar doesn't evaulate the charities. It simply lists key financial information available about them and posts the complete IRS returns, known as 990s. While the information in 990s doesn't tell the whole story, the summaries on Page 2 of the forms give donors a good spending snapshot, Cox said.

Donors interested in looking up a local charity, such as The Relief Nursery, which provides help for families with young children, can easily find its 990 forms at Guidestar.

United Way of Lane County also can be found on Guidestar, where its 2003 tax return shows that 83 percent of its funds went directly to helping programs and just over 10 percent to fund-raising.

Priscilla Gould, executive director of United Way of Lane County recommends that donors ask charities directly for information.

Grading groups just on the percentage they spend on fund-raising and administration only tells part of the story, she said. Many groups have legitimate reasons for spending more in those areas. Health services groups will likely have higher overhead than food banks, she noted because of the equipment they need to provide services.

Donors can get a better understanding of those issues by asking to see a charity's annual report.

But there's nothing better for judging the quality of a group than by the familiarity with it that comes through personal contact, she said. "The closer they can get to an organization through their own experience or their families and friends, they're going to feel a whole lot better about their giving decisions," she said.

ON THE WEB

These sites help donors evaluate the effectiveness of charities

www.guidestar.org: Created by Philanthropic Research Inc., it's the most complete listing of charities.

www.charitywatch.org: Created by the American Institute of Philanthropy, it grades charities based on the amount of money going directly to programs.

www.give.org: Sponsored by the Better Business Bureau Wise Giving Alliance, it gives a thumbnail analysis of the effectiveness of organizations.

www.doj.state.or.us: The Oregon Department of Justice Web site lists the 20 nonprofit groups that generate the most calls to its office.

PHILANTHROPY TIPS

Charity watchdog groups don't want to discourage giving. They just want to make sure money is going to the groups that use it effectively. These tips for wise giving come from the American Institute of Philanthropy and the Oregon Department of Justice.

Don't be misled by a familiar sounding name. The Humane Society of the United States (rated D) is not the same as The American Humane Association (rated B+).

Find out how your money is spent. Watchdog groups suggest that 60 percent or more of each dollar donated should go to program services and 40 percent or less go to fund-raising and administration.

Check the tax deductible status of your donation. Some groups may be exempt from paying taxes, but your donation may not be tax-deductible.

Don't be pressured into contributing on the spot. Request more information in writing and scrutinize it before writing a check.

Make sure the charity is registered with federal and state authorities.

Keep records of your donations, and don't give your credit card number to a telephone solicitor you do not know.

Once you feel confident in the charity you've selected, give generously.

CHARITIES WITH FAILING GRADES

Here are 10 of the 100 charities the American Institute of Philanthropy gave failing grades this year, based on the low percentage of money they spent on program services. It's legal for nonprofits to spend as little as 1 percent on program services, the institute notes.

Nonprofit group

Percent spent on programs

Percent spent on fund-raising

American Ex-Prisoners of War Service Foundation, Watauga, Tenn. 1 89

American Institute of Marine Studies, Sebring, Fla. 1 95

Helping Hands for the Blind, Chatsworth, Calif. 8 83

Little Heroes Foundation, Ada, Mich. 3 89

National Cancer Center, Plainview, N.Y. 21 77

Vietnow National Headquarters, Rockford, Ill. 6 90

National Police Defense Foundation, Morganville, N.J. 18 73

Police Protective Fund, Austin, Texas 7 88

Save a Child Foundation, Flint, Mich. 11 85

Veterans Fund, Nashville, Tenn. 9 85

- American Institute of Philanthropy