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Jeff Gelles: Let the donor beware: How to double-check on charities

Mike Hardy doesn't have vast sums to donate to charity. But he and his wife, Marion, give as much as they can, and they want their money to count. So Hardy has found himself increasingly upset by signs of waste and deception.

Mike Hardy doesn't have vast sums to donate to charity. But he and his wife, Marion, give as much as they can, and they want their money to count. So Hardy has found himself increasingly upset by signs of waste and deception.

In the fall, Hardy counted 184 fund-raising letters sent to the couple's home in Maris Grove, a Delaware County retirement community, most from groups to which he has never contributed. One pitch, in a large yellow envelope, seemed emblematic.

It came from the Disabled Veterans National Foundation, and included a calculator, planner, and pen, along with a plea for donations that would help veterans get the rehabilitation, care, and education they deserve.

To Hardy, such costly gifts were a red flag. And when he turned to the Internet to learn more, he says, his suspicions were confirmed.

Thanks to a 2010 report from CharityWatch, a Chicago organization that digs deep into the financial disclosures of charities, Hardy found that donations to the veterans group were going almost entirely to marketing companies that solicited them.

One firm told its staffers to promise prospective donors that "100 percent of your donation will go to the charity." But on forms filed with regulators in Massachusetts and Colorado, the company estimated its fees would eat up 98 percent of the donations it collected on the veterans group's behalf in 2009.

That wasn't even the worst. Documents showed the veterans group had agreed to allow another fund-raising contractor to keep 100 percent of what it raised - yes, every single penny - "until the charity's debts to this company are paid off," CharityWatch said.

Better alternatives

I couldn't reach anyone last week at the Disabled Veterans National Foundation - it was closed from Dec. 22 to Jan. 2 for the holidays. And neither Hardy nor I want to dwell on the shortcomings of any single charity.

It's worth noting that the veterans group's website says it cut fund-raising costs to 35 percent of total expenses in 2010 from 55 percent in 2009, while boosting program spending to 57 percent from 37 percent. It's also worth noting that CharityWatch disputes key elements of those calculations. Its president, Daniel Borochoff, says the veterans group, like some other charities, counts some large fund-raising costs as program expenses.

The key point is that, in any category of charity, there are alternative recipients scored more highly by CharityWatch, a 19-year-old nonprofit formerly known as the American Institute of Philanthropy.

CharityWatch grades about 600 organizations. Though about 90 get an "F" in its grading scheme - including the Disabled Veterans National Foundation - most do better.

Borochoff says veterans groups are particularly problematic, but some rate highly. You might consider the Injured Marine Semper Fi Fund, which rates an A+ and spends 94 percent of its intake on programs. Or Homes for Our Troops, which equips homes for disabled vets and earns an A.

Other veterans groups earning an A or A+ include the Armed Services YMCA of the USA, Fisher House Foundation, Intrepid Fallen Heroes Fund, National Military Family Association, Navy-Marine Corps Relief Society, and Operation Homefront. And others earn an A-, B, or C, grades considered satisfactory or better by CharityWatch.

Hardy was pleased to see that two charities he gives to often, the American Red Cross and Habitat for Humanity International, get good grades. The Red Cross spends 92 percent of what it raises on programs and gets an A. Habitat spends 79 percent on programs and gets a B+.

Standards and scrutiny

CharityWatch isn't alone in evaluating charities. Many donors rely on sources such as the Better Business Bureau's Wise Giving Alliance ( or Charity Navigator (, a nonprofit that rates more than 5,000 charities. Both provide useful data on the charities they rate on their websites.

CharityWatch ( provides its grades and a Charity Watchdog Report three times a year to members who donate at least $40, though you can request a sample copy for $3. If you want to spend your donations wisely, its deeper analyses are worth a look.

Sometimes, CharityWatch concludes that organizations are disguising fund-raising as program spending. And it often shows the limits of simply accepting numbers the charities submit to the IRS.

For instance, Charity Navigator gives zero stars to Intrepid Fallen Heroes Fund; CharityWatch gives it an A.

Borochoff says the difference arises because the Fallen Heroes fund invests in state-of-the-art facilities to care for injured veterans, capital costs that he says Charity Navigator wrongly omits from program expenses.

"Some groups actually look better if you look more closely into the details," he says.

Hardy checked the 175 charities that solicited him in the fall, excluding nine religious organizations that weren't rated. They ran the gamut on CharityWatch: 78 rated A's or B's, while 47 got D's or F's.

To me, the most striking thing about CharityWatch's ratings are the contrasts, both between categories and between charities with similar names and goals.

Concerned about kids? The Commitee for Missing Children rates an F, spending just 12 percent of its income on programs. Child Find of America rates an A+, and spends 94 percent. Cancer? CharityWatch rates more than 40 groups, with grades ranging from A+ to F.

This is a time to be as generous as you can. But Hardy is right: It's always time to be cautious if you want your money put to the best use.