Investigating the Worst Charities

The Tampa Bay Times and The Center for Investigative Reporting spent a year looking at 5,800 charities nationwide that pay professional solicitation companies — basically for-profit telemarketers — to raise donations. Red flags are raised when charities use for-profit fundraising companies because experts agree that using this method is a highly inefficient way to collect donations because much of the money — as much as 90 cents for every dollar — goes directly to pay the telemarketing companies. Meaning: Donors who believed that their money would be going to help terminally ill children or homeless veterans or whatever caused they were championing were actually handing most of their money over to for-profit telemarketing companies. In addition, when asked how much of their money would be going to the actual charities, telemarketers often lied and said all or most of it was.

Tampa Bay Times and CIR examined a decade of IRS filings and put together a list of the 50 worst charities based on which charities gave most of their money to for-profit fundraisers.

Among the findings:

• The 50 worst charities in America devote less than 4 percent of donations raised to direct cash aid. Some charities give even less. Over a decade, one diabetes charity raised nearly $14 million and gave about $10,000 to patients. Six spent nothing at all on direct cash aid.

• Even as they plead for financial support, operators at many of the 50 worst charities have lied to donors about where their money goes, taken multiple salaries, secretly paid themselves consulting fees or arranged fundraising contracts with friends. One cancer charity paid a company owned by the president’s son nearly $18 million over eight years to solicit funds. A medical charity paid its biggest research grant to its president’s own for-profit company.

• Some nonprofits are little more than fronts for fundraising companies, which bankroll their startup costs, lock them into exclusive contracts at exorbitant rates and even drive the charities into debt. Florida-based Project Cure has raised more than $65 million since 1998, but every year has wound up owing its fundraiser more than what was raised. According to its latest financial filing, the nonprofit is $3 million in debt.

• To disguise the meager amount of money that reaches those in need, charities use accounting tricks and inflate the value of donated dollar-store cast-offs — snack cakes and air fresheners — that they give to dying cancer patients and homeless veterans.

Part one of the investigation examines a few of the most guilty charities, while part two looks at why regulators have failed to stop charities from breaking the rules.

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