January 17, 2008
Lawmakers Propose New Fund-Raising Disclosure Requirements at Hearing
By Elizabeth Schwinn
Washington
Members of a key House committee today suggested that all charities should be required by law to tell donors how much of their contribution would be spent on programs related to the group’s mission.
The suggestion came after lawmakers grilled officials of a veterans charity that spends just 25 percent of the money it raises on programs.
Said Henry A. Waxman, chairman of the House Oversight and Government Reform Committee, “We ought to shine a finer light on charities, all of them.” He added: “Any charity ought to use a majority of its funds to benefit the purpose of that charity.”
Roger Chapin — whose charity, Help Hospitalized Veterans, in Winchester, Calif., was a subject of the hearing — objected to Mr. Waxman’s proposal, saying donors have unrealistic expectations about the costs involved in direct-mail fund raising. “If we disclose, we’d all be out of business,” he said.
Mr. Waxman disagreed. People understand there are costs to running a charity, he said. But “if you had to disclose,” he told Mr. Chapin, “there would be market forces, there would pressure on you to lower your costs.”
The comments capped a three-and-a-half hour hearing in which Mr. Chapin, two direct-mail firms with which he does business, and a charity regulator from California took questions from more than a dozen irate lawmakers. The lawmakers said Mr. Chapin’s organization spent too much in salaries and other payments for its officials and the for-profit companies it worked with while doing little to help the people the charity was supposed to support.
Mr. Chapin has defended his charity’s operations, saying it provides much-needed assistance to veterans.
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I’m all for it. People would be shocked to know what the overhead is at some of their favorite charities. In light of all the publicity surrounding the Red Cross deficit, I’m happy to report that an average of 91 cents of every dollar the American Red Cross spends is invested in humanitarian services and
programs (source: crossnet.org)
— AY Jan 18, 02:05 PM #
Hey, AY, not so fast. Liars figure and figures lie as the old saying goes. Your 91 cents comes from a Red Cross source, not an external one. As a former staff of the Red Cross, one of the things that bothered me was the response to disasters—they were essentially gatherings of “volunteers” who didn’t stay in the shelters but in nice hotels and didn’t eat the food at the shelters but ate in nice restaurants and rented cars to get around in, etc. That’s not on crossnet.org because it’s part of the overblown expenses that the Red Cross, in its long-time arrogance—became heir to. So much for 91 cents.
— Philanthro Joe Jan 18, 05:56 PM #
Many charities raise funds via different methods, some of which are far more efficient than others. For example, renewal drives directed at “current” donors or sustainer invite campaigns are much less costly than those directed at “re-upping” donors who haven’t contributed in several years, yet the latter is nevertheless important to a charity. Since all funds raised go into the same pot, what would be helpful to a prospective donor would be data that reflected what sum or percentage of funds raised from all methods utilized are applied to advancing the charity’s mission (e.g., “91 cents of every dollar…”). Further, using a “3-year rolling average” would probably create the best picture.
— Fundraiser Phil Jan 19, 11:58 AM #
Functional accounting totals are easy to manipulate, unfortunately. And this forced disclosure has been tried by State Attorneys General and ruled unconstitutional (free speech) over and over. The state of the law in most places is that if a donor asks the charity must answer accurately. Other than that the key is to look at what gets done for how much money. The public’s understanding of what is in “Management and General” (for that matter, most NPO finance people’s understanding) is weak.
— Terry Miller Jan 24, 09:07 AM #
Transparency and disclosure are key. However, what does the research say about levels of cost for types and sizes of charitable organizations? Mr. Waxman and the Committee staff are highly professional, however, shouldn’t they and those professionally engaged in philanthropy be engaging in an ongoing dialog about appropriate standards based upon existing and verifiable data?
— Rick Blake Jan 27, 07:30 AM #