Charities often need middlemen

Before you get out the checkbook or credit card and make a donation to your favorite charity, you might want to read this.

Last Sunday I wrote about a Los Angeles nonprofit that’s been working for years to help troubled veterans. The National Veterans Foundation, founded by Vietnam War medic Shad Meshad, has been doing good work since the 1980s. Meshad and a staff of a dozen have made it their mission to help vets and their families. They coax homeless vets off the streets and help them jump Veterans Administration hurdles to get their benefits and healthcare.

Meshad thinks the VA does great work for the most part but is overwhelmed by a growing need fueled by two of the longest-running wars in American history. He knows we haven’t begun to feel the full impact from thousands of soldiers coming home to a lousy economy with physical injuries and crippling mental disabilities.

After my story ran, I wasn’t surprised when lots of readers asked how they could donate to Meshad’s group. But a couple of readers raised questions about the nonprofit’s fundraising and spending practices. One directed me to a website called Military-Money-Matters, which carried a scathing analysis:

“National Veterans Foundation has sold out our veterans,” the site declared. The conclusion was based in part on the nonprofit’s use of professional fundraisers, who raised several million dollars ostensibly for the vets but then got most of that money in payment for their services.

The American Institute of Philanthropy — which, like Military-Money-Matters, rates charities on financial administration but does not evaluate their programs — gave the National Veterans Foundation a grade of F.

“National Veterans Foundation spends 19% of their budget on programs, and it costs them $89 to raise $100 in public donations,” Laurie Styron, an analyst with the philanthropy group, told me.

Meshad and his board of directors dispute much of this, and I’ll get to that in a minute.

But first, I should point out that Meshad’s group wasn’t alone in getting an F from the philanthropy institute. It was one of 20 veterans groups that flunked and one of many that use private fundraisers, which keep the bulk of revenues to cover their expenses.

Styron asked me a fair question: If I got a phone call or a letter asking me to give $100 to a charity, would I still consider giving if I knew the vast majority of my money would go to a professional fundraising company instead of to the charity?

I had to admit, my answer would be no.

“These professional fundraising groups are rip-offs,” said Pablo Eisenberg, a philanthropy scholar at Georgetown University. “Small nonprofits, even in desperate straits, should not hire them just to get 10%, if that, of the proceeds. Instead, they should put their efforts in creative grassroots fundraising efforts.... Their hopes of future larger returns are for the most part wishful thinking.”

So why would Meshad, who has dedicated the last 40 years of his life to helping veterans, get involved with such an outfit?

Meshad said he and his board of directors decided, a few years ago, that they had two problems: The bad economy had made fundraising more difficult, and the demand for services from vets and their families was growing.

The National Veterans Foundation’s directors knew that as good as the organization was at helping vets, it wasn’t great at raising money. So they studied several options and decided to go with a New York-based fundraising group called Quadriga Art Inc. to supplement their own local fundraising campaign. Quadriga’s pitch was that it would grow the nonprofit’s donor base nationally, through direct-mail solicitations, without any payment up-front.

Quadriga CEO Mark Schulhof defends the company’s work. Direct-mail campaigns, he told me, are hugely expensive, because only 1.5% to 2% of the people who get a solicitation by mail even bother to respond. But in the two years his company has been working on behalf of the National Veterans Foundation, he noted, more than 600,0000 people from across the nation have learned about the group and made donations in return for mugs, T-shirts, tote bags and other items bearing the nonprofit’s name.

The bulk of those donations have ended up going to Quadriga and its marketing partners to cover expenses, he said, but over time and as the list grows, the hope is that the nonprofit will get a growing share of the money.

Doug Garnee and Jim Watson, local business executives who serve on the foundation’s board, told me the deal is paying off sooner than they had expected.

“What this has allowed us to do is keep the doors open and in fact expand the program to 24/7,” said Garnee, who said the demand for services has grown from vets to active-duty personnel in Iraq and Afghanistan.

Not all experts are critical of these kinds of arrangements. Richard Steinberg, a philanthropy expert at Indiana University-Purdue University Indianapolis, told me they can bring in millions to groups that might otherwise fail. He said he thinks the grading systems used by the American Institute of Philanthropy and other groups are unfair, and he pointed out something I had overlooked:

If struggling nonprofits didn’t use professionals to help grow their donor files, they’d have to do it on their own, which could be even more expensive.

Yes, making money is expensive. The California Department of Justice reported that for the year 2008, commercial fundraisers collected $355.8 million in donations and, after expenses, sent $156.4 million of it to the charities.

So how can you beat those numbers and make a more direct impact with your donation?

Throw away the solicitations stuffed into your mailbox, don’t answer the telemarketing calls and give directly to the charity of your choice. If that’s Meshad’s group, you can give at https://www.NVF.org or send a check to the National Veterans Foundation, 9841 Airport Blvd. No. 512, Los Angeles CA, 90045-5417.

steve.lopez@latimes.com