Charitable Giving All Over Nation Declines for the First Time in 20 Years

The nation’s hard-pressed charities face a decline in annual contributions for the first time in two decades. Donors are holding back--because they fear lingering recession, and because they don’t trust some of the do-gooders.

Federal and state budget deficits have cut into the flow of government grants to charities. Corporate giving has sunk with the economy. A survey by Independent Sector, a Washington-based coalition of philanthropic groups, found household donations down 20% in 1992.

“Charities are having one of their hardest years raising money,” said Virginia Hodgkinson, head of research for Independent Sector. “I think we’re going to see a decline in giving this year over last year.”

The effects are being felt at San Francisco’s Haight Ashbury Food Program, where donations are down 10% to 15%; at Mile High United Way in Denver, which warned its 106 member agencies to brace for cuts of up 30%; at “Toys for Tots” programs such as the one in San Diego, where Marines collected 43,000 toys, down from 115,000 the previous year.

The dip in fund raising, which increased steadily through the 1980s to $124 billion in 1991, comes as demand for help is greater than ever. Charities have not faced the prospect of shrinking resources since the oil bust of the 1970s.

Beyond economic factors, charity watchers note a newer, more troubling aspect to the decline: a wavering of public confidence in charitable organizations.

Over the last year, once-trusting contributors got hard lessons in the dark side of the charity world. Among them:

* The $442,000 in salary and perks for the head of United Way of America.

* Warnings from state regulators about fund-raising campaigns that send only a few pennies on each dollar to those in need.

* Lawsuits alleging that some charities use accounting alchemy to transmute donations of old vegetable seeds and torn books into millions of dollars in falsely reported aid to cancer patients and refugees.

As a result, nearly half those questioned in the Independent Sector survey said they had a low degree of trust in charities.

“The public is more cautious about giving,” said Kenneth Albrecht, president of the National Charities Information Bureau. “One factor has obviously been the economy. But a second factor is the stream of disquieting news about the operation of some organizations.”

This jitteriness is recorded at watchdog agencies where questions about charities come in at an ever-increasing rate.

“Americans have been generous in the past, but because of the economy and new concerns about accountability, they are asking tougher questions,” said Bennett Weiner, vice president of the Better Business Bureau’s Philanthropic Advisory Service.

The business bureau’s office in an Arlington shopping mall is lined with manila folders documenting everything from the IRS filings to fund-raising brochures of some 6,000 charities. In about a fourth of those files, researchers have found something to withhold their seal of approval.

Usually it is an easily fixed procedural glitch. But increasingly it is some sleight-of-hand accounting, done to make the numbers charities are judged by--money raised vs. money spent on programs--more impressive than their growing list of competitors.

“Competition can bring out the best in a charity, but it can also bring out the worst in an organization that cuts corners in fund raising and tells white lies in its publications,” Weiner said.

Competition for funds is fierce. With the rise of new causes, from child abuse to AIDS, the number of groups that receive donations grew from 561,000 in 1989 to 632,000 in 1990; for every charity that closed its doors in that time, three sprang up.

Sometimes the competition gets nasty. Save the Children, a Connecticut-based charity, takes Feed the Children of Oklahoma to court over name infringement; Easter Seals and Christmas Seals knock heads over similar fund-raising techniques.

“I see it happen all the time where two groups competing in the same area will bad-mouth each other,” said Seth Perlman, a New York lawyer who specializes in charities. “It’s an issue of money and power.”

The greater competition for fewer dollars has turned many charities into savvy marketers of their cause. Some buy heart-wrenching ads with toll-free numbers. Phone appeals, once limited to local charities, have been taken up by national organizations. More turn to direct mail campaigns and micro-marketing, buying or trading lists of those demographically suited to their pitch.

The rush to raise money can push charities to the edge. Smaller organizations hire professional fund-raisers who often keep 90 cents or more of every dollar raised. Recently, California officials charged one fund-raising group with creating its own charities to make money.

To avoid such dodges, donors are urged to look at a charity’s numbers. How much money did they raise? How much money did they spend in raising it? How much of the funds actually went to aid programs?

Watchdog agencies recommend that at least 60% of a charity’s donations go to aid programs. But some charities have countered with creative accounting that puts their numbers in a better--and often false--light.

To look good in this number game, some charities stuff throwaway information about cancer prevention or the evils of drugs into their solicitations, then write off the cost of printing and postage to education programs rather than fund raising.

“All the legitimate charities feel under pressure to enhance their accounting lines. People are being forced to count things in ways that are questionable,” said Stacy Palmer, managing editor of the Chronicle of Philanthropy.

Others cook their books with donated materials that have little to do with their charity. Connecticut and Pennsylvania recently brought charges against half a dozen charities accused of writing off donations of expired seed packets and discarded textbooks as aid to cancer patients and drug therapy.

One charity valued damaged paperbacks at their original retail price of $1.2 million; expired baby food donated in this country was given the retail value of food sold in British Columbia, Canada, where prices are 25% higher.

The donated goods were then either handed along to another charity or distributed to people who were said to be in need. In either case, using these inflated values, the charity claimed that 75% of its revenues went to aid programs. State regulators claim that the actual number was closer to 3%.

“Beyond the question of inflated values, we’re asking what in the heck does a lot of this stuff have to do with what these organizations say they’re all about,” said Mark Pacella, a deputy state attorney general in Pennsylvania.

Such cases still represent a very small percentage of all charities.

“People will ask, ‘What’s your percentage?’ They don’t know that our programs take time to get results,” said Caroline Williams, the head of fund raising for TechnoServe, a small, well-respected group that provides technical advice to Third World farmers from Spartan offices in Norwalk, Conn.