Veterans’ Charities Take In More, Give Out Less

Veterans’ charities, whose donations have increased since the start of the war in Iraq, lag well behind other charities when it comes to the percentage of money that goes directly to services, a three-month Hartford Courant investigation has found.

A handful of veterans’ groups spend almost nothing on veterans’ causes, diverting 90% or more of their money to administration and fundraising. Scores of other groups claim hefty spending on veterans’ services by including costs of their fundraising drives.

At the Foundation for American Veterans in Michigan, just 6 cents of every dollar is used to help veterans. At the American Ex-Prisoners of War Service Foundation in Tennessee, it’s 2 cents. At the American Veterans Relief Foundation in California, less than a penny.

“It’s disgusting,” said Trent Stamp, president of Charity Navigator, a nonprofit watchdog group in New Jersey. “You can’t respect your donors if you think that people who write you a check are entitled to have 2 or 3 cents of every dollar reach veterans.”

Using financial data provided by GuideStar, a Virginia organization that compiles information reported by more than 1.5 million registered nonprofits, the Courant analyzed 286 veteran-related charities.

Among the findings: Veterans’ groups are more than twice as likely as other charities to use professional solicitors, which typically keep 70 to 90 cents of every dollar they raise. Because of this, veterans’ charities overall spend a greater percentage of their budgets on fundraising, leaving less money to help ex-GIs struggling with healthcare, housing or financial problems.

“We actually get a lot of calls from people looking for a good veterans’ charity,” said Daniel Borochoff, president of the American Institute of Philanthropy.

But he doesn’t have an answer for them. Of 13 veterans’ groups rated by the institute, one received a grade of C-plus and the rest earned D’s and F’s.

The culprit in many cases: excessive fundraising costs.

In Santa Ana, the American Veterans Relief Foundation has raised millions for “helping veterans when they need it most.” According to the charity, that includes assisting with mortgage payments and medical bills, sending “Thinking of You” packages to patients in VA hospitals and giving money to build veterans’ memorials.

But of the $3.6 million raised and spent in four years, through March 2005, the foundation devoted just $21,000 to aid veterans. That’s 58 cents in help for every $100 donation. Professional fundraisers, meanwhile, collected almost $3 million.

The American Veterans Coalition in Washington state raised about $1.1 million last year -- and gave grants totaling $15,000. Although veterans have seen little, the group’s officers and fundraisers have hit pay dirt. Between the coalition and three other charities that share the same Gig Harbor, Wash., mailbox, fundraisers pocketed $1.8 million last year, while the husband-and-wife team that runs the charities paid themselves just under $140,000.

“That’s for four charities,” said Robert M. Friend, president of the American Veterans Coalition. “You should see how much work goes into running four charities.”

At the National Veterans Services Fund in Connecticut, Philip Kraft takes a dozen calls a day from veterans who are down on their luck or getting the runaround from the federal government. Kraft has counseled vets for 14 years, and he believes he runs a lean operation with a $125,000 annual budget.

But the $125,000 that Kraft saw last year started out as $4.3 million in donations; fundraising costs consumed about 97 cents of every dollar.

“It’s that necessary evil, that price you pay to stick around,” he said, noting that a small percentage of something “is better than 100% of nothing.”

That rings hollow to Borochoff.

“That’s what they say -- ‘It’s money that we wouldn’t ordinarily have’ -- even though it’s totally disrespecting the people who gave it,” he said. “Giving is a fixed pie. And money given to this guy is money not available to another charity, a more efficient charity.”

Some states have attempted to curb professional fundraisers, but the U.S. Supreme Court has consistently struck down laws that cap fundraising commissions. The rationale: Limiting how groups can raise money might hamper the ability of advocates to advance unpopular causes, a right the court has ruled is guaranteed by the 1st Amendment.

The court also has struck down laws that would require paid fundraisers to tell potential donors how much of their contribution would go to charity, ruling that it would amount to “forced speech.”

“I wish we could require that every telemarketer say in the first or second sentence: ‘Please contribute, but you should know that 90 cents will go to the paid solicitor and only 10 cents will go to the veterans’ group that you want to support,’ ” said Connecticut Atty. Gen. Richard Blumenthal. “That should be as straightforward as the ingredients on a box of cereal. But the Supreme Court has said that we can’t require that message.”

John Paul Schaffer of Parkersburg, W.Va., who used to make calls for a professional telemarketer, understands the economics for charities.

“They’re usually guaranteed 15%. And all they have to do for that is give the professional fundraiser permission to use their names,” he said. “The shame is that that much has to be wasted so that little bit gets through.”

Meanwhile, advocates for veterans see an unmet need as they brace for an influx of service members returning from Iraq and Afghanistan -- veterans at risk for homelessness, mental illness and substance abuse.

It is those lost opportunities that most frustrate charity watchdogs.

“That’s the tragedy in this whole thing -- that you have sympathetic donors who believe in the cause, who want to support veterans, and you have veterans who need support,” said Stamp, of Charity Navigator.

“And somehow or another, you have inefficiencies or abuses in the middle which cause donor and recipient not to get matched up. That’s absolutely the tragedy in this.”

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Giving wisely

Americans donated almost $250 billion to charity last year. To ensure that contributions are used wisely, experts offer these tips.

When solicited by phone, ask how much of your donation will go to the charity. Although paid solicitors are not required to volunteer the information, it is illegal for fundraisers to deceive donors if they ask.

* If you are responding to a phone solicitation, ask for written information, rather than giving your credit card information over the phone, and read the material carefully when it arrives.

* Beware of sound-alike names. Some unscrupulous charities choose names that donors may confuse with respected groups.

* Ask if your donation is tax-deductible. Because an organization is tax-exempt does not automatically mean a donor’s contributions are deductible.

* Don’t give cash, if you are responding to a face-to-face solicitation. And if you are paying by check, make the check payable to the organization, not the solicitor.

* Don’t feel pressured. Legitimate charities won’t badger you into donating.

* Give directly to charities to bypass fundraisers that may take most of your contribution.

Hartford Courant

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Resources for donors

* GuideStar: www.guidestar.org

Free access to images of recent IRS tax forms for thousands of charities.

* Better Business Bureau Wise Giving Alliance: www.give.org

Evaluates charities against 20 “standards for charitable accountability.”

* Charity Navigator: www.charitynavigator.org

Rates charities based on measurements that gauge each group’s “organizational efficiency” (how well it functions day to day) and its “organizational capacity” (how well it has sustained its programs over time).

* American Institute of Philanthropy: www.charitywatch.org

Grades 500 charities based primarily on percentage of spending devoted to charitable purposes and the cost of raising funds.

* Internal Revenue Service: apps.irs.gov/app/pub78

Searchable online version of IRS Publication 78, the government’s official list of nonprofit organizations.

* State regulators: Most states regulate charities from divisions within the office of the attorney general or secretary of the state. Some states publish annual reports online detailing fundraising campaigns conducted by charities, or offer online access to regulatory filings by charities.

Source: Better Business Bureau, various state charity divisions

Hartford Courant