Exercise Caution with Veterans’ Charities

Say hello to WeaponsMan’s First Law of Veteran’s Charities: the more you’ve heard of it, the more likely it’s a racket. That thought came to us yesterday — Memorial Day — when a local talk show had an unusual sponsorship — the Paralyzed Veterans of America. This charity is one of the largest in America, but it’s a legendary ripoff, and has not only been savaged by charity evaluators like Charity Watch (formerly the American Institute of Philanthropy) and Charity Navigator, but even drew a 2010 Page 1 smackdown from the Washington Post (article, chart of charities, and PVA’s pushback).

Just because something is a “non-profit” doesn’t mean it’s any damn good, it just means it doesn’t have stockholders or private owners who profit from its activities. Some charities have founders and managers whose actions make it clear their objective is more to enrich themselves than to enrich society: to do well by appearing to do good. Many soi-disant charities have a symbiosis with for-profit fundraisers who use the charity’s name to raise hundreds of thousands or even millions — and then pocket nearly all of it. And some of the biggest names in military and veterans’ charities are these kinds of operations.

Here’s an excerpt from an eye-opening CNN report on the Disabled Veterans National Foundation, which raised $50 million plus, and spent essentially zero on disabled vets, instead using the hoary old “goods in kind scam” to accept and overvalue worthless goods, creating phony tax writeoffs for donors, then overvalue them even higher as “donations in kind” to other, actually working, charities, that are then stuck with the expense of disposing of this trash.

The Disabled Veterans National Foundation, based in Washington, D.C., and founded in 2007, received about $55.9 million in donations since it began operations in 2007, according to publicly available IRS 990 forms.

Yet according to the DVNF’s tax filings with the IRS, almost none of that money has wound up in the hands of American veterans.

Instead, the charity made significant payments to Quadriga Art LLC… nearly $61 million from 2008 until 2010, which was the last year public records were available.

The independent group CharityWatch gave the DVNF an “F” grade. More than 30 veterans charities were rated by the independent group by the amount they spend on fundraising compared to actual donations, and two-thirds were given either a D or F grade, according to CharityWatch president Daniel Borochoff.

Emphasis ours.

Charity Watch, Charity Navigator and other evaluators (which sometimes, to be sure, squabble as hard among themselves as they do with bogus charities) rather charitably, no pun intended, refer to these operations as underperforming charities. 

We’re a little less charitable around here, after having been conned into giving money to uncharitable charities before, including the Combined Federal Campaign, the Military Order of the Purple Heart Foundation, and the Wounded Warrior Project. Each of these has a different problem. But we call them rackets. 

Click “more” to see:

  • our specific beefs with those charities
  • a list of charities recommended by one watchdog
  • our personal preferences (we recommend you vet them against the watchdogs, too), and
  • some rules of thumb for evaluating a charity’s pitch to you.

(Sorry for the break, but this would be a very long post).

The problem with the CFC

The Combined Federal Campaign is the USG equivalent of the United Way. In this kind of scheme, you donate money to a big central organization where that org’s insiders decide where the money goes. The Army periodically goes through cultural throes in which it pressures people down-rank to give to CFC, gives units quotas, etc., and we’re sure this happens in other departments, as well. The last time we donated was in the 1980s, and we discovered that one of the organizations CFC then supported was Noraid, the funding auxiliary of the IRA terrorist group. (It had been added to CFC because of pressure from a US Senator who was an IRA supporter, the late and unlamented Ted Kennedy). They took Noraid off their list, but they never got us back on. Why give money to an unaccountable middleman? Choose your own charity, or keep your own money; both positions are morally more defensible than letting some full-time apparatchik pool your contribution with others and do whatever-the-hell with it.

The problem with the MOPH Service Foundation

Is basically that it’s a racket. It’s a partner organization of the MOPH itself, but it’s the partner that raises, and spends the money, in a symbiosis with a notorious fundraising firm. MOPH national commander Henry Cook exposed the racket in 2007. According to CharityWatch (AIP):

Military Order of the Purple Heart Service Foundation (PHSF) also utilizes the fundraising company, Xentel. It has filed with Colorado’s Secretary of State a report on its contract with Xentel that allows this company to retain 84% of the money raised from 2006-2011. An official from PHSF defended its hiring of a professional fundraising business in a letter to ABC News by saying “we believe…donations are best utilized by providing needed assistance to our veteran community and not in developing at our cost…an internal volunteer fundraising program.” PHSF also said in its letter that it tries to minimize fundraising costs and maximize returns.

PHSF raises and controls funds for the Military Order of the Purple Heart (PH). PHSF, which reports having over $27 million in unrestricted fund balances in its fiscal 2007 tax form, asked PH’s national commander, Henry Cook, to reduce the budget for his veterans service program by at least $250,000, while PHSF was holding a $40,000 black-tie dinner for a retiring official, according to an ABC News story. The story also reported that PHSF officials were given access to a luxury suite at a Washington Redskins game for buying commercials during the football broadcast and showed Cook saying that he was told by PHSF that he could not bring wounded veterans to the suite and instead was given two tickets in the stands for them. The complete video, which includes comments by AIP’s president, is posted at charitywatch.org in the “Hot Topics” section.

We’re extremely proud of Henry Cook, who is a Special Forces officer and Vietnam veteran. For his whistle-blowing, he was hounded out of the MOPH, which has continued as before, fundamentally a front for the MOPH Service Foundation, which is as crooked as 80 miles of Route 1 in Afghanistan. He sued but the lawsuit was thrown out. Still, everyone who has taken a hard look at the MOPH Service Foundation knows he’s right. (His lawsuit against the Service Foundation failed for lack of timely filing; the court never got to the merits of the case). Don’t give these clowns a dime: it will not benefit Purple Heart veterans, but professional fund-raising scamsters. Unlike the wounded guys, they don’t need your help.

The problem with the Wounded Warrior Project

The Wounded Warrior Project is one of those post-9/11 cash-ins. A guy named Steve Nardizzi was running a disease charity when he realized there was more public relations benefit, and more cash, to be had in the travails of the wounded. Hence, WWP. The WWP is rated differently by different evaluators, according to this report from Non Profit Quarterly, a trade magazine for charity racketeers:

According to [AIP/Charity Watch] the Wounded Warriors Project’s “D” rating is partly due to its low proportion of revenues devoted to program activities. Program activities account for only 43 percent of the charity’s spending if one excludes the costs of direct mail, telemarketing, and other solicitation costs that it includes as program services. Without that exclusion, WWP’s program expenditure proportion is 63 percent, but that is still below Charity Watch’s recommended 75 percent mark. According to CharityWatch, out of $74.4 million in 2011 revenues, WWP spent $13.8 million on fundraising, $11.5 million on salaries, $8.9 million on consulting and outside services, $5.5 million on meetings and events, and $3.1 million on travel.

Note that GAAP accounting guidelines let a charity like the WWP put an informational sheet into a fund-raising mailer, or add an informational line to a telemarketer’s script, and presto! The fund-raising pitch is now an “informational program expenditure” and counts as part of what they’re doing for vets. That is, even their low, low performance is inflated this way. Of the evaluators, only Charity Watch catches scams like this, because only Charity Watch has real humans evaluate the audits.

The BBB Wise Giving Alliance reports that the Wounded Warriors Project met the BBB’s standards for charity accountability. The BBB reports that WWP’s fundraising costs were 11 percent of contributions received as a result of fundraising activities, a calculation reached by allocating activities that included “informational materials and activities” to program activities instead of fundraising. However, regarding the charity’s total expenses, the BBB’s Wise Giving Alliance concluded that 13 percent went to fundraising, 83 percent went to programs, and four percent went to administrative expenses.

The BBB’s is a robo-rating that allows one micropixel of informational content to turn a 99.9999% fund-raising solicitation into “program expenses.” It also appears to work strictly off self-reports in Form 990s, forms that are not required to be very complete or comprehensive. BBB does not appear to look at (statutorily required, but often hidden by questionable charities) audits. So 83% went to program expenses, counting most fundraising as program expenses. The BBB also counts lots of overhead (travel, consultants) as program expenses. (Consultants are usually a scratch-our-own-back expense in this field). Guess which rating is the only one that the massively inefficient WWP says is credible?

Charity Navigator’s three-star rating of WWP is due to its having scored only 54.18 out of a possible 70 points in its rating system, including a two-star rating on its finances. Charity Navigator’s review of WWP’s financial metrics found only 55 percent of its total budget spent on programs and services, eight percent spent on administrative costs, and 36.8 percent spent on fundraising. Oddly, in four Charity Navigator reviews of WWP published since 2010, the 2012 analysis shows WWP with its lowest program percentage and highest fundraising proportion.

A three-star rating is not good, as the CN robo-rating peaks at five stars. But even the three stars are questionable. This evaluator also lets them play the one-iota-of-content game, just not as loosely as BBB does. The Charity Navigator rating is split into to parts… the “financial” part addresses the fundraising and, indirectly, the integrity of the charity, and in this case they scored low, and the scores are declining over time. WWP recovered a star because they scored well on “transparency,” which is short for, how easily it lets the robo-raters get access to the financial information.

Exercise for the reader: If their financial management sucks, but they don’t go out of their way to hide it, are they really a charity we want to donate to?

The bottom line is less than 50¢ of every donor dollar goes to benefit wounded warriors — most goes to fundraising, overhead, and into Steve Nardizzi’s and his cronies’ pockets. If he called it the Steve Nardizzi Project, which is what it really is, he wouldn’t be quite so successful at fund-raising. (Now, the WWP does do some good stuff with its 40¢ on the dollar. If that’s enough bang for your buck, by all means support them).

We’ll just throw out there that Soldiers’ Angels is another charity that looks like it’s run for the primary benefit of the insiders, not the nominal beneficiaries, uncannily like WWP.

The Good Guys:

Charity Watch’s carefully considered top-rated vets’ charities are here at this link and we’ve pasted it below:

Armed Services YMCA of the USA        A–
Fisher House Foundation        A+
Homes For Our Troops        A
Intrepid Fallen Heroes Fund        A
Iraq & Afghanistan Veterans of America        A
National Military Family Association        A
Operation Homefront – N.O.        A
Semper Fi Fund / Injured Marine Semper Fi Fund        A+

Personally we don’t support the IAVA, which is basically a political organization run by a one-tour wonder to support his political ambitions, and an organization that has been plagued by wannabes and phonies. If we had to pick from this list, we’d throw our money down with on Fisher House or Intrepid Fallen Heroes Fund. (The only reason we would pass on Semper Fi is that, well, we’re not Marines and in our experience veterans of the Corps do a fantastic job looking out for their own). But any of these is a better bet than the PVA, the MOPF Foundation, or the WWP.

In more general charity terms, in the overseas hellholes of the Third World, we never saw the charities that advertise on TV and by telephone and direct mail. Not one. Not ever. Not anywhere we went: not in Asia, Africa, or South and Central America. Who did we see? Religious charities, especially the Salvation Army and the Mormons. (Sorry, we don’t remember what the name of the big LDS charity is, but they were always in there pitching, almost as often as the Salvation Army). Oddly, given how generous the Jews we know are to charities, and how many work in the non-profit sector, we never saw an overtly Jewish charity downrange. Maybe Jewish philanthropy flows to secular charities?

Our Preferred Charities

Some veterans charities we like are the Special Operations Warrior Foundation and the service relief charities. The SOWF is very lean and helps the families of KIAs from SOF (and they were doing it decades before 9/11 made it cool), and they also do something most charities neglect, they offer the same benefits (primarily, scholarships for surviving sons and daughters) to the many SOF warriors who fall in training evolutions. We’d like that number to be zero, but it isn’t. And as long as it isn’t, SOWF will be there to send the kids in school because Dad can’t be there. In effect, Dad’s buddies from all services’ SOF elements, and their generous supporters in the private sector, have got his back.  The service relief charites (Army Emergency Relief, Navy Relief, MC Relief, etc) get some government support and do a lot of little micro-aid loans and grant that help out, mostly, strapped junior enlisted people. It’s not glamourous but if you ever have a chance to talk to a first sergeant or platoon sergeant (or his or her air or naval equivalents) ask for a Relief story. You’ll probably get two good ones and one where AER or whatever didn’t help the guy. (They’re not perfect).

Our advice to all is: pick one. You get less bang for more bucks by spreading your donations around, and you reduce your risk of getting on the sucker list (about which, more below).

Some Rules of Thumb for Evaluating a Charity Pitch

The pitches will always be with us, and the same scamsters that pitch phony police and fire charities (a staple of the bogus-charity racket) began hitting troop and vet charities hard after 9/11. They also crop up after a Hurricane Katrina or Sandy, or a Boston Marathon bombing, with their hands out and their pitch polished. Here’s how to spot them:

  • If they solicit by telephone, they’re a ripoff. Always. The “industry standard” is that 85% to 95% of the money raised by telemarketing consultants sticks to them, and as little as 5% creaks through to the charity. (AIP’s found cases where a half-million was raised and under $25k went to the charity — which then had over 50% overhead!) Phone solicitors are normally trained to pretend they work directly for the charity, while they invariably work for for-profit fundraising firms. Also, if you do give them a pledge, or your credit card number, your details go on a “sucker list” (that’s what they really call it) that’s sold and resold among telemarketing firms. Unfortunately, Congress carved out two exemptions when they criminalized rapacious telemarketing: non-profit fundraising (even by for-profit contractors) and, naturally, political fundraising and surveys. Finally, the people who man the phone banks are sketchy individuals, often rounded up from ex-con hangouts, rehab facilities, homeless shelters and other manifestations of what a 12-step program calls Rock Bottom. You wouldn’t give your credit card number to a bum in the street, don’t give it to a bum on the phone.
  • If they solicit by direct mail, they’re a ripoff. Always. The economics of direct mail are identical to telemarketing (including the danger of being sucker-listed). They just don’t have to put some toothless meth addict on the phone with you. The current state of the art in mail pitches is to send a big fat envelope with a chaotic mess of different sizes of paper, some of which emulate typed or handwritten appeals. The theory is, if you take the time to read their pitch, you’ll give and they (the marketers) will cash in.
  • If there are a lot of chachkas in the direct mail, they’re absolutely a ripoff. These include things like address labels, bookmarks, and the fad from a couple years ago, a coin or a dollar bill. Our advice: use the labels if they don’t advertise the dodgy charity; use the bookmarks if you must, but black out the “charity’s” website and phone number lest you forget where it came from and are moved to donate; and spend the dollar with aplomb. You’re not taking a dollar away from veterans (or starving Africans or orphaned kittens, for all these scams are run by the same for-profit ripoff artists); you’re taking a dollar away from a pustule on the ass of the advertising industry. Aplomb, hell; spend the dollar with glee.
  • If they pay executives over $350k, there’s about a 90% chance they’re a ripoff. You can see some key salaries in the Form 990s, but sometimes they hide them with creative dodges like “renting” a building or an office from the CEO or his/her spouse at ten times market rate, or those famous consulting contracts. This is why you need to look at the charity evaluators before you sign that check.
  • If they’re not up to date with their Form 990s with the IRS, they’re either incompetent or hiding something. Neither way do you want to finance that, right?
  • If they don’t have all their Form 990s readily on their website, they’re hiding something. Legit charities are proud of the tale of good works the 990 tells.
  • If the charity evaluators disagree, rely on the most pessimistic and lowest rating. Because they’re probably worse than the evaluators could find out.

One last warning: if a charity was created since 9/11, be extremely wary. As we mentioned, a lot of charity profiteers flocked to this sector in the last decade or so, because that’s where the generosity is. Or to boil it down: “That’s where the money is” — Willie Sutton. Mr Sutton, you may recall, was a bank robber, a trade that’s been in decline since his heyday. The Willie Suttons of the 21st Century run charities — with the blessing of the IRS and other government entities. There are some good post-911 charities, but there really weren’t any new problems to address, just new people wanting to be involved — many for good reasons, other for less so. (And this dynamic affected traditional charities, too. The American Red Cross, a perennial bad-financial-management tale, parlayed 9/11 into huge fundraising — and then hung on to the money, paying the fundraisers bonuses).

 

One thought on “Exercise Caution with Veterans’ Charities

  1. Hognose Post author

    Here’s a training aid from a Poynter Institute class on investigative reporting of fraudulent charities:
    http://www.newsu.org/course_files/veteranscharityfraud.pdf

    Also, we have since heard of a case where the charity (if that’s the word) had a contractual arrangement with a fundraiser that allowed the fundraiser to retain 100% of the funds raised to repay any expenses it incurred in fund raising — and Hollywood accounting ensured they were always in the red, on paper.

    A 2003 Supreme Court decision forbade states from requiring telemarketers to disclose what percentage they were retaining, so don’t expect honesty there.

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