As regular readers of this blog know, living here in Seattle I receive a fair number of telephone cold calls in the name of charities that will end up getting just a few pennies on the dollar of any resulting cash donation. That’s because the bulk of the money goes to the telemarketing fundraiser.
This, of course, is not good, but it’s more or less legal so long as the caller doesn’t make false statements. However, today I received a cold call from a Pennsylvania-based charity that I would say went a little over the line. I was explicitly told my contribution would benefit a specific Seattle hospital. I don’t really believe it, for reasons to be explained below. On top of that, it doesn’t look to me like more than 15 cents of every cash dollar donated in the recent past went to what I would call a proper charitable purpose.
The caller–initially, another one of those annoying computer-controlled voices–said she was seeking a donation for something called the Children’s Cancer Recovery Foundation, of Harrisburg, Pa. Following her usual m.o., “Vanessa,” as she was later identified, pressed me to pledge a donation. Following my usual m.o., I asked for the name and address of the charity. I couldn’t understand the street name and asked her to repeat it. “Vanessa” said she was still in training–since a computer was talking, I giggled at that answer–and would get a “supervisor” on the line.
It was the “supervisor”–a real human–who told me what I consider to be the whopper. Since I was in Seattle, he said, my contribution would benefit “Children’s Hospital and Regional Medical Center.” As I am still New To Seattle, I told him I had never heard of that institution. The “supervisor”–whose name I never got–insisted that was the name and the facility would get some portion of my gift. He was very sure of it.
The call soon ended. For me the fun began when I started doing some research. “Children’s Hospital and Regional Medical Center,” I quickly learned, was the old name of Seattle Children’s Hospital. But the name was changed five years ago. Since there no longer is a Children’s Hospital and Regional Medical Center in Seattle, what I was told on the phone by definition literally can’t be true. As Dashiel Hammet memorably wrote in The Maltese Falcon, the gaudier the patter, the cheaper the crook. But I just hate sharpsters who can’t keep their patter current.
Then I started digging into financial filings.
Using round numbers, for 2011 (the latest data available), Children’s Cancer reported about $11.8 million in both donations received and expenses expended. But $7.2 million of that consisted of unspecified donated medicines. Such gift-in-kind (GIK), as donated goods are called, cost almost nothing to procure and are prone to wild exaggerations of value by charities seeking to impress would-be future cash donors or burnish their reported financial efficiencies. I have written about this here, here and here. Indeed, a footnote on the Children’s Cancer federal tax return said the $7.2 million involved 136,000 units of medicine. That works out to a valuation of nearly $53 per dose. When’s the last time your bulk purchase of meds at Costco cost $53 per pill?
Subtracting out the donated goods, here’s how things looked to me. Children’s Cancer received $4.5 million in cash gifts. That’s also about how much cash was spent. But by my reckoning, no more than $650,000–and maybe a lot less–was spent on the stated charitable mission of assisting children with cancer. The rest went to fundraising, telemarketing and overhead.
So as I crunched the numbers after ignoring the GIK, the true fundraising efficiency–the amount of funds raised after the cost of raising them–was no more than 15%. That also was roughly the true charitable commitment, the amount of total expenses spent in direct furtherance of the charitable mission. The Better Business Bureau Wise Giving Alliance, a major charity watchdog, says neither ratio should be less than 65%.
The use of overvalued GIK, plus accounting rules that allow part of telemarketing costs to be classified as seemingly charitable activities like “community outreach” or education, can make the scuzziest charity look presentable. Indeed, the Washington State Secretary of State’s website says Children’s Cancer has a charitable commitment ratio of 81%. That’s the same number that Children’s Cancer touts on its website. In my opinion, the figure is wildly high by about a factor of four.
The website also claims the organization, “affiliated” with more than 200 hospitals and cancer centers, is “offering programs and services to any child receiving treatment at those facilities.” Note that Children’s Cancer doesn’t state it provides programs and services at all of them, merely that is “offering” them. In any event, from the financial statements it’s hard to see how any benefit averages more than $1,500 a hospital–or one-quarter of one cent of each donated dollar. To help you with the math, that’s 25 cents on a $100 donation.
As it turns out, the primary cash fundraiser of Children’s Cancer is an outfit called Associated Community Services, of Southfield, Mich. ACS is no stranger to Seattle–nor to me or other journalists. As I wrote here a few months ago, ACS was the fundraiser behind the epic accomplishment of Vietnam Veterans of Washington State in spending 0% on its stated mission. Another ACS client soliciting in Seattle, United States Armed Forces Association, spent all of 25% on its charitable purpose. Both of these pitches to me, by the way, also used computer-guided voices. In the case of Children’s Cancer, it’s pretty clear that the call I got came from ACS; at one point the “supervisor” mentioned he was in Michigan, where ACS has its boiler room.
As always, I invite anyone mentioned or interested in this post to add their thoughts below. Even “Vanessa” and her “supervisor.”
UPDATE ON 2/24/2013: Two days after I posted this, the Chronicle of Philanthropy put online a long investigative story about Children’s Cancer Recovery Foundation in its forthcoming February 28 edition. The story is entitled, “Little Money of Children’s Cancer Charity Goes to Main Programs.” The article also calculated the true charitable commitment ratio at just 15%.
UPDATE ON 5/9/2013: The Chronicle of Philanthropy reported that the Children’s Cancer Recovery Foundation will remove from a past financial statement reported GIK contributions amounting to more than one-third of all its incoming gifts. As is so often the case in these situations, the charity blamed someone else.
UPDATE ON 5/23/2013: “Vanessa” continues to ply her trade on behalf of Children’s Cancer Recovery Foundation. This morning, in his charity accounting blog, “Nonprofit Update,” James Ulvog recounted a call he received from the female computer voice. When he asked for information to be mailed to him, he wrote, she “hung up.”
UPDATE on 5/28/2013: Michigan Attorney General Bill Schuette issued a cease-and-desist letter against Associated Community Services and said he would sue to recover $2.3 million in fines and penalties on allegations its telemarketers deceived donors.
UPDATE on 11/15/2013: The Tampa Bay Times takes a real close look today at the high-pressure m.o. of Associated Community Services.