Newspaper article THE JOURNAL RECORD

Donors Should Scrutinize How Charities Use Funds

Newspaper article THE JOURNAL RECORD

Donors Should Scrutinize How Charities Use Funds

Article excerpt

By Joshua Mills

N.Y. Times News Service

Letters from charities requesting money are as common in mailboxes these days as holiday greeting cards. Hoping to take advantage of the giving spirit of the season and reminding taxpayers that Dec. 31 is the deadline for gifts deductible against this year's income, charitable organizations from the well known to the obscure pull out all the stops.

Many groups find a receptive audience, for charitable impulses run deep through the American culture. Donations totaled more than $124 billion in 1992, with the vast majority of them from individuals, according to the American Association of Fund-Raising Counsel Inc.

In a recent survey of 1,007 families by Louis Harris Associates for the Lutheran Brotherhood, 81 percent of the respondents said charitable giving was a value they tried to pass on to their children.

Eighty percent of the responding households with more than $50,000 in annual income said they contributed to their churches or synagogues, and 94 percent of them to other charities.

Yet few donors pay much attention to how charities spend their money, regulators and watchdog groups say. Now and then, an ugly incident provides a reminder of the potential for abuse.

A charity pays its staff high salaries and passes little money to the needy, or a scandal erupts like the one last year at the United Way.

Fraud and scandal aside, donors would do well to scrutinize how groups parcel out their money. Before making a donation, particularly a sizable one, they might ask an organization what portion of its expenditures are left after fundraising and overhead to support its mission. An organization should be willing to provide its audit and annual report.

Many people in philanthropies say at least 60 percent of spending should go to charitable programs. Some organizations do much better. The Child Welfare League of America devotes 91 percent of its budget to helping children; the National Hispanic Scholarship Fund spends 95 percent on student aid; the American Red Cross spends 92 percent on services.

No one has challenged those numbers, but several watchdog groups and state regulators say many groups' figures deserve a second look.

Until 1987, most charities counted money spent for fund-raising in a separate category from money used to feed the hungry, support medical research or other activities known as program services. So it was relatively easy to see what portion of a charity's budget went to service.

Then, in response to lobbying from some charitable groups, the American Institute of Certified Public Accountants began allowing groups to count part of their fund-raising costs as program services _ if the solicitations contained educational material intended to motivate some action.

"We find that most people do not want to pay for this type of activity," said Daniel Borochoff, who founded the American Institute of Philanthropy earlier this year.

If a group you support counts some mailing costs as program services, does it trouble you? Look at the material you received. Did you learn from it and share that information with neighbors or children? Were you motivated to do something _ write a legislator perhaps or read a recommended article?

"We say our mailings have an educational purpose, and we comply with Internal Revenue Service guidelines," said Helen Neuborne, executive director of the NOW Legal Defense and Education Fund, which was criticized by two watchdog groups for counting mailing costs as program expenses. …

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