- published in the May 2008 issue of the Charity Rating Guide & Watchdog Report

It is ironic that veterans charities, having one of the most popular causes, are also some of the least efficient with America’s donated dollars. It is a national disgrace that hundreds of millions of dollars raised in the name of injured veterans are not being used to help them. Too many veterans charities are wrapping the American flag around themselves and hiding behind the First Amendment to justify their wasteful, over-solicitation of funds. With the current downturn in the economy and the great needs of our disabled veterans, it is not acceptable for poorly performing or inefficient charities to squander our limited charitable resources.

The following are policy recommendations to improve the odds that contributions intended for veterans will be used primarily to benefit veterans and not to enrich charity executives and/or professional fundraising companies. These recommendations also apply to charities with other popular causes, such as firefighters, police, disaster relief, sick children and cancer.

Veterans charities should be required to maintain reasonable annual fundraising costs of 35% or less. Exceptions would be made for groups that have been in existence for less than 3 years or with gross revenues of $500,000 or less. Unlike veterans charities, groups with controversial or unpopular causes should be allowed to have fundraising costs exceeding 35% per year due to the smaller number of people willing to support these causes.

Veterans charities should not be allowed to pull the wool over the eyes of the donating public by asking for contributions to provide services to veterans when they really plan to use most of the funds raised for solicitations with educational messages and thrift shop operations. We need “truth in fundraising” laws that require point-of-solicitation disclosure of how money will actually be spent or was spent in the past year.

Percentage based fundraising contracts need to be outlawed. These are contracts between a charity and its professional fundraising company where the charity receives a set portion or predetermined amount of donations, regardless of the company’s cost to raise these funds. Fundraising professionals need to be paid on the basis of their time and efforts and not be allowed to receive windfalls on the backs of charities. A fundraising company should not be permitted to take money intended for a needy person or charitable program just because a lazy, incompetent or corrupt charity allows it. Percentage based fundraising can also lead to excessive solicitations and place undue pressure on donors.

Past attempts to regulate fundraising costs and disclosure have failed in the courts due to free speech concerns. A charity is protected under the First Amendment from having to keep the cost of raising funds below a particular threshold. The First Amendment should continue to guarantee that we have the right to raise money for unpopular
causes even if it is very expensive to do so. However, opportunistic fundraisers, who purposely pick causes that the public is most likely to support, should not be allowed to hide behind the First Amendment.

Because charities can receive postal discounts, are tax-exempt, and have the privilege of giving donors tax deductions on their contributions, we are all indirectly paying for them. Anyone can start a charity that conducts its program via its solicitations and draw a salary from a portion of the donations. All they have to do is hire a professional fundraising firm, which will do nearly all of the work, and let them keep most of the money raised. If the fundraising company raises $1 million and is allowed to keep 85%, there is enough money left over for the charity founder to have a six figure salary. It is bad enough that the money donors give to highly inefficient charities does not go toward the purpose they intended. It’s even worse that people who know not to support poorly performing charities have to indirectly support these groups and their for-profit vendors through higher taxes and postage fees. Charities that cannot demonstrate reasonable overhead expenses should not be allowed to accept tax deductible contributions or to mail solicitations at discounted nonprofit postal rates.

The misuse of Congressional charter status needs to be stopped. It is confusing to some donors when veterans charities prominently state or display their congressionally chartered status. Many of the major
veterans groups are chartered by acts of the U.S. Congress, including AMVETS, Blinded Veterans Association, Disabled American Veterans, Military Order of the Purple Heart of the USA, Paralyzed Veterans of America and Veterans of Foreign Wars of the United States.

According to a 2004 report by the Congressional Research Service, Congressional charter status does not mean that the U.S. government approves these groups’ activities and provides oversight. That report also stated that Congress has never pulled a charity’s charter status. Congressman Barney Frank was cited in 1992 in The Washington Post as calling charters “a ‘nuisance,’ a meaningless act. Granting charters implied that Congress was exercising some sort of supervision over the groups and it wasn’t.” In order to reduce public confusion, AIP believes charities that wish to promote their Congressional charter status should be required to state that this status does not imply endorsement, approval or recommendation by Congress.

Charities that hire celebrities to endorse them or accept an award from them ought to be required to disclose that a payment has been made and its amount. Otherwise, many people will falsely assume that the celebrity is endorsing the charity on its merits alone. Until laws exist to require such disclosures, AIP encourages donors to disregard celebrity endorsements when making giving decisions.

Under present regulations and accountability requirements too much of the money given to aid our brave veterans is being diverted to non-charitable purposes. AIP strongly encourages Congress, the IRS and the states to create and enforce rules that motivate veterans groups and other charities to better fulfill their vital missions.