CharityWatch has been keeping an eye on Planet Aid, a charity known for its ubiquitous clothing collection boxes, for many years. This charity consistently reports low overhead and high program spending in its annual financial documents, but a closer analysis by CharityWatch reveals a different picture of how efficiently Planet Aid is operating.

Planet Aid reports spending 84% of its expenses on programs in 2011. CharityWatch's analysis of Planet Aid's 2011 tax form and audited financial statements shows the charity spending only 29% of its expenses on programs.

Why the difference?

In short, Planet Aid considers the costs associated with collecting and processing donated clothing and other goods to be a "recycling" program expense in support of its "significant contribution in the fight against climate change." It argues that if it did not collect these items they would end up in a landfill. In 2011 Planet Aid spent over $20 million to collect and process these non-cash donations, and reported these costs as Program expenses. CharityWatch disagrees with Planet Aid's reporting and reallocates these expenses to Fundraising. Here's why:

• The expenses a charity incurs to raise donations, whether the donations are in the form of cash or non-cash items like donated clothing, are fundraising expenses, not program expenses.

• There are many nonprofit organizations that compete with one another for clothing donations. If Planet Aid did not collect the used clothing and other goods, most of it would surely be collected by another charity, or by a for-profit company that could sell it for a profit. So it is not the case that all of these items would likely end up in a landfill if Planet Aid did not collect them.

• The most damning evidence against Planet Aid's financial reporting logic is provided by the charity itself. This charity does not distribute the vast majority of the clothing and other goods it collects to needy people-it sells it. In 2011 Planet Aid brought in over $31.4 million from selling these items. This proves that there is a ready market of buyers willing and able to pay large sums of money to purchase used clothing, shoes, and textiles like the ones Planet Aid collects. It is ridiculous for this charity to assert that items worth millions and millions of dollars would end up in a landfill if Planet Aid did not collect them.

Watch analyst, Laurie Styron, discuss CharityWatch's rating of Planet Aid's 2010 finances with CBS Los Angeles.

Unlike many other sources of charity information online today, CharityWatch does not simply repeat information that charities report about themselves. Our in-depth analysis of charities is what has set us apart for more than twenty years as the smart source for independent charity ratings and other information. For more articles on this or other charities analyzed by CharityWatch, please see our Articles Page. Thank you for caring enough to give wisely!