From
the Fall 1997 Watchdog Report
A
Crafty Project
Is
It An Employment Program or Just Clever Marketing?
As you go through your daily routine of looking through
the mail, you may find sandwiched between your bills and solicitations
a catalog of stunning Indian jewelry and crafts from the Southwest
Indian Foundation.
The Southwest Indian Foundation (SWIF) reports
that for over 25 years it “has been working to relieve the
tremendous poverty and despair of these forgotten Americans [Indians].”
SWIF says that it supports mission schools and homes for battered
women and children, sponsors alcohol counseling centers, delivers
food baskets every Christmas and clothing and shoes throughout the
year and repairs homes and installs wood stoves.
The above description paints a glowing picture of
the charity. However, that glow fades rapidly when one tries to
review how SWIF is actually spending its money. This is not an easy
proposition since the group has not complied with AIP's repeated
requests, starting in early 1995, to disclose voluntarily its complete
financial statements. According to Nina Smith, Chairwoman of the
Fair Trade Federation (FTF), marketers of products that purport
to help low-income artisans should have “total transparency.”
SWIF is not a member of FTF. The FTF and some of its high ethical
standards for membership are described in “Do Craft Purchases
Help the Poor?” (see below). “I never
heard of it” was William B. McCarthy’s (Executive Director
of SWIF) reply when asked by AIP if his organization was a member
of FTF.
Unlike most other charities SWIF is not required to
file public information. Why? Because the Internal Revenue Service
classifies SWIF as a church or church-related organization. SWIF
does not appear to have a congregation that regularly meets for
prayer services but has obtained church type status with the IRS
under a group ruling of the U.S. Catholic Conference. This status
allows SWIF to be exempt from state and federal laws that require
charities to regularly file financial information with the government.
Churches involved in trade or business activities unrelated to their
exempt or charitable purpose do file annual information with the
IRS on the for-profit portion of the organization but these filings
are not open to public inspection.
Fortunately, AIP was able to obtain SWIF’s documents
from two reliable sources. What we found is that SWIF’s primary
activity, other than fundraising, is buying and selling jewelry
and craft items. SWIF’s support of mission schools and other
human and social service programs only accounted for about a quarter
of its total expenses in 1996.
A letter on the back of SWIF’s Winter 1996 gift
catalog from Deacon Daniel Nez Martin, who is not a staff or board
member of SWIF, states that “it is a catalog of uniquely crafted
gifts from some of the poorest people in the United States-the Indian
peoples of the American Southwest.” It also says that “this
catalog helps provide jobs because it serves as an outlet for my
people to sell their precious crafted goods.” AIP asked SWIF's
Executive Director how “some of the poorest people in the United
States” can afford silver, gold, turquoise and other expensive
materials to make the fine crafts displayed in its catalog. He said
that there are commercial suppliers that will loan materials to
artists with the expectation of receiving a percentage of the future
sales revenue. McCarthy said SWIF does not provide this service.
When asked by AIP if SWIF teaches or trains poor or
unemployed Native Americans to make crafts, McCarthy said that this
was not feasible “on site” because the Indians are spread
out over vast areas. He did say that one or two dozen participants
in SWIF’s alcohol counseling program were trained to make ceramics.
“Many hundreds [of Native Americans] make products for our
catalog” and “lots of them would not [otherwise] have
jobs,” according to McCarthy. McCarthy likes to refer to the
“ripple effect” of SWIF’s craft purchases. He cites
an improved local economy, more jobs at the post office, positive
effects on an artist's family and preserving the Indian culture
for future generations as indirect benefits of SWIF’s catalog
operation.
After reviewing the Winter 1996 Southwest Indian Foundation
catalog, Ms. “Cat” McClannan, who manages a store in Bethesda,
Maryland that specializes in Native American art, said that most
of SWIF’s products are not unique but are mass market items
that can be purchased through wholesale distributors. SWIF’s
Executive Director said that a “good portion” of its catalog
sales are unique crafts and a majority of its sales revenue comes
from products made by poor Native Americans. McCarthy was not clear
about how he defined “poor.” He did not define it in terms
of income but said the artisans were “poor by degree”
in comparison with most Americans.
McCarthy did not tell AIP what portion of the retail
sales price of a crafted item was received by the Indian artist
but did say that about one-third to one-half of SWIF’s catalog
costs went to them.
In SWIF’s financial statements the cost of buying,
selling and promoting the jewelry or crafts in its catalog is labeled
as a program service called “Employment project – jewelry.”
Yet SWIF has reported to the IRS in its 990-T, (Exempt Organization
Business Income Tax Return) for fiscal 1994, that the costs of its
so called employment program are unrelated trade or business expenses.
Unlike SWIF’s financial statements, its IRS report indicates
that its jewelry sales do not substantially fulfill an exempt or
charitable purpose.
AIP would consider the cost of training or teaching
Native Americans to make jewelry and the identifiable expense of
locating and reaching isolated Indian artists to be a bona-fide
charitable program but does not consider the total cost of goods
sold by SWIF to be one. Being that there are numerous for-profit
outlets for the sale of Native American crafts, it appears that
SWIF’s craft sales serve primarily to generate sales revenue
and donations for the charity.
Donors to American Indian charities may also want
to consider the charity’s board composition. When AIP asked
McCarthy how many Native American were on SWIF's Board, he said
that “it didn't matter if there were any Indians on the Board”
but that 5 out of 12 are Native Americans, including 2 Navajo Judges.
First Nations Development Institute and the Campaign for Human Development
(CHD), which make grants to Native American charities, feel strongly
that Indian leaders should control the money that is donated to
help their tribe. Both of these groups only make grants to those
Native American charities with a majority of Indian board members.
DO CRAFT
PURCHASES HELP THE POOR?
The Fair Trade Federation (FTF) is an association of
over 130 producers, wholesalers and retailers “committed to
providing fair wages and employment opportunities to low-income
artisans and farmers worldwide.” Before buying crafts for the
purpose of helping poor artisans, one might want to consider if
the marketer is a member of FTF (508-355-0284) or meets its membership
criteria.
Some of the criteria: paying a fair wage in the local
context; engaging in environmentally sustainable practices; being
open to public accountability; providing healthy and safe working
conditions within the local context; providing financial and technical
assistance to producers whenever possible.
Even with these criteria it can be difficult to determine
whether poor people are receiving substantial benefits from the
sale of their crafted items.
Another approach is to buy crafts directly from a
business owned and operated by members of a group that you want
to help. To receive a free listing and description of a wide variety
of American Indian and Alaska Native owned and operated arts and
crafts businesses, write to:
Indian Arts and Crafts Board
US Department of the Interior
MS-4004-MIB
Washington, DC 20240
From the Fall
1997 Watchdog Report
Funding
Fundraising Opportunities
Unlike other charities that have programs to employ
disadvantaged people as childcare workers, retail store clerks,
landscapers, etc., The Native American Heritage Association (NAHA)
hires American Indians “in areas of high unemployment and discrimination”
to help solicit funds.
NAHA, which is based in Rapid City, South Dakota and
leases office space in Orange, Virginia, claims to have employed
100 disadvantaged Native Americans, who are “primarily engaged
in fund raising activities.” In its financial statements, NAHA
includes the salaries of its Native Americans solicitors in program
services and excludes them from fundraising expense. 80% or $1.7
million of its total cash programs cost in 1998 was spent on its
Native American fundraising employment program.
NAHA continues to evolve and create more opportunities
for its employees since it was formed in 1991 as Little Soldier
Sioux Pottery, Inc. It began a bingo operation in October 1997 but
closed it in May 1998 after incurring $135,000 in net losses. NAHA
took over the assets and liabilities of The American Forum in 1994
and the Grant-A-Wish Network in January 1999. NAHA also reported
in its financial statements that it is planning a Native American
Museum in South Dakota.
From the Winter
2000 Watchdog Report
Indian
Charity Accused of Lying
The
American Indian Relief Council (AIRC), AKA National Relief Charities,
and codefendants last year entered into a $395,000 consent agreement
with the Commonwealth of Pennsylvania to settle allegations that
“they intentionally exploited the plight of Native Americans
to obtain donations–and then used the contributions to primarily
benefit certain officers and directors of the charity,” according
to Attorney General Mike Fisher.
The state accused the charity of using false claims
in its mail solicitations during July 1991 to December 1993. A.G.
Fisher, in a news release last June declared: “We contend that
this organization's intent was to deceive potential donors and play
on every human emotion imaginable to extract dollars. Consumers
were told that Native Americans, on several South Dakota reservations,
were suffering from widespread famine and other life threatening
conditions that we determined either never existed or were greatly
exaggerated.”
In the consent agreement AIRC and its codefendants
admitted no wrongdoing but are required to:
1) Pay $350,000 in restitution, $15,000 in civil
penalties, and $30,000 for the cost of the attorney general’s
investigation,
2) Maintain an autonomous board of directors, and
3) Maintain AIRC’s existing level of program
services benefiting Native Americans in South Dakota, in addition
to the restitution mandated.
AIRC President Brian J. Brown told AIP that the consent
agreement speaks for itself and that AIRC continues its relief activities
in compliance with the agreement. He also said that it was “nice
to win that case.”
Mark Pacella, chief of the Attorney General’s
Charitable Trusts and Organizations Section, reported that AIRC
paid $175,000 of restitution after the agreement was signed last
summer. His office distributed the funds to relief programs in the
Pine Ridge, Rosebud and Cheyenne River Sioux Tribe reservations
in South Dakota. The distribution of the money falls within the
scope of AIRC’s charitable purposes, Pacella said. The remaining
$175,000 in restitution is due this summer.
“AIRC’s direct mail solicitations did change
after the consent agreement,” Pacella told AIP. Pacella added
that AIRC is “doing a better job now. Our case in no small
measure contributed to this.” A.G. Fisher in his office's June
release said, “Our legal action has stopped this charity from
using half-truths and outright lies to obtain donations and has
resulted in increased funding for Native Americans living on three
reservations in South Dakota.”
When asked about the term “widespread famine”
that A.G. Fisher said the charity used in solicitations that triggered
the Pennsylvania suit, Brown replied that its meaning depends on
the definition of hunger. When AIP pressed on other elements of
the agreement and AIRC's current operations, Brown ended the conversation,
saying, “I’m busy.”
AIRC states in it IRS Form 990 that its primary purpose
is “To focus public attention upon the needs, concerns, and
conditions of those people in need.” This charity receives
an “F” grade from AIP because in our opinion in 1998 it
spent only 34% of its budget on program services and spent $62 to
raise each $100 of contributions.
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