Planet Aid's Recycling Program, Debunked!
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 85% of its expenses on programs in 2017. CharityWatch's analysis of Planet Aid's 2017 tax form and audited financial statements shows the charity spending only 24% 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 global warming and climate change." It argues that if it did not collect these items they would end up in a landfill. In 2017 Planet Aid spent approximately $25 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 the items would surely be collected by another charity, or by a for-profit company that could sell the items 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 the items. In 2017 Planet Aid brought in over $32 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 tens of 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.
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