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WE Charity Accused of Double-Dipping Donors to Pay for the Same Projects

   Nov 18, 2021
UPDATE (November 19, 2021): Watch the broadcast of The Fifth Estate’s investigation: WE Charity’s donor deception in Kenya: Finding School No. 4

In an article published today by the CBC News program, The Fifth Estate, an investigation into the charity's operations in Kenya alleges that "We Charity misled donors about building schools in Kenya." The Fifth Estate compiled its own list of money raised and travelled to Kenya to see first-hand if it matched the number of schools actually built. 

The Fifth Estate's Mark Kelley describes the duplicate photos their team found online reflecting that pictures of what appears to be the same school house were sent to multiple donors or donor groups, with each being given the impression that their donation would fully fund its construction. "The deception resulted in multiple donor groups paying for the same schoolhouses many times over," according to The Fifth Estate

According to The Fifth Estate, "WE Charity told a [Canadian] parliamentary ethics committee it had built hundreds of schools in Kenya with donors' money, but an unhappy donor told MPs [members of Parliament] he felt defrauded because another donor funded the same school he was told he had paid for." 

The Fifth Estate's months-long investigation into WE Charity's Kenyan operations reveals that far fewer schools were built than were funded by donors. Internal WE Charity documents leaked to journalists suggest that overfunding schools was a co-ordinated effort at the highest levels of the organization. A former WE Charity employee told Fifth Estate journalists that there was "a strategic decision by senior leaders" to deliberately overfund projects. 

Laurie Styron, executive director of CharityWatch, reviewed the leaked documents and said they troubled her. "They're relying on the good grace of donors to just not ask too many questions? That's just wrong. It's a breach of trust," she said. 

In a letter to The Fifth Estate, WE Charity denied the allegations, saying that "claims that multiple donors funded the same school" are "false." 

In a video interview, WE Charity executive Carol Moraa says that media attacks on WE Charity are "unfair" and encourages the public to disregard concerns over the infrastructure built and instead focus on WE Charity's "impact" on communities. In an article published in Reuters Taxation of Exempts journal earlier this year, CharityWatch Executive Director, Laurie Styron, warns that charities' impact claims are extremely difficult for third parties to verify, and that financial efficiency measurements remain an incredibly important vetting tool for this reason. "Deemphasizing the importance of quantitative measurements like financial efficiency and replacing them with amorphous and largely qualitative ones that attempt to measure impact is attractive" to [some] charities "in part, because impact measurements are so much easier to manipulate," says Styron. 
 
The Fifth Estate's in-depth investigation into WE Charity's operations follows a Canadian political controversy that arose when information came to light revealing that WE Charity had paid family members of Canadian Prime Minister, Justin Trudeau, to appear at its events, despite making claims to the contraryand conflict of interest concerns over the Trudeau government's decision to award a $900 million contract to WE Charity to manage a student grant program. 

CharityWatch assigned WE Charity a "?" rating for its fiscal years 2020 and 2019, citing in our Analysts Notes' that concerns raised by journalists about the charity's claimed program accomplishments may impact the reliability of WE Charity's financial reporting for purposes of determining how efficiently and effectively it uses donors' contributions. CharityWatch also raised transparency concerns related to WE Charity's association with the for-profit B Corporation, Me to WE Social Enterprises, Inc., through which We Charity co-founders Craig and Marc Kielburger receive employment income. 

Charity Intelligence Canada, a Canadian charity watchdog and rating organization, reported the following about WE Charity in 2020:

"Recent news: WE Charity announces closure: September 9, 2020. Co-founders Craig and Marc Kielburger announce WE Charity’s Canadian operations will close down, with net proceeds from the asset sales transferred to a new foundation as an endowment for WE Charity’s programs in Kenya, Ecuador and China. At this time, the closure is only WE Charity’s Canadian operations not affecting WE Charity US, WE Charity UK, ME to WE social enterprise, or other WE entities." 

"DONOR ADVISORY: July 17, 2020, WE Charity has a nearly completely new board. Six of last year’s directors were replaced with four new directors, with Greg Rogers as the new board chair. In June 2020, one new director resigned."

"On June 25, 2020 for the COVID-19 pandemic response, the Canadian government awarded a $912m [million] contract to WE Charity to recruit, manage, and fund student volunteers. On July 3, WE Charity withdrew from this contract."

Additional articles and media may be viewed here


CharityWatch's Findings:

In addition to WE Charity’s affiliation with other nonprofit organizations in the U.S. and elsewhere, WE Charity is also associated with the for-profit B Corporation, ME to WE Social Enterprises, Inc., through which WE’s co-founders receive employment income, according to an "independent assessment of certain topics related to WE Charity and ME to WE Social Enterprises, Inc.," dated May 23, 2019, posted on we.org. The financial statements of B Corporations are not a matter of public record. For this reason, CharityWatch is unable to verify the accuracy of the reported employment income amounts.

Charities are, however, required to report transactions among their related organizations on IRS Form 990, Schedule RRelated Organizations and Unrelated Partnerships, of their annual tax filing if they respond "Yes" to the following question: "Was the organization related to any tax-exempt or taxable entity? If 'Yes,' complete Schedule R, Part II, III, or IV, and Part V, line 1" (IRS Form 990, Part IV, line 34). WE Charity responded "No" to this question on its fiscal year 2020 and 2019 tax filings.

For purposes of Form 990, Schedule R, the IRS defines a related organization as "[a]n organization, including a nonprofit organization, a stock corporation, a partnership or limited liability company (LLC), a trust, and a governmental unit or other governmental entity...[that] stands, at any time during the tax year, in one or more of the following relationships to the filing organization" (among others, as detailed at irs.gov): 

  • Parent – An organization that controls the filing organization. 
  • Subsidiary – An organization controlled by the filing organization.
  • Brother/Sister – An organization controlled by the same person or persons that control the filing organization.
  • Supporting Organization  An organization that carries out its exempt purpose by supporting other exempt organizations, usually other public charities, within the IRS's definitions of Type I, Type II, or Type III. 

Whether or not transactions among WE Charity's related organizations meet the IRS's definitions of "control" and "related organizations" for the purposes of Form 990, Schedule R, it is clear that significant transactions did occur among them. 

WE Charity's audited financial statements for fiscal years 2020 and 2019 each report significant related party transactions between WE Charity and Me to We Foundation. The U.S. tax filings of WE Charity (tax ID #16-1533544) and ME to WE Foundation (tax ID #27-3338929) for fiscal years 2020 and 2019 analyzed by CharityWatch do not include a Form 990, Schedule R. On this schedule, charities are required to report the nature and amounts of certain financial transactions with related organizations, including transactions with related for-profit companies, if any. 

WE Charity’s fiscal 2020 audited financial statements (Note 11, Related Party Transactions) disclose that the U.S. entity of WE Charity made payments to WE Charity – Canada in fiscal 2020 that amounted to $15,744,490. This $15.7 million is allocated to WE Charity’s program services expenses, at approximately $6.3 million and $9.4 million to international projects and domestic projects, respectively, according to the audited Statement of Functional Expenses. Other than the general descriptions of its international and domestic program services provided in audit Note 9 (Program Services), no additional details are reported about how the $15.7 million was expended.

WE Charity’s fiscal 2019 audited financial statements (Note 11, Related Party Transactions) disclose that the U.S. entity of WE Charity made payments to WE Charity – Canada in fiscal 2019 that amounted to $18,789,912. The $18.8 million is allocated to WE Charity’s program services expenses, at approximately $8.0 million and $10.8 million to international projects and domestic projects, respectively, according to the audited Statement of Functional Expenses. Other than the general descriptions of its international and domestic program services provided in audit Note 9 (Program Services), no additional details are reported about how the $18.8 million was expended.

"?" Rating of WE Charity by CharityWatch:

CharityWatch has assigned WE Charity a "?" rating for its fiscal year ended 08/31/2020 due to the above-cited concerns related to its governance, transparency, and accounting of program accomplishments. If additional information becomes available in the future that would allow us to provide a meaningful rating of WE Charity, we will update our information as we are able to assess that information. 

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