(Updated April 2021)
Wise donors like you turn to CharityWatch for ratings and quality reporting
on wrongdoing in the nonprofit sector because you know we aren’t afraid to name
names and hold charities accountable to their donors. Conducting a meaningful analysis of a charity’s financial
activities is time-intensive and requires the expertise of qualified analysts
who can compare tax form reporting against a charity’s more reliable audited
financial statements. CharityWatch catches reporting errors, inconsistencies,
governance issues, and questionable financial practices that other sources of
charity information lack the expertise or interest to identify and address.
Unfortunately, sometimes we lack the information
necessary to complete a meaningful analysis and must assign a “?” rating to a
charity. In some cases, the “?” rating is due to a significant governance or
financial issue that creates an obstacle to measuring its financial efficiency
in a particular reporting year, such as a significant pending lawsuit or an
investigation by a state charity regulator. But in other cases, CharityWatch
could assign an “A+” to “F” letter grade rating to a charity instead of a “?”
if those running the organization were willing to respond to our questions.
That’s where you come in. Read on to understand how you can help.
In most cases, charities claiming a religious aspect to
their missions are not legally required to publicly disclose information that
many other charities must report to the Internal Revenue Service (IRS) each year. Donors who want to know
how such a charity spends its donations, compensates its employees, or even who
sits on the charity's board of directors may be at a loss if the charity does
not want to willingly open its books to outside scrutiny. If a religious group
declines CharityWatch’s requests for information and is not required to file
financial documents with the IRS or state regulators,
it will receive a “?” rating with a religious exemption explanation on charitywatch.org.
|Call to Donors: While charities claiming a religious aspect to their missions may have more limited reporting obligations, donors have the power to demand transparency from such groups as a condition of their donations. Do you want to know how charities rated "?" by CharityWatch due to religious exemption stack up against other groups? Ask such charities for complete copies of their most recent audited financial statements, including notes, and pro forma IRS Form 990, if available, then forward these to CharityWatch for our analysis. In this way you can help us make charities more accountable for how they spend your contributions.
List of Charities With “?” Ratings Due to Religious
Other “?” Rated Charities
A quick online search for information about a charity will
often produce pages of results, including efficiency pie charts circulated by
the charities themselves, or “ratings” published by third parties who claim to
measure the financial efficiency, transparency, governance, or program impact
of hundreds of thousands of charities. In reality, these “ratings” are typically
based on simple, computer-automated computations generated by pulling self-reported
numbers from various fields of charity tax filings. Conducting a meaningful
analysis of a charity’s financial activities is time-intensive and requires the
expertise of qualified analysts who can compare tax form reporting against a
charity’s more reliable audited financial statements, including transactions
between a charity and its related organizations. CharityWatch catches reporting
errors, inconsistencies, governance issues, and questionable financial
practices that other sources of charity information lack the expertise or
interest to identify and address.
|Call to Donors: Do you want to know how charities rated "?" by CharityWatch due to nondisclosure or specific concerns stack up against other groups? Consider asking one or more “?” rated charities to respond to CharityWatch’s questions then forward their responses to us for our review.
Summarized below are some examples of the specific concerns
CharityWatch analysts uncovered in our evaluations that led to our assignment
of “?” ratings.
350.org is an environmental
charity with a mission to solve the climate crisis. Upon analyzing its fiscal
2018 financial reporting, CharityWatch became concerned that it may be
overstating its program expenses and contributions for the year. Among these
and other concerns:
- In its IRS Form 990 tax filing, 350.org includes almost 99% of the $1,157,657 it reported spending on “Events & Materials” in its program expenses. If the activities that generated these expenses meet the IRS definition of “Fundraising Events,” they should instead be netted from related revenue rather than included in operating expenses, resulting in lower reported program spending for the year.
- In its tax filing, 350.org reports spending $5,140,438 on
"Consulting Services." This line item comprises more than one-third
of 350.org's fiscal 2018 reported total expenses of $15,450,256, and the
portion of this amount the charity claims are program-related expenses amounts
to $4,713,283. This latter amount accounts for nearly 39% of 350.org's total program
spending in fiscal 2018. Understanding what types of activities comprise these
expenses is critical to any meaningful analysis of 350.org’s financial
reporting, but the charity discloses very little in this regard.
- In its tax filing, 350.org did not complete the schedule
reconciling its IRS reporting to its audited financial statements. The charity
reports grants and contributions of $19,128,157 in its tax form, but its audit
reporting reflects $100,000 less than this amount, and no explanation of the
discrepancy is provided.
- 350.org's fiscal 2018 audited financial statements report as
a subsequent event a "significant unaudited loss" that occurred
during the fiscal year-ended 9/30/2019. The audit note does not describe the
nature or amount of the loss, which could be a relevant factor for potential donors
CharityWatch contacted 350.org via email and U.S. Mail in
June and July 2020, respectively, with questions about its fiscal year ended
9/30/2018 financial reporting. On August 13, 2020, 350.org communicated in an
email that answering CharityWatch’s questions is taking "longer than
planned" and that they are "working on this." As of the time of
publication, 350.org has not provided responses to CharityWatch’s questions.
UPDATE: In an email dated March 16, 2021, 350.org communicated that
its reported “Events & Materials” expenses do not meet the IRS definition
of Fundraising Events and stated that this spending is properly reported as
program expenses. Examples of such program events, according to 350.org,
include “large scale public mobilizations such as the Peoples Climate
March...or Rise for Climate Action.”
350.org also communicated that the $5.1 million of reported expenses
for Consulting Services did not include any expenses related to combined
educational/fundraising campaigns, nor did it include fundraising activities
required by the IRS to be reported on Form 990 Schedule G. In response to
CharityWatch’s request to describe the types of consulting services included in
this expense line item, 350.org stated: “The scale of this line item is due to
personnel costs where our staff were paid through third party Professional
Employer Organizations. We employ individuals in many countries to support 350’s
global mission, but it is cost prohibitive for us to maintain a corporate
presence in all jurisdictions in which we have staff. Professional Employer
Organizations provide 350 with the employment infrastructure for us to be able
to hire more individuals with on the ground experience in the communities we
wish to serve. We have recently (after FY18) adjusted our accounting to better
reflect these expenses as part of our overall personnel costs.”
350.org did not provide additional detailed information in
response to our question about its reported “significant unaudited loss,”
saying: “We prefer to provide additional information through our FY19 [fiscal
year 2019] filings. Please find the FY19 990 filing attached and please let us
know if that satisfies the need here.” CharityWatch has since updated 350.org’s
rating based on its fiscal 2019 financial reporting and has cited in an
Analysts’ Note 350.org’s audit note reporting about “a decrease in net assets
of $10.6 million and a decrease in operating cash flow of $10.3 million for the
year ended September 30, 2019 due to revenue being below targeted levels as the
Organization continued its worldwide expansion.”
American Life League (ALL) has
received a “?” rating from CharityWatch since its 2015 financial year. Among
our ongoing concerns:
- ALL reports in its 2018 IRS Form 990 tax filing that
Virginia is the only state with which a copy of that form is required to be
filed. However, since at least March 2018, the Virginia Department of
Agriculture and Consumer Services website has reported ALL's Registration
Filing Status as: "Organization is not authorized to solicit in Virginia
(pending)." On the “WAYS TO DONATE” section of its website, ALL states
that it welcomes “any donations by mail or by phone,” and lists additional ways
to donate, including making an online donation, or donating stocks, bonds, real
estate, or matching gifts. ALL reports raising over $3.6 million in
contributions in 2018, according to its tax filing.
- ALL reports its revenues and expenses based on when cash
flows in and out of the organization (cash basis) rather than the more typical
accounting method used by nonprofits of ALL’s size (accrual basis). The latter method
reports revenues and expenses when earned and incurred, respectively, complies
with Generally Accepted Accounting Principles (GAAP), and is less susceptible
to manipulation that can be caused by the timing of cash deposits or
- In its 2018 tax filing, ALL reports for Business Transactions
Involving Interested Persons a transaction with Anthony Kane and Associates for
"printing and mailing services," with the relationship reported as
"board of director is owner." ALL left blank the "Amount of
transaction" field on the schedule, and reports no supplemental
information about the transaction. In its 2015 tax filing, ALL reported a
similar transaction with Anthony Kane and Associates for "printing and
mailing services" in the amount of $1,862,208.
CharityWatch has contacted ALL three times since 2016 to
request a copy of its most current IRS Form 990 and audited financial
statements, most recently in June 2020, and ALL has not responded to our
requests. Though ALL reports in its 2018 Form 990 that its financial statements
were audited by an independent accountant, we have been unable to locate a copy
of this document from public sources. CharityWatch's most recent letter grade rating
for ALL was a "D" based on a Program Percentage of 53% and a Cost to
Raise $100 of $48 for its fiscal year 2014.
UPDATE: CharityWatch contacted the Virginia Department of Agriculture and Consumer Services in August 2021 regarding American Life League's authorization to solicit in its home state of Virginia and detailed our concerns regarding its financial reporting. We received a response letter later that month that included the following: "The information will be reviewed, and the appropriate course of action will be determined. This may include referral to another agency with enforcement authority over the subject of this complaint."
As CharityWatch becomes aware of the progress of this investigation, we will update our information on American Life League accordingly. For more details, read: CharityWatch Alerts Regulator to Red Flags at American Life League.
CDC Foundation, also known as the National Foundation
for the Centers for Disease Control and Prevention, receives a "?"
rating from CharityWatch for its fiscal year ended 6/30/2019. CharityWatch
contacted the organization via email and U.S. Mail in June and July 2020,
respectively, with questions about its financial reporting. Among our concerns:
- A $1,408,214 discrepancy exists between the $16,625,343 of
“Government grants (contributions)” reported in its IRS Form 990 tax filing,
and the $15,217,129 in “Direct Federal grants” reported in its audited
financial statements. While CDC Foundation may have reasonable justification
for differences in line item reporting between its tax filing and audit, it did
not provide one to CharityWatch when asked.
- The charity reports $11,859,039 in “Indirect cost recovery”
revenue in its audited financial statements. Indirect cost recoveries typically
consist of funds paid to a charity by the government to cover certain overhead
costs a nonprofit incurs related to fulfilling the terms of a government grant.
In order to compute a valid fundraising efficiency ratio for CDC Foundation, a
determination must be made as to whether this reported revenue should be
treated as a contribution or as revenue received in exchange for services provided
(program service revenue).
As of the time of publication, CDC Foundation has not
responded to CharityWatch’s requests for a reconciliation of government grants
reported in its tax filing and audit, or for a description of the activities
included in its reported indirect cost recovery revenue.
Crisis Relief Network / Child Watch of North America (CRN) receives a “?” rating from CharityWatch due to our
concerns that it appears to be allocating significant professional fundraising and
related expenses to its reported program spending. CRN also lacks an
independent governing body to help ensure that operating decisions are being
made in the charity’s best interest. We analyzed CRN’s 2018 IRS Form 990 tax
filing, audited financial statements, and annual registration filings in select
states. CharityWatch identified multiple fundraising campaigns conducted by
professional fundraisers on behalf of CRN for which CRN received either only
10% or 12% of the gross donations raised during periods that included 2018.
Among these and other concerns:
- In its tax filing, CRN reports that its total 2018 program
expenses of $2,108,333 consisted of: $239,165 for Case Management; $545,842 for
Poster Distribution; and $1,323,326 for "Spreading the word about the
services offered for free to the public..." In its 2018 audit, CRN reports
spending $549,545 on "Marketing and promotions" and $1,091,986 on
"Printing, publications and postage." CharityWatch is concerned that
these expenses, which comprise approximately 78% of CRN’s reported total program
spending for the year, may include fundraising expenses and/or joint cost
- According to CRN’s 2018 audit, Note 6, Related Party
Transactions: "During 2018, the executive director had an employment
agreement with [the] organization that was approved by the Board of Directors.
The executive director also provides contractor services as a therapist. The
executive director is related to members of the Board of Directors through family
relationships." In its 2018 tax filing CRN reports a Board of Directors
consisting of five people. Of these five, only two are reported as independent.
Don Wood (CEO), Brandon Wood (president), and Bridget Wood (executive
director), share the same last name, and all are reported as “related parties.”
In addition to fundraising under its legal and doing
business as (dba) names, CRN solicits under multiple other names. These
include: Breast Cancer Relief Network, Childhood Abuse and Trauma Foundation, Children's
Cancer Relief Foundation, Disabled Children's Relief Foundation, and Veterans
Trauma Support Network.
UPDATE: Crisis Relief Network (CRN)
was cited as a "charity client" in the Federal Trade Commission's lawsuit against
several telemarketers, Federal Trade Commission, et al. v.
Outreach Calling, Inc., et al., filed in September of 2020. When
soliciting donors on behalf of CRN, the Defendants made representations that
were "false and misleading," according to the Complaint, when they
communicated that funds would be used to provide therapy to children exposed to
violence and trauma, to children with cancer, to disabled children and their
families, and to women living with breast cancer.
According to the
- "From 2013 to 2017, CRN
raised over $7 million through its professional fundraisers, but in 2015
and 2016 spent approximately $84,000 per year on therapy services,
amounting to less than 1.2% of the funds raised."
- "CRN has had only one
therapist on staff able to provide trauma therapy, and from 2011 to 2017,
CRN provided therapy treatments to approximately 50-100 patients each
year. Since 2017, CRN has only provided therapy services to approximately
20 breast cancer patients."
on CRN’s contract with [professional fundraising company] Outreach [Calling],
Defendants have retained approximately 90% of the funds they raised and
distributed 10% to CRN."
National Rifle Association (NRA) and
National Rifle Association Foundation (NRA Foundation)
each receive a “?” rating from CharityWatch due to our concerns related to
their respective governance practices which may impact the reliability of the
organizations’ financial reporting. NRA and NRA Foundation are currently under
investigation by the offices of the New York and District of Columbia attorneys general, as further
described in our article: NRA and NRA Foundation Facing Lawsuits—NY AG Seeks to Shutter NRA; DC AG Accuses NRA Foundation of Misusing Charitable Funds to Support NRA’s Wasteful Spending.
Paws for Purple Hearts (PFPH) may
be including fundraising expenses in its reported program activities and
inflating its program accomplishments in the process. CharityWatch contacted
PFPH’s chief operating officer in 2018 and 2019 with questions about variances
in its 2017 financial reporting compared to prior years. In October 2018, PFPH
told CharityWatch that it was working to provide us with "thorough
responses,” but when we followed up in early 2019 the charity stated that it is
"going to have to decline the opportunity to provide a detailed response."
CharityWatch’s most recent letter grade rating of PFPH is an "F" based
on its 2015 fiscal year in which it spent only 26% of its budget on programs
and $44 to raise each $100 of contributions. We have since assigned PFPH a “?”
- PFPH reported significantly higher expenses for “Postage”
and “Printing and copying expenses” in 2017 and 2016 as compared to prior
years, and allocated almost 60% of its “Mailing lists” expenses to program
services in 2017. Such variances are often an indicator that a charity has
engaged in joint educational/fundraising campaigns, which would require it to
provide additional breakouts in its tax form. These activities, known as joint
costs, often consist of direct mail solicitations that include an educational
component and a call to action. The aggregate of the three aforementioned expense
line items make up almost 30% of PFPH’s reported total program expenses in
2017. In contrast, they comprised 17% and 23% of total program expenses in 2015
and 2016, respectively.
- PFPH allocated $540,804 in “Professional services” to
program expenses in 2017. We noted that “Professional services” comprised less
than 5% of the charity’s reported total program expenses in 2015, but that proportion
increased to 12% in 2016 and 14% in 2017 without explanation.
Veterans Community Project (VCP) is
a charity that provides transitional housing to veterans in an effort to
eliminate homelessness. CharityWatch contacted VCP in February 2020 to request
copies of its IRS Form 990 tax filing and audited financial statements. As of the
time of publication, VCP has not responded, but CharityWatch did acquire copies
of the charity’s recent tax filings from public sources. Among our concerns
upon reviewing these documents:
- In its 2018 tax filing, VCP does not check the box to
indicate that an independent audit was conducted that year. This is unusual for
a charity of VCP’s size—it netted nearly $3 million in cash contributions in
2018. If it is the case that VCP solicited donations only in its home state of
Missouri that year, an audit may not have been required to comply with state
law. Whereas, if VCP solicited donations nationally, it likely did so in
violation of various state charitable solicitation laws.
- In its 2017 and 2018 tax filings, VCP leaves blank the
fields designated for a response to the following question: “List the States
with which a copy of this Form 990 is required to be filed.” Forty-one U.S. states
and/or jurisdictions require charities to register as a condition of being
allowed to solicit charitable contributions within their borders. Many of these
states require a copy of a charity’s IRS Form 990 to be included as part of
meeting filing requirements. As of the date of publication, CharityWatch has
been unable to locate a copy of VCP’s audit or Form 990 in the public databases
of state charity regulators, calling into question whether VCP is properly
registered to solicit donations in one or more jurisdictions.
A meaningful analysis of a charity’s financial operations is
often time-intensive and requires the expertise of qualified financial analysts
with specialized knowledge, skills, and experience in nonprofit reporting and
accounting. We hope the examples of our work outlined in this article have
inspired you and other donors to be cautious about taking a charity’s claimed
accomplishments or financial efficiency at face value. As we are able to obtain
the necessary financial reports and other information from the charities cited
in this article regarding our concerns, we will update their ratings
accordingly. As appropriate, we will also post updates within this article to
indicate when a charity’s rating or other relevant information has changed.
For more information about the work that goes into
CharityWatch’s “A+” to “F” charity ratings, please visit the Our Process page. To better understand how
CharityWatch’s ratings differ from other sources of charity information, please
read The CharityWatch Difference. Thank you for
making the extra effort to give wisely by reading this and other CharityWatch
articles, and for checking our charity ratings prior
to making your donating decisions.