I haven’t seen a lot of articles in the last few months on the overhead and “worst charities” issue. Haven’t seen anything on deworming meds in a long time. Maybe I’ve just not been paying close enough attention.
Here are a few articles I’ve noticed lately. First, on for-profit thrift stores, and a few old stories gaining new coverage. Finally, a couple of articles on donor advised funds.
For-profit thrift stores
I haven’t seen discussion of this issue before. Wasn’t actually aware of the concept.
Apparently there are a number of for-profit companies that operate thrift stores. They sell things for their own gain and to liquidate GIK for charities. One charity gets paid a fixed amount per pound of goods they gather with the for-profit company selling the goods and keeping any gain.
Here’s one question when AGs get involved: Do for-profit thrift stores forward all the money to the charities for whom they are raising funds?
A 12/12 article at Chronicle of Philanthropy reports the Minnesota AG says the answer to the question is no: Report Slamming Savers LLC Prompts Pivot in Handling of Donated Goods.
Check out the article for a new wrinkle in creative fundraising.
Concerns for auditors
An issue for auditors is completeness of contributions for NPOs using these types of fundraisers – are all the funds remitted to the charity?
Might also want to think about whether all the fundraising costs have been reported. If a for-profit shop just sends a net check, there is probably a large volume of fundraising costs that aren’t booked.
Old stories resurfacing
12/16 – Tampa Bay Times – The worst charities, ranked by money blown on soliciting costs – The Tampa Bay Times and Center for Investigative Reporting have updated the data for America’s Worst Charities through December 2014.
12/17 – Chronicle of Philanthropy – Quadriga, Accused of Misleading Donors, Reorganizes Under New Name – Quadriga Arts got in trouble with the New York AG, with their share being $10M of the total $25M settlement. Quadriga and several former affiliates were combined into one new entity, Innovairre Communications.
Donor Advised Funds
DAFs continue to draw occasional attention:
10/28 – Chronicle of Philanthropy – Donor-Advised Funds Are a Boon to Savvy Charities – Author advocates for DAFs. He points out that on average DAFs disburse 16% of their funds annually.
This is in contrast to private foundations which only disburse on average around 5% or 6%. Keep in mind that calculation for private foundations includes all administrative costs, so the actual help to charities is much lower. What would you guess? Somewhere in the range of 3% or 4% on average? Maybe possibly as much as 5% on average in a good year?
12/10 – ProPublica – The Wall Street Takeover of Charity – Author is critical of the DAF industry, especially the concentration in the large mutual fund companies.
He points out there is an accelerating volume of assets parked at DAFs, which means the dollars so parked aren’t helping charities. The concern is when, or if, charities will benefit.
Extracting data from the article, contributions to DAFs were $17B in 2013 and were around $14B in 2012.
Here is my calculation of the total amounts for the industry, based on data in the article:
- $45B – assets at end of 2012
- $17B – contributions into DAFs for year
- $ 2B – earnings, net of direct fees of ~0.6%, which is ~$270M
- (10B) – disbursed in year
- $54B – assets at end of 2013