functional allocation

Details on FTC enforcement action against four cancer charities – 2

This is the second in a series of posts diving deep into the detail mentioned in the complaint by the Federal Trade Commission and all Attorneys General against four named cancer charities.

My goal is to highlight some of the information that I think is of particular interest to the wider nonprofit community.

I perceive the attention paid to the complaint is drying up. Before discussing the FTC complaint, want to mention one interesting article of late:

6/1 – Suzanne Perry at Chronicle of Philanthropy – $187-Million Fraud Case Puts Charities on the Defensive – Article has reactions to the FTC and 50+ AGs going after the cancer charities that were so far over the line.

My description of the comments are they range from wondering what took the regulators so long to whether this is just a start.  Article points out there has been regulatory action against some members of this group for a long time (over 20 years with CFOA) but that doesn’t seem to have deterred additional problematic efforts.

One focus on the article is the limited staffing at the AG offices which limits how much they can focus on the charity sector. Various industry sources comment on the limits of self-regulation.

Back to the FTC complaint, which can be found here.  It is a public document. I assert journalist status, so will quote the document at length.

Here is the summary of the organizations’ activities, as interpreted by the FTC: (more…)

Jim Ulvog

More followup on FTC action against 4 cancer charities

There is a lot more to say on the FTC and all AGs going after four charities that were way out of line.

5/19 – William P. Barrett at Forbes – Cancer Charities Agree to Dissolve Amid Fraud Claims – Article summarizes the case by the FTC. Two of the four charities have agreed to close their doors. Three of the named individuals have agreed they will not have future involvement with charity management or even fundraising.

We did nothing wrong and we agree not to break the law again

Article points out the irony we seen these kinds of settlements. Even though the three individuals agreed to not be involved in the charity sector again during their lifetime and two of the charities agreed to be taken over by receivers and then liquidated, the charities and individuals involved denied doing anything wrong.

It is as if it’s a normal and everyday thing that individuals agree to be legally barred from involvement in their economic sector and charities agree to corporate suicide when they have done nothing wrong.

But that’s the legal dance that is necessary. Denying wrongdoing is necessary to prevent the consent degree from becoming proof to anyone who later tried to sue the charities or individuals.  Even though I understand the reason, it seems silly to those looking in from the outside.

Contested claims

(more…)

Jim Ulvog

Survey of first day reporting on major FTC enforcement action

Here is a collection of the articles I found the day the FTC and all state Attorneys General took enforcement action against a group of four charities:

Update: A quote in the Chronicle of Philanthropy article provides a massive warning to the nonprofit community:

Hugh Jones, a charity regulator in Hawaii, said to his knowledge “this is the first time state charity regulators have aggressively pursued the deceptive use of gifts in kind.”

While this case looks to be extraordinarily extreme, there are a variety of issues that the FTC and every AG has now declared to be the fraud category. Anyone who has been paying attention knows the issues under discussion are not limited to these four charities. 

It isn’t too late to clean up policies, valuations, and modify some past filings.

Let those with ears to hear, hear.

FTC litigation

FTC press release which lists the names of the charities and key executives: (more…)

Jim Ulvog

Free class on how charities account for expenses

Learn All About Nonprofit Expense Accounting on May 1 is the announcement from Sift Media of another free webinar on NPO accounting. The class is Expense Accounting – Key Accounting and Reporting Issues for Nonprofits #3.

The free class is one hour long and will be offered on May 1, 2014 at 2:00 p.m. Eastern. That means 11:00 here on the west coast.

Some of the topics covered will be the functional allocation of expenses and joint cost allocation.

(more…)

Jim Ulvog

Portion of telemarketing proceeds retained by charities in Michigan

Previously mentioned that in 2012 California charities retained 37% of the total proceeds raised by telemarketing firms. In New York, the percentage going to the charities was 38%.

The Michigan Attorney General released their report on telemarketing campaigns in the state for 2013 –  

(more…)

Jim Ulvog

Portion of telemarketing proceeds retained by charities in CA and NY during 2012

What portion of telemarketing campaigns makes its way to charities for whom the campaigns were conducted?

Here’s the 2012 results based on two recent articles:

  • New York – charities retained about 38%
  • California – charities retained about 37%

The articles:

(more…)

Jim Ulvog

More good stuff on overhead ratios and “worst charities” – 11-7-13

Two great opinion pieces in the Chronicle of Philanthropy that are worth your time, both dealing with the ‘overhead’ issue. At first glance they seem to have opposing views. I think they are both correct with many good points, which illustrates the complexity of the issues.

(more…)

Jim Ulvog

A different perspective on what ails the critique of what ails the nonprofit sector

The debate around what is happening in the NPO sector is a good and healthy.

For some serious pushback against the critique of the charity sector by Mr. Dan Pallotta (which I’ve mentioned here and here), check out the article by Mr. Phil Buchanan at Huffington Post:  Getting the Facts Straight About the Nonprofit Sector.

If you have been following the conversations in the NPO community, you really ought to check out Mr. Buchanan’s article.

Here are my brief thoughts on three of his four critiques of the critique:

First, Pallotta says the sector has failed because we haven’t “ended” homelessness or poverty.

Mr. Buchanan wonders that if that’s the standard, then perhaps the NPO community should get full credit for improved infant mortality.

(more…)

Jim Ulvog

More good stuff on overhead ratios and “worst charities” – 9-9-13

Some more articles that are worth attention but I don’t have enough time to comment in a full post. Not a lot going on that I’ve been reading until I saw two articles in two days.

Here’s a few articles exploring the challenges of outcome measures, whether NPOs are spending enough on infrastructure, possible regulatory revisions in Florida, and is anyone criticizing the practices in the “worst charities” articles?

Previous lists of good stuff here and here.

“Overhead ratio”

(more…)

Jim Ulvog

Charity pushes back against CNN and Tampa Bay Times. CNN stands firm.

The charity at the top of the America’s Worst Charities list compiled by the Tampa Bay Times, Center for Investigative Research and CNN, Kids Wish Network, is pushing back against the methodology. You can see the detail about the Times’ reporting on the charity here.

(This post will be a deep inside-baseball discussion.)

You can see the rebuttal here.

(more…)

Jim Ulvog

Template for analyzing financial data of charities that are in the news

If you want to see an example of how to analyze the financial statements of a charity that has lots of GIK or lots of telemarketing costs or lots of publicity, check out Brian Mittendorf’s illustration at Counting on Charity: When Summary Accounting Metrics Fall Short:  The Case of Breast Cancer Charities of America.

In that post he analyzes the financial statements of that charity. Using that post as an example, here’s a few steps you can take:

Start with total revenue, total expenses, and total program costs.

Look at the GIK, especially if it is going places or has uses other than what otherwise would seem to be the core programs. Subtract that from revenue and expenses. That exact same amount also comes out of program costs.

(more…)

Jim Ulvog

More good stuff on overhead ratios and “worst charities” – 6-29-13

An actual conversation is going about how to use overhead ratios and what outcome measures might look like. Lots of writers out on the ‘net are involved.

Writers are actually engaging ideas from other writers. All of us working in the NPO community need this conversation to develop ideas on how to move away from the misuse of overhead ratios that has been going on for decades.  I think this conversation is a good thing.

In addition, the feature articles by the Tampa Bay Times, Center for Investigative Reporting, and CNN on “America’s worst charities” is developing legs.

There are so many articles I’d like to discuss in my own post but time doesn’t allow doing so.

Soooo, I’ll start to aggregate a few of the more interesting articles.

My comments usually will be limited to one or three sentences.

Focus will be on two areas:

  • Overhead ratio discussion
  • Developments flowing from the “America’s Worst Charities” articles

Here’s my first list:

Overhead ratio

(more…)

Jim Ulvog

The “worst charities” discussion isn’t about overhead ratios

The ranking approach used by the Tampa Bay Times in their “America’s Worst Charities” articles is focusing on the high fees paid to telemarketers rather than just the overhead ratio. One of the threads of the online discussions is that their methodology is just focused on overhead ratios.

That is not the case. The overhead ratio conversation is a separate issue. The Tampa Bay Times approach focuses on the high cost of telemarketing as a fundraising technique and the issues related to that industry.

The reporters outlined their approach in a separate article here.

As I looked at bits and pieces of the data, I noticed several of the charities had respectable program ratios, so I decided to poke at the data.

(more…)

Jim Ulvog