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1/28/06

Big Charity Ripoffs

So many large charities start out as humanitarian, then become corporate bureaucracies. They say that you have to run a charity like a business, so many of them as soon as they get enough funding run out and hire a CEO that is used to running for profit companies.

They justify huge salaries in the same manner they would at the for profit companies and use the reasoning that if you want to compete for the best people to run your charity, you have to pay what the for profit companies pay.

Not true at all. Most CEOs are not that special. There are only a few CEOs that have made huge differences in for profit corporations. Most do an average job that others could do given the same opportunity.

Then there are those that do a really poor job of running companies. The funny thing is that as soon as it gets discovered they are no good at their job, they get fired, get their golden parachute and are immediately hired at some other corporation.

Good example: GOP activist Mike Brown was fired from his a private-sector job overseeing horse shows and got appointed head of FEMA by GW Bush.

Then I suppose we need to mention there are the CEOs who loot their companies thinking it is their priveledge to do so. They are the people you see in court these days totally shocked that anyone thinks it was wrong for them to rip everyone off.

The best people to run charities as CEOs are people who actually care about the charity they run. They can hire business advisors, accountants, lawyers, etc. But the final decisions made for a charity should be the person that cares most about that charity, like the Founder where possible.

The United Way, the Red Cross, and the Salvation Army have all been exposed for some of their business practices that in no way seem like those that should be used by a charity.

People write about commercial fundraisers as bad people. These are the telemarketing companies that solicit funds for charities. Everyone likes to point to the fact these commercial fundraisers take a large percentage of the money away from poor charities they dupe into signing contracts.

Nothing could be farther from the truth. The fact is, yes the contractor does get the lion's share of the money. However no one ever mentions that these commercial fundraisers pay for all the costs associated with the fundraising project.

They pay for the phones, the payroll and payroll taxes, advertising, taxes on their portion of the income, and they pay for the concert, game, or other event or publications they raised the money for.

If a performer came to town and said they were holding a concert and were going to donate 10% to charity, they would be a hero. When a commercial fundraiser only gives 20% of his project to the charity, he's a crook. Go figure.

The reason I brought commercial fundraisers (CF) up is this; CF signs contract with charity. CF pays all costs associated with project. CF gives percentage of gross to charity. Charity risked nothing.

United Way doesn't perform any actual social services. United Way signs agreements with charities. United Way raises funds. United Way gives a percentage of the funds raised to a charity.

What is the difference between the two? The IRS has given the United Way 501c3 status. That is the only difference between them and a commercial fundraiser.

All the big charities love to talk about percentages. They say no one is legitimate if a large percentage goes to administration. The United Way, Red Cross, and Salvation Army all claim that only 7% goes to administrative costs.

Many charities spend 50% on administrative costs. Does that mean they are worse to give to? Those big charities have convinced the general public to rely on percentages.

If charity A raises 50 million dollars per year and uses 7% for admin costs, that is 1.4 million dollars. If Charity B raises just $500,000 dollars, then their admin costs are $250,000. If you gave charity B more money, their percentage would be less, unless of course they ran right out and gave themselves a raise.

People who give money should not stop giving, but they should take more time to examine who they are giving it to.

1. Just having themselves listed in all the right places does not mean they are a better charity. It means they have paid someone who knows how to get them listed in all the right places.

2. Percentages mean nothing. What is the total amount being paid to the executives of the charity?

3. What is the background of the person who actually runs the charity? Are they the founder? Were they involved in charity work at a lower than executive level before? Are they "hands-on"? They should be if they really care about the cause rather than the job. Were they a for-profit CEO before being hired by the charity?

4. Is it an advertising agency putting out what you hear about the charity or documents that came directly from them?

5. Just because you have heard about a charity a lot doesn't mean they are a good charity to give your money to. It means they are spending a lot of money advertising so you will see their name a lot.

6. The reverse of #5. Just because you haven't heard of the charity doesn't mean they are not a good charity to donate to. It means they either don't have the money to hire ad agencies or they just don't spend their money on that because it's needed to perform the mission.

Here is a related article about some of the big charities who raise money to feed people in poor countries. These countries are beginning to ask where all that money is going. You need to register with the NY Times to view the article and it's free to do so.

by Chris McElroy
More things that just piss me off

1 Comments:

Blogger Orion Blastar said...

Bah I used to give to charities only finding that most of them have a high overhead cost and pay their executives a fortune. Many used similar names anyway. I gave to vetran, police, disaster recovery, disability, poor, missing children, cancer, and kidney charities. What they did was sell my info to other charities and now I get a ton of annoying telemarketing phone calls from charities just like them asking me for donations and being very pushy about it.

When I was working I gave generously. I lost my last job in 2002. I have to live on a limited budget now. Most of my charity work includes fixing computers for charities or helping out in homeless shelters. Due to many illnesses, caused by stress, abuse, harassment, and threats from former employers of mine, I was ordered by my doctors to not work anymore. Classic Management is a big problem in the USA, and most charities are run by Classic Management as this blog states. Classic Management creates negative workplaces that become toxic, causing a lot of the health problems with their employees due to the stress, abuse, harassment, and other things heaped upon them. Most employees when stressed out that way, work extra hard and longer hours, and that is the way they want it to be. Some, like me, just get sick and need healthcare to help out. Once we use up so much healthcare costs for the company they will find any way to get rid of us, even making things up, but the real reason is that we have health issues. Wal-Mart already made it a policy to not hire people with health issues to keep their healthcare costs down, and many other companies are going to follow suit.

We need to pass new laws, or amend the ADA that it covers employees being fired for being sick. We also need to pass laws that make golden parachutes in contracts against the law, and hold a CEO or Executives responsible for their actions and behaviors in companies and charities.

10:36 PM  

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