Putting Charities Under A Magnifying Glass

With government and corporate contributions in a recessionary tailspin, the nation's charities didn't need a crisis of confidence. But that's what many fear occurred after recent disclosures about the lavish lifestyle and $463,000 compensation of the president of United Way of America. "When my own mother heard it, she said she wasn't going to give anything to anybody ever again," says Clare Haggarty, a communications officer at the National Anti-Vivisection Society in Chicago.

If you harbor similar thoughts, charity officials hope they'll be fleeting. Many worthy causes have stepped up personal appeals to offset funding cuts. If your heart is large but your budget slight, it can be a chore to decide which pleas to answer. But there are ways to pinpoint organizations that seem most likely to spend your charity dollars wisely.

Two watchdog groups can provide valuable data:

-- The National Charities Information Bureau (19 Union Square West, New York, N.Y. 10003) keeps tabs on how 300 charities measure up. You can order its Wise Giving Guide, as well as detailed reports on any three organizations, at no charge.

-- The Philanthropic Advisory Service (PAS) of the Council of Better Business Bureaus (Dept. 023, Washington, D.C. 20042-0023) publishes an annual Charity Index with information on 200 nonprofit groups. The 160-page booklet is $9.95. A $2 bimonthly brochure, Give but Give Wisely, tells which organizations most recently drew the largest number of inquiries and indicates how each conforms to 22 voluntary guidelines.

PAS says nearly one-fourth of the most popular charities fail to meet at least one of its standards, such as "fund-raising shall be conducted without excessive pressure." But on the most important points, many well-known charities have better records than the watchdog groups require. Two of the major guidelines specify that at least half of all money collected must go into programs and activities described in solicitations, and the cost of raising funds can't exceed 35% of donations. A compilation of data on the nation's 100 largest organizations shows that on average, they spent 65% of total 1990 income on programs, says The NonProfit Times, a monthly trade paper.

The average fund-raising expense was 4.4%, but there were wide variations. Habitat for Humanity, which sponsors low-income housing projects, spent 33% of its income to bring in money, and Amnesty International spent 27%. Only 34 organizations out of the 100 surveyed spent more than 10%; 10 spent less than 1%.

It can be misleading to merely compare percentages, says David Andrews, executive vice-president of Planned Parenthood Federation of America. Similar organizations in the same field can have sizable variations (table). And trying to gauge charities in different fields is virtually impossible. Planned Parenthood spent about 74% of $383 million in 1990 income for program activities and put almost 19% into administration and fund-raising. If the figures are matched against those of, say, Lutheran World Relief--which spent 99.6% on programs and 1.3% for fund-raising and administration--the relief group may seem to be more efficient. "But our work on two fronts--medical and legal--is highly labor-intensive," Andrews says.

PADDED PERKS. The NonProfit Times numbers on United Way of America (not including figures for the regional United Ways) show administration costs consumed 8.8% of its $33 million in 1990 income--but that tells you nothing about the high salary and excessive perks mf its president, who resigned in March.

Digging deeper, you can learn plenty from a document available from your state. For a dollar or so to cover duplication costs, either the attorney general's office or the charity-registration department will send you a copy of a charity's Form 990. That's the tax form all nonprofit groups file with the Internal Revenue Service. Just two to four pages long, it shows, among other things, what the charity pays its top executives and consultants.

If you request a charity's Form 990s for a few years back, you can get an idea of whether it is acting responsibly in tighter times. Does the trend show program expenses going down and executive salaries going up? "If you have any reservations at all on how your dollars are being used, you should write an organization's headquarters and ask questions," says John Huber, executive director of the Lupus Foundation of America.A responsible charity willrespond promptly, he says.

But don't be surprised if the organization pleads austerity. Planned Parenthood laid off 40 people nationwide in 1991, and the Lupus Foundation moved from Washington to lower-rent quarters in Rockville, Md. So, while you get answers, you might also get a question: "Won't you give more?"

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