We’ve been chatting with leaders from various sectors about challenges in philanthropy, overhead, salaries, and what these challenges mean for sector employees. See our interviews with Dan Pallotta and Peter Buffet.
A few months ago, the Center for Investigative Reporting released their list of the worst charities in the United States. The list— based on how much money organizations spent on telemarketers and other solicitors over the past decade—sparked interest in overhead, what it takes to determine a good nonprofit vs. a bad nonprofit, and the role of fundraisers in the sector.
Kendall Taggart of the Center for Investigative Reporting was one of the reporters who helped compile the list, along with Kris Hundley of the Tampa Bay Times. We spoke with Kendall about why the list was created, what she learned, and how she hopes the conversation will move forward.
What sparked interest in this topic?
We had a sense (my editor and the editors at Tampa Bay Times) that the stories that explore the challenges facing the charitable sector are based on one offs; rarely is there a look at systemic structures that allow bad actors to operate. We wanted to explore that.
What has feedback been like?
It’s varied. I was surprised by the positive feedback – not just donors but leaders in the industry.
My favorite example is that two days after the story ran, older man in Southern California, heard us on NPR and wanted to get the list of the charities. I guess he wasn’t the most tech savvy person, so he had to call the public library just to get my number and we mailed him several copies of the list. He identified himself as someone who often gives to charity. Like many people, he wants to be generous but also wants to ensure that the money is spent as he intended.
I’ve also seen people in the fundraising industry people push to hold their peers accountable. These charities are often sharing their donor lists, so they have to ensure that they don’t fall into bad hands. At the same time, the Association of Fundraising Professionals criticized the series for focusing on extreme cases.
One criticism I have noticed is that your report reinforces the idea that nonprofits should be measured on their overhead. There’s been a lot of push back against that thinking. Why does overhead matter? What does a successful balance look like?
It’s a good question and conversation happening in nonprofits. When we talk to experts in the sector—for example the president of Guidestar—we’re told that overhead can be a helpful tool for identifying bad charities at the end of the spectrum. The challenge is that it’s not that helpful for identifying the best ones. All nonprofits spend money on fundraising, so when trying to decide between two organizations that have middle of the road financial performance, that fact alone isn’t enough. The organizations we were focused on benefit their professional fundraisers far more than the causes they claim to support.
Another concern is that this paints a bad picture of the sector, with some wondering, “Why not America’s best charities?” What are your thoughts on that?
I hope that someone does do that list. There are a few organizations, like GiveWell, who are identifying good charities. However, the tools that allowed us to identify bad actors might not be the best tools to identify good actors.
Beyond the spending on for-profit fundraisers, what are some other interesting facts or trends you uncovered?
In the beginning, I didn’t appreciate the role that state regulators play in protecting donors. I thought the IRS was primarily responsible for policing the nonprofit sector. But once organizations get their tax-exempt status, state regulators, like the Attorney General, are largely responsible for enforcement.
I also didn’t realize there was a subculture of nonprofits that are legally allowed to give 90 cents of every dollar to fundraising companies and not have their tax-exempt status revoked.
I also noticed some differences in how organizations responded. About half of the nonprofits on our list would never return a phone call or letter yet the ones that did were very proud of their work and transparent. Transparency is definitely something to look for in a charity.
You offer advice on what donors can do, but what about employees? In one blog post you share the experience of two former employees of Kid Wish who regret the work they did. What impact should your research have on employees if any?
Employees are in the best position to know what’s going on; whether their organization is doing good work or is ineffective. For example, we’ve heard from 300 people telling us who we should investigate next, and some are former employees.
Some employees did tell us that their organizations shouldn’t be on the list. Even then, they have a real world role to play to explain what their organization does.
What are your next steps, as far as keeping the conversation going?
We have more stories coming out in the next few months, doing a deeper dive into the key players who are tied to the worst charities.
We’re also doing a series of blog posts focusing on finding solutions. Do we need a regulatory change? A new law to pass?
Finally, we’ll have more profiles of the organizations that people ask us to investigate. Suggestions from readers have been really helpful in letting us know what organizations people are curious about.