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12.13.2012

The Scandal of the Charity Business: Donors Beware!

Charity show
Charity show (Photo credit: Wikipedia)
The charity business is the unsavory side of humanitarian assistance. A recent Arte TV investigation (aired on 11 December 2012, click here) revealed the extent of the scandal in Germany, France and the United States. The film lasts 100 minutes and is in French and German only, but here are the highlights, you don't want to miss them:

- fund-raising activities tend to gobble up most of the donations, in some cases up to 100% and not a penny arrives at destination!  In Germany, only some 230 charity funds out of a total of 580,000 have been classified as bona fidae institutions by the German Central Institute of Social Questions. They base their judgment on whether those charity funds make their budget public or not (most of them don't) and whether less than 30% of their budget is spent on fund-raising. 

In France, there is no similar oversight institution, control is in the hands of  the Cour des Comptes (Controller Court) that doesn't see it as its mandate, and more generally French Justice. As of now, 17 French charity institutions are under investigation. And this has been going on for 3 years now, with still no verdict in sight. Meanwhile these organizations continue to raise money and, interestingly, they refused to talk about their business. In the film, we see how, along with the cameramen of Arte TV, a French journalist (Etienne Gingembre of the Revue Economique, Le Capital), repeatedly  tries to reach them and is every time rudely turned away. 

In America, the situation is better: charity funds must make their budget public and there is an organization, the Better Business Bureau's Wise Giving Alliance (see article below) that provides guidance to donors and helps them avoid scams. 

This said, the fact remains that there is no government oversight or law about what percentage should go to beneficiaries. That 30% limit which sounds so reasonable is simply not respected. Hundreds of thousands of charitable organizations manage to fall through the cracks and avoid investigation while donors keep giving and lining up the fund-raisers' pockets!

- the number of charitable foundations has exploded and they compete with each other to raise funds, mostly via mailing: as a result, they invest increasing resources in communications, PR and mailing out requests for donations. Arte TV dug out the extraordinary story of the St Joseph charity (run by a Catholic priest) in Dakota, US aimed at taking care and educating some 200 local American Indians. Bottom line, because of the costs of fund-raising, they run a huge budget, some $40 million/year! In other words, to give an education to 200 children, $200,000 are spent every year on each child!

- the massive mailing campaigns yield an amazingly low rate of return: somewhere between 0,5% and a maximum of 2% of the requests are answered, and average donations are puny (between $15 and $20). This means that requests and pamphlets that are both costly to print and to mail have to be sent in the millions to give any results, and the campaigns have to be repeated several years (up to 3 or 4 years) to give results in terms of donations!

- a whole mailing industry has arisen in the charity business, in parallel to the charity funds, effectively pocketing the donations or at least leaving very little for charity. They make some charitable organizations look like mail boxes!

- the strategies to request donations verge on the immoral as a result of the acute competition between charity organizations. While Christmas cards included in the mailed request are considered "normal", even acceptable, the inclusion of physical gifts like a writing set, a small wooden carved bison (a St Joseph's gift), a false "silk" scarf etc are close to unacceptable as they induce in the donor guilt feelings for having received such a gift, thus inspiring him to give more than he intended. 

When one brave German journalist tried to draw attention to the fund-raising hubris with both a website (Stefan Loipfinger who ran CharityWatch.org on the web) and a book ( Die Spendenmafia: Schmutzige Geschäfte mit unserem Mitleid, published in 2011), he found himself under violent attack, accused of calumniation and brought to court. In the Arte TV film he reports that his family's safety has been directly threatened and by February 2012 he had to close down his website!

- the humanitarian aid community lives in a state of denial: instead of cleaning up the charity industry and setting rules of behavior and calling for oversight systems, the problems are swept under the rug. As a result, the bad sheep threaten to overrun the good ones and could bring down the whole system. 

Moreover, recession and austerity are bound to hurt the fundraising business. In America, there is talk among both the Democrats and Republicans to tighten up on current tax exemptions on donations, thus putting an end to fundraising hubris. In Europe, government support (where it exists, e.g. in the UK) could come to an end. Furthermore, there's evidence that the ultra-rich gives less today than in 2007, before the start of the recession.

Better Business Bureau logo.
Better Business Bureau logo. (Photo credit: Wikipedia)


Under the circumstances, it would seem urgent for the humanitarian community to wake up and address those issues! 

Meanwhile, if you're thinking of giving this Christmas, beware! Take a little time to double check on exactly what your favorite charity is up to!


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