Trego's Mountain Ear

Kevin O’Brian died a couple of years back – but in 2013, he wrote these rules for evaluating charities in his Weaponsman blog:

Some Rules of Thumb for Evaluating a Charity Pitch

The pitches will always be with us, and the same scamsters that pitch phony police and fire charities (a staple of the bogus-charity racket) began hitting troop and vet charities hard after 9/11. They also crop up after a Hurricane Katrina or Sandy, or a Boston Marathon bombing, with their hands out and their pitch polished. Here’s how to spot them:

• If they solicit by telephone, they’re a ripoff. Always. The “industry standard” is that 85% to 95% of the money raised by telemarketing consultants sticks to them, and as little as 5% creaks through to the charity. (AIP’s found cases where a half-million was raised and under $25k went to the charity — which then had over 50% overhead!) Phone solicitors are normally trained to pretend they work directly for the charity, while they invariably work for for-profit fundraising firms. Also, if you do give them a pledge, or your credit card number, your details go on a “sucker list” (that’s what they really call it) that’s sold and resold among telemarketing firms. Unfortunately, Congress carved out two exemptions when they criminalized rapacious telemarketing: non-profit fundraising (even by for-profit contractors) and, naturally, political fundraising and surveys. Finally, the people who man the phone banks are sketchy individuals, often rounded up from ex-con hangouts, rehab facilities, homeless shelters and other manifestations of what a 12-step program calls Rock Bottom. You wouldn’t give your credit card number to a bum in the street, don’t give it to a bum on the phone.
• If they solicit by direct mail, they’re a ripoff. Always. The economics of direct mail are identical to telemarketing (including the danger of being sucker-listed). They just don’t have to put some toothless meth addict on the phone with you. The current state of the art in mail pitches is to send a big fat envelope with a chaotic mess of different sizes of paper, some of which emulate typed or handwritten appeals. The theory is, if you take the time to read their pitch, you’ll give and they (the marketers) will cash in.
• If there are a lot of chachkas in the direct mail, they’re absolutely a ripoff. These include things like address labels, bookmarks, and the fad from a couple years ago, a coin or a dollar bill. Our advice: use the labels if they don’t advertise the dodgy charity; use the bookmarks if you must, but black out the “charity’s” website and phone number lest you forget where it came from and are moved to donate; and spend the dollar with aplomb. You’re not taking a dollar away from veterans (or starving Africans or orphaned kittens, for all these scams are run by the same for-profit ripoff artists); you’re taking a dollar away from a pustule on the ass of the advertising industry. Aplomb, hell; spend the dollar with glee.
• If they pay executives over $350k, there’s about a 90% chance they’re a ripoff. You can see some key salaries in the Form 990s, but sometimes they hide them with creative dodges like “renting” a building or an office from the CEO or his/her spouse at ten times market rate, or those famous consulting contracts. This is why you need to look at the charity evaluators before you sign that check.
• If they’re not up to date with their Form 990s with the IRS, they’re either incompetent or hiding something. Neither way do you want to finance that, right?
• If they don’t have all their Form 990s readily on their website, they’re hiding something. Legit charities are proud of the tale of good works the 990 tells.
• If the charity evaluators disagree, rely on the most pessimistic and lowest rating. Because they’re probably worse than the evaluators could find out.

One last warning: if a charity was created since 9/11, be extremely wary. As we mentioned, a lot of charity profiteers flocked to this sector in the last decade or so, because that’s where the generosity is. Or to boil it down: “That’s where the money is” — Willie Sutton. Mr Sutton, you may recall, was a bank robber, a trade that’s been in decline since his heyday. The Willie Suttons of the 21st Century run charities — with the blessing of the IRS and other government entities. There are some good post-911 charities, but there really weren’t any new problems to address, just new people wanting to be involved — many for good reasons, other for less so. (And this dynamic affected traditional charities, too. The American Red Cross, a perennial bad-financial-management tale, parlayed 9/11 into huge fundraising — and then hung on to the money, paying the fundraisers bonuses).

Kevin O’Brian