Charitable Giving?

Corporations are legally permitted to expend general treasury funds for charitable purposes.  Indeed, corporations are encouraged to contribute to charities in order to improve the communities in which they do business and to support the consumers that purchase their products or use their services.  State rules place parameters around the amount of money that can be allocated from corporate coffers to charitable entities with most rules allowing contributions that are reasonable in amount, related to a corporate purpose, and not distributed to "pet" charities.  With corporations now stepping into the giving role that large philanthropic families played in the 19th and 20th centuries (like the Mellon family, the Rockefeller family, etc.), and with charities relying more heavily than ever on corporate gifts, what are we to make of news today that dozens of charities are little more than scams initiated by individuals seeking easy windfalls?

CNN, together with the Tampa Bay Times and the Center for Investigative Reporting, released a stunning report today indicating that hundreds, if not thousands of charities are siphoning millions of dollars from charitable givers and enriching charity founders and executives and for-profit companies that are paid to solicit the charitable gifts.  This report indicates that thousands of charities pay for-profit vendors to raise their donations, sometimes spending more than 90% of the contributions on soliciting more contributions.  CNN reports that the worst charity investigated was the Kids Wish Network:

"Every year, Kids Wish Network raises millions of dollars in donations in the name of dying children and their families.  Every year, it spends less than 3 cents on the dollar helping kids.  Most of the rest gets diverted to enrich the charity's operators and the for-profit companies Kids Wish hires to drum up donations.  In the past decade alone, Kids Wish has channeled nearly $110 million donated for sick children to its corporate solicitors. An additional $4.8 million has gone to pay the charity's founder and his own consulting firms.  No charity in the nation has siphoned more money away from the needy over a longer period of time.  

But Kids Wish is not an isolated case, a yearlong investigation by the Tampa Bay Times and The Center for Investigative Reporting has found.  Using state and federal records, the Times and CIR identified nearly 6,000 charities that have chosen to pay for-profit companies to raise their donations.  Then reporters took an unprecedented look back to zero in on the 50 worst - based on the money they diverted to boiler room operators and other solicitors over a decade.  These nonprofits adopt popular causes or mimic well-known charity names that fool donors. Then they rake in cash, year after year. The nation's 50 worst charities have paid their solicitors nearly $1 billion over the past 10 years that could have gone to charitable works."

The Kids Wish Network is not alone.  This investigative report listed the 50 worst charities.  Below is a chart listing the top ten worst charities ranked by money spent on soliciting costs versus money spent on direct cash aid.

Are publicly traded corporations engaging in appropriate due diligence before spending general treasury funds on charitable contributions?  The report above indicates that there is an urgent need to engage in such diligence.

The 50 worst, ranked by money blown on soliciting costs

Totals from the latest 10 years of available federal tax filings

Rank	Charity name	Total raised by solicitors	Paid to solicitors	% spent on direct cash aid
1	Kids Wish Network	$127.8 million	$109.8 million	2.5%
2	Cancer Fund of America	$98.0 million	$80.4 million	0.9%
3	Children's Wish Foundation International	$96.8 million	$63.6 million	10.8%
4	American Breast Cancer Foundation	$80.8 million	$59.8 million	5.3%
5	Firefighters Charitable Foundation	$63.8 million	$54.7 million	8.4%
6	Breast Cancer Relief Foundation	$63.9 million	$44.8 million	2.2%
7	International Union of Police Associations, AFL-CIO	$57.2 million	$41.4 million	0.5%
8	National Veterans Service Fund	$70.2 million	$36.9 million	7.8%
9	American Association of State Troopers	$45.0 million	$36.0 million	8.6%
10	Children's Cancer Fund of America	$37.5 million	$29.2 million	5.3%