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From the August
2006 Watchdog Report
Our
Veterans Deserve Better from America's Charities
by Daniel Borochoff, AIP
President
With over 20,000 Americans wounded in the ongoing Iraq and Afghanistan
wars, and as many as 200,000 homeless veterans which account for one-third
of the adult homeless population, veterans and military charities need to
accomplish as much as they can with our donations. It is sad that all but
one of the veterans and military charities included in past AIP Charity
Rating Guides were rated unsatisfactory or poor.
Many conscientious AIP members have contacted us to express
their concern that no highly rated veterans or military charities are in
the Guide. Therefore, we are pleased to announce that in this issue of our
Guide, we are adding two AIP A+ rated veterans charities: Fisher House
Foundation (FHF) and Intrepid Fallen Heroes Fund (IFHF). FHF
constructs facilities to house families temporarily while visiting patients
in military and veterans hospitals and provides financial and other
assistance to armed services personnel and veterans. IFHF recently
completed a $35 million campaign to build a physical rehabilitation center
at Brooke Army Medical Center in San Antonio, Texas, which will open in
January 2007. IFHF's original purpose was to provide financial aid to the
families of military personnel killed in the Iraq and Afghanistan war, but
according to IFHF, it switched its program to serve severely wounded armed
services personnel after Congress passed legislation in 2005 to award
surviving families $250,000 to $500,000.
In our hunt for highly rated veteran or military charities we
ran across three emergency relief groups that are holding massive asset
reserves. They are the official armed forces charities for the U.S. Army,
Air Force, Navy and Marines, which provide financial, educational and other
assistance to current and past members of the armed services and their
families. These three charities have combined fund balances of $638 million
yet spent only $59 million, according to their most recently available
financial reports. Army Emergency Relief (AER) tops AIP's list of
large asset reserve charities in relation to expenses with 17.6 years of
available asset reserves and a fund balance of $307 million as of 2005. Air
Force Aid Society (AFAS) has 10.1 years of available asset reserves and
as of 2005 holds fund balances of $172 million. Navy-Marine Corps Relief
Society (NCRS) has fund balances of $158 million as of 2005. Its years
of available assets is lower at 4.8, barely low enough to keep them from
earning an automatic F grade for charities having over 5 years worth of
available reserves.
Why are these large stockpiles of reserves not going to aid
the vast numbers of homeless veterans? Because most of the homeless vets do
not meet the armed forces charities' eligibility requirements. For
instance, AER states that it only helps active duty soldiers and reservists
and their dependants, soldiers retired from active duty due to reaching age
60, or "longevity," usually defined as 20 or more years of
service, or physical disability. AER also helps surviving spouses and
children of soldiers who died while on active duty or after retirement from
the military. Since poverty is the major cause of homelessness, the
veterans eligible for AER assistance due to having obtained Army retirement
status and the accompanying Army benefits are not likely to become
homeless.
While these armed forces charities do accept contributions
from the general public, most of their contributions come from armed
services personnel through payroll deduction plans. Little to no funds come
from the U.S. Government. They are very efficient fundraisers; each has a
cost to raise $100 of only $2 to $3 in 2005. Also, each of these charities
spends a very high percentage (93% to 94%) of its budget on charitable
programs.
The armed forces charities operate more like private
foundations than emergency relief charities. Private foundations typically
spend only a small portion of asset reserves, usually 5% of their
investment portfolio, whereas emergency relief charities generally spend
most of their donations in the year received. For example, AFAS reports on
its web site, www.afas.org, that
throughout its 64-years of operations some donations were put into an
investment fund for contingencies and future programs. AFAS' 2005 audit
says its current policy is to spend annually about 6% of its investments.
I asked Col. George Mason, Treasurer of AER, why it was not
spending more of its available asset reserves to assist needy veterans. He
said, "the key reason and probably the only reason" is "the
unknown contingencies faced on a daily basis." He said that the
largest outflow of funds from AER was 15% during a 1.5-year period in the
early 90's as a result of Operation Desert Storm and Desert Shield. I
replied that based on AER's reasoning for holding its high level of asset
reserves, the American Red Cross could claim that it needed to hold a few
billion dollars in reserve in the event of another Katrina scale hurricane.
Many other charities could also claim that they need to hold large reserves
for unknown contingencies. The problem with this reasoning is that there
are not enough charitable dollars to go around for groups to stockpile
massive reserves for events that may never happen. Annual giving is a fixed
pie that has equaled 2% of GDP (gross domestic product) for decades. Groups
that hold over five times their budget in reserve are limiting the supply
of money for other charities that need it to meet their annual budgets so
that they don't have to turn away those in immediate need. Certainly, it is
reasonable for some charities to maintain reserves worth a year or two, but
to hold available reserves for over five years worth their budget is, in
AIP's opinion, excessive.
I asked why AER wouldn't undertake a special public
fundraising campaign in the event of a large, protracted war, rather than
holding 17.6 years of asset reserves that could be used to assist veterans
now. He said that traditionally AER has refrained from actively soliciting
the public. AER's audit reports that 35% of its total contributions were
"unsolicited." Its web site, www.aerhq.org
welcomes contributions from "Army or civilian individuals or
organizations."
I also asked Col. Mason if AER was doing enough to inform
soldiers and veterans of the availability of charitable aid. He said that
$100,000 had been spent to publicize AER over the last 6 months and cited some
new outreach efforts, including 45-minute classes for brigade commanders
and spouses, and briefings to Army Reserve and National Guard. He said that
traditionally 8% of the Army utilizes AER and that they would like to
increase that to 10%-12%.
Many veterans charities, much like police or firefighter
groups, know that they can solicit practically anyone because their cause
is so highly popular. The problem with soliciting so widely, rather than to
a smaller group of people more likely to make a donation, is that it is
very inefficient and results in large fundraising expenses eating up the
bulk of contributions. Many veterans groups include address stickers,
greeting cards or other inexpensive gift items with their solicitations.
The problem with this fundraising method is not necessarily the cost of the
gifts but rather the size of the individual contributions that are given in
response to these items. Many people who receive the gift do not want to
make a donation, but feel obligated to send the charity a few dollars to
pay for it. (Note: under U.S. law recipients are under no obligation to pay
for any gift that they did not order.) Fundraising efficiency is usually a
function of the average size of the contributions a charity receives. In
other words, charities that receive mostly very small contributions tend to
have high fundraising costs.
A number of AIP F rated veterans charities return most of the
money raised to their professional fundraiser. It's a shame that groups
such as American Veterans Relief Foundation, American Ex-Prisoners of
War Service Foundation and Vietnow National Headquarters
dishonor America's brave veterans by using over 80% of the money raised on
their behalf to pay fundraising expenses. More charities need to adopt a
policy to not enter into costly arrangements with for-profit operations.
Many of the major veterans groups are chartered by acts of
the U.S. Congress, including American Ex-Prisoners of War, AMVETS,
Disabled American Veterans, Jewish War Veterans of the USA, Paralyzed
Veterans of America and Veterans of Foreign Wars of the U.S.
Does congressional charter status mean that the U.S. government approves
these groups' activities and provides oversight? No, according to a 2004
report by the Congressional Research Service, which also stated that
Congress has never yanked a charity's charter status. Congressman Barney
Frank called charters "... 'a nuisance,' a meaningless act. Granting
charters implied that Congress was exercising some sort of supervision over
the groups and it wasn't..." as cited in a 1992 article from the
Washington Post.
Another slap in the face to our veterans comes from a couple
who during this past Memorial Day weekend were allegedly posing as military
reservists to sell raffle tickets at stores in DuPage County, Illinois to
raise money for Navy/Marine Relief Fundraiser O a nonexistent
charity. As announced in a press release by the County Sheriff, the couple
was charged with "felony Theft by Deception and False Impersonation of
Charitable Organization."
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