Spending practices of veterans charities vary,
analysis shows
By Alison Young
Knight Ridder
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AMVETS tells potential donors that it's chartered by
Congress, which creates the misleading impression that the
AMVETS spent $8.5 million in 2004, but according to its
tax record only 22 percent of it went for programs that helped veterans, much
less than the 60 to 65 percent that experts on philanthropy consider the
minimum.
Far from watching over AMVETS and the dozens of other
veterans groups it's chartered, Congress doesn't even examine the annual
reports they're required to file, other than to make sure that they've been
filled out properly.
"The fact that they're a congressionally chartered
group should no more incline people to give to that group than the fact that it's National Pickle Month should make them eat more
pickles," said Rep. Barney Frank, D-Mass., who in 1992 banned new charters
when he led the subcommittee that was responsible for them. Since then,
however, Congress has made exceptions and granted charters to at least three
additional veterans groups.
Congressionally chartered veterans groups do plenty of
good work: lobbying for veterans rights, funding medical research, providing
training and counseling, and helping disabled veterans and their widows battle
the U.S. Department of Veterans Affairs for benefits.
But just as they should with any charity, donors who
want their money to be used efficiently need to look closely at each veterans
group before giving, experts said.
"They have one of the most popular causes ...
particularly when we've got a war going on," said Daniel Borochoff, the president of the American Institute of Philanthropy.
"It's unconscionable that they're so inefficient."
AMVETS and other congressionally chartered veterans
groups defend their spending practices as legitimate and say the high cost of
fundraising leaves them with less money for programs.
A Knight Ridder analysis of
the charitable tax returns filed by the 15 largest congressionally chartered
veterans groups and their 32 foundations, scholarship funds, auxiliaries and
other related organizations, however, found wide variations in how much of
their money is spent to help veterans.
Among the 15 largest chartered groups, six spent less
than 60 percent of their money on programs that helped veterans and weren't
also used to pay for fundraising. They include such well-known groups as
Disabled American Veterans, Paralyzed Veterans of America and Veterans of
Foreign Wars of the
Five of the 15 groups reported that they spend at least
60 to 65 percent of their money on programs, the minimum that watchdogs at the
American Institute of Philanthropy and the Better Business Bureau recommend.
The remaining four groups didn't disclose on their tax
returns how much they spent on programs.
Some of the chartered groups' related foundations,
auxiliaries and other affiliates spent very little on programs. Only 29 cents
of every dollar spent by the Military Order of the Purple Heart Service
Foundation went for programs; at the American Ex-Prisoners of War Service
Foundation, it was 2 cents.
In the past year, the 15 largest congressionally chartered
veterans groups and their related organizations have generated more than $480
million in revenue, $330 million of it from public donations, according to
Knight Ridder's analysis of their financial records.
(For more information online about the 47 groups and their finances, go to www.krwashington.com.)
Veterans group officials said their fundraising costs
were high because their contributors tended to be elderly,
gave small donations of $5, $10 or $20 and were drawn to solicitations that
included expensive stickers, address labels, calendars and other giveaway
items. Some of these fundraising costs are really educational programs, the
officials said, because they give safety tips and facts about the groups' services
at the same time that they ask for money.
Tax returns can never fully capture the good work that
veterans groups do, these officials said.
"One of the frustrations or difficulties for us is
a lot of what we do is intangible and goes back to our founding premise of
blinded veterans assisting blinded veterans," said Tom Miller, the
executive director of the Blinded Veterans Association, which provides
counseling, advocacy and other services.
Last year, the association spent $3.8 million. Of that,
43 percent paid for programs that were unrelated to donation requests and the
rest went for solicitations and administrative costs. The group lets donors
know it's chartered by Congress in its fundraising pitches.
"A lot of folks receive solicitations and wonder,
`Are these folks legitimate?'" Miller said. "I think a congressional
charter gives that assurance."
But the title is largely honorific, and Congress
provides no meaningful oversight of these groups, despite concerns that have
been raised for decades.
In some states, such as
Chartered veterans groups noted that they send
financial reports to the House Judiciary Committee each year. The committee,
which has primary responsibility over chartered organizations, hasn't raised
concerns about how they spend their money, they said.
Neither Rep. James Sensenbrenner Jr., R- Wis., the
chairman of the House Judiciary Committee, nor Rep. John Hostettler, R-Ind., the chairman of the subcommittee that oversees
chartered groups, agreed to be interviewed for this story or responded to
written questions. A Judiciary Committee staffer, who can't be named because
only the chairman is allowed to speak for publication, said the groups'
financial reports got cursory looks for completeness and to ensure that they met
accounting standards, but that that was all.
The Congressional Research Service highlighted the
"mixed signals" that federal charters send to the public in a 2004
report. There "is an understandable assumption on the part of the public
that somehow the charter signifies
With $127 million in revenues in 2004, Disabled
American Veterans is the largest congressionally chartered veterans group.
Of the $118 million it spent last year, 50 percent went
for programs that didn't include requests for money; the rest went for
administration overhead and fundraising. The group's many programs include a
national corps of service officers who help veterans obtain VA benefits.
Officials at Disabled American Veterans headquarters in
When the group sends fundraising letters, it tucks
information inside asking potential donors to identify veterans who need its
services. By taking advantage of an accounting rule that allows fundraising to
be combined with other activities, Disabled American Veterans counts more than
$21 million of its $47 million in joint fundraising-related costs as an
educational-outreach program.
By including joint fundraising-education costs, the
group says it spends 68 percent of its money on programs, rather than just 50
percent.
Among the groups in Knight Ridder's
analysis, four chartered groups and two of their related groups use this legal
accounting maneuver, which boosts the amount they can report spending on
programs.
The Blinded Veterans Association is one of them. It
includes tips such as "What to do when you see a blind person" in its
fundraising letters. Such joint fundraising-education expenses allow it to say
that it spends 82 percent on programs, rather than 43 percent.
AMVETS' financial performance looks so bad because it
doesn't use this accounting maneuver. It declares all of the $5 million it pays
annually to a professional fundraiser as a fundraising expense.
Velma Hart, AMVETS' chief financial officer, said the
group's auditors hadn't felt that they could justify counting some fundraising
expenses as education. But Hart said she was going to revisit the issue because
donors and the news media increasingly were asking to see how all the
tax-exempt entities in the AMVETS family of charities performed, not just
AMVETS.
Like other chartered veterans groups, AMVETS has given
rise to several subsidiaries and affiliated nonprofit organizations: AMVETS
Charities, AMVETS Ladies National Auxiliary, National Sons of AMVETS and the
AMVETS National Service Foundation. They also have numerous local posts across
the country.
By far the largest of these related entities is the
AMVETS National Service Foundation, which has annual revenues of about $16
million, nearly double that of its namesake. Only
about $500,000 a year is passed on to AMVETS, the chartered group, Hart said.
Many chartered veterans groups have set up
"service foundations," which sometimes serve as separate tax-exempt
fundraising arms in addition to doing varying amounts of charitable work.
In some cases, donors may think they're giving to the
parent organization, when in fact the donation request is coming from a
separate service foundation.
Consider this telemarketing pitch by the service
foundation of the congressionally chartered Military Order of the Purple Heart
of the
Solicitors first say they're calling on behalf of the
Military Order of the Purple Heart Service Foundation. But they go on to say:
"The Purple Heart is a special organization chartered by Congress and is
made up entirely of combat-wounded veterans," according to a script filed
with
In addition to citing the credibility of the parent
group's congressional charter, the service foundation uses the Purple Heart
Medal on its mailings.
Purple Heart's service foundation, based in
The parent organization gets about $4 million annually
from the service foundation, nearly all the funding it has to help veterans
file VA claims and to finance other charitable programs.
It's difficult to know how efficiently Military Order
of the Purple Heart of the
Officials with both Purple Heart organizations declined
to be interviewed. Richard Gallant, the service foundation's executive
director, said his group's program spending would be higher if it counted some
of its fundraising costs as education. "The foundation believes that this
type of approach is disingenuous," he said.
The small amount of money that the chartered American
Ex-Prisoners of War receives from its service
foundation has the two groups suing each other in federal court in
The chartered organization wants its service foundation
to stop using its name and mailing list when seeking donations from the public.
"We didn't feel like the foundation was spending
their money properly," said Clydie Morgan, the
national adjutant of American Ex-Prisoners of War, based in
Morgan said her group created the American Ex-Prisoners
of War Service Foundation about seven years ago. Because the
membership of the chartered group includes family members, not just veterans,
donations to it generally aren't tax-deductible. The idea was to raise
more money through a service foundation that could accept tax-deductible
donations.
Norm Bussel, the president of
the Watauga, Tenn.-based service foundation, declined to answer questions,
citing the pending litigation.
In 2004, the American Ex-Prisoners of War Service
Foundation raised nearly $1.7 million, but its tax return shows that only
$26,589 went for programs to help veterans. Almost $1.5 million was spent on
fundraising, and $50,000 went to administrative overhead.
Its congressionally chartered parent group reported
$450,000 in revenue. It reported that 88 percent of the money it spent went to
programs that help veterans.