Child illness charity soliciting in Las Vegas fibs about fundraising costs

fibs about fundraising costsThe recent telephone caller to the New To Las Vegas world headquarters said his name was Jake Williams. He was soliciting a contribution to the Childhood Leukemia Foundation, a charity based in far-away Brick, N.J.

Okay, I said, how much of what’s raised is spent on fundraising? The excited reply: “Fifty percent to the foundation after fundraising!” This was not a direct reply to my question, which asked for the amount of fundraising expense rather than what’s left over. But it was the mathematical equivalent of saying the fundraising efficiency ratio–the percent of donations remaining after subtracting fundraising costs–was 50%.

As I will explain below, that’s not a great percentage. But for CLF it’s not even close to the truth, based on its very own latest available financial filing, submitted under oath. The actual percentage easily calculated from the filing: 21%. Put another way, 79 cents of each donated dollar went right out the door in fundraising, leaving the foundation with only 21 cents of each dollar for the stated mission and other overhead.

I also will explain below why I think the response was so off it might have violated Nevada law and constituted an actionable deceptive trade practice.

Now, I admit I followed that old trial lawyer trick of not asking an important question I don’t know the answer to. With Jake Williams–probably a computer-generated voice controlled by a  human supervisor using soundboard technology–this was ridiculously easy to do. You see, CLF and I have a history together going back to BC (Before Covid). CLF’s financial efficiencies haven’t gotten better. In 2019 after being solicited two times on the phone I twice wrote up CLF’s poor financial efficiencies and other deficiencies. (You can read the posts here and here.) The second time, I even made CLF a candidate for my list of America’s Stupidest Charities. The criteria is simple: fundraisers that call asking for a donation despite a previous critical post by me. In that line of work, how much dumber can it get? You can find the list of nominee nearby. I don’t have to update it today with CLF because it’s already listed.

Let’s walk together through the numbers, plus some other issues.

I’m using CLF’s own Form 990 filing with the Internal Revenue Service for the year ending December 31, 2020. (The return for 2021 hasn’t been submitted yet.) It was signed on May 11, 2021, by Executive Director Barbara Reid-Haramis under this language:”Under penalties of perjury, I declare I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, is true, correct and complete.”

Despite a 2013 Nevada law requiring that the Nevada Secretary of State’s Office publicly post on its website the 990 or a full financial statement of every registered charity, the agency consistently has refused to do so. So I had to go elsewhere for the return, in this case the website of ProPublica Explorer, part of ProPublica, the nonprofit news site. You can, too, by clicking on this link for either viewing or downloading. You’ll quickly become better informed about CLF than Nevada state officials.

On the 990, Part VIII Statement of Revenue (PDF page 9 on the download) lists on line 1f the amount of contributions received: $4,042,963. On the next page (PDF page 10), Part IX Statement of Functional Expenses, column (D) on the right is headed Fundraising Expenses. At the bottom of that column on line 25 is the total fundraising expense: $3,194,394. (Go to Schedule G on PDF page 32, and you’ll see that most of that expense was paid to a single telemarketer, Innovative Teleservices of Port Huron, Mich.)

In words, the standard formula for calculating the fundraising efficiency ratio of a charity is: contributions received minus fundraising expenses, with this result divided by contributions received. For CLF plugging in numbers: $4,042,563 minus $3,194,394, then divided by $4,042,563. This equals $848,169 divided by $4,042,563, which equals 20.98%, rounded to 21%.

Jake Williams told me 50% went to CLF after fundraising. From CLF’s own documents, it was just 21%. Not even half as much. (A higher number is better.)

How bad is 21%? The Better Business Bureau Wise Giving Alliance, the leading charity watchdog that set out standards for accreditation, says anything under 65% is unacceptable. So even Jake’s claim of 50% wouldn’t have passed muster, either, but if true would be materially closer to respectability.

Another standard metric of charitable financial efficiency is the charitable commitment ratio. The definition is simple: percent of total expenses spent directly on the stated mission, or program service as it’s called in nonprofit-speak. Again, the higher the better.

This ratio, too, can be calculated from the IRS Form 990 filing, and from just one page, the aforementioned Part IX Statement of Functional Expenses, PDF page 10 on the download. Column (B) is headed “Program service expenses.” The total can be found on line 25: $664,599. Column (A) is headed “Total expenses.” The total can be found on line 25: $3,935,437. Here’s the math: $664,599 divided by $3,935,437 equals 16.89%, rounded to 17%.

How bad is this? The BBB again says a charitable commitment ratio below 65% flunks its standards. CLF fell short by nearly three-fourths.

The extremely low fundraising efficiency and charitable commitment ratios, plus the lack of an obvious link on its website to the 990 (which many charities simply post), all violate BBB standards. They probably are among the reasons why CLF has refused for years to be evaluated by the BBB. The watchdog right now has this statement about CLF on its website:

Did Not Disclose. This charitable organization either has not responded to written BBB requests for information or has declined to be evaluated in relation to BBB Standards for Charity Accountability … The BBB encourages charities to disclose accountability information beyond that typically included in financial statements and government filings, in order to demonstrate transparency and strengthen public trust in the charitable sector.

The BBB is positively circumspect about CLF compared with another leading charity watchdog. “Exceptionally poor,” thunders Charity Navigator, giving CLF no stars on its zero-to-four-star rating system. Charity Navigator essentially calculated the same financial efficiency ratios as I do. In 2019, Consumer Reports magazine listed CLF on the bad side in a feature entitled, “Best and Worst Charities for Your Donation.”

CLF’s first money pitch to me in 2019 was outright illegal. Nevada law (then and now) requires most charities to first file paperwork with Nevada before soliciting donations in the state. There was no filing in Carson City for CLF. In a later email to me, Reid-Haramis basically admitted her charity wasn’t in compliance but blamed that on what she said was a state employee who took the information from a CLF representative, then left her job without forwarding the data to the proper place. “It was the state of Nevada that dropped the ball,” she claimed. In any event, CLF soon got right with Nevada, apparently incurring no sanction for what its older tax returns clearly suggested were many years of illegal solicitation in the state.

But this brings me to Jake Williams’s false claim on behalf of CLF of a 50% fundraising efficiency ratio when the actual number was a far-less-favorable 21%. NRS 598.1305 is a section of Nevada Revised Statutes published under the heading “Solicitations For or on Behalf of Charitable Organizations. It’s been on the books since 1997. I quote in pertinent part:

A person, in … conducting … a solicitation for or on behalf of a charitable organization or nonprofit corporation shall not … make any claim of representation concerning a contribution which directly, or by implication, has the capacity, tendency or effect of deceiving or misleading a person acting reasonably under the circumstances … the Attorney General has primary jurisdiction to investigate and prosecute a violation of this section … a violation of this section constitutes a deceptive trade practice … “Solicitation” means a request for a contribution to a charitable organization or nonprofit corporation that is made by any means, including, without limitation … telephone … the term [solicitation] includes, without limitation, solicitations which are made from a location within this State and solicitations which are made from a location outside of this State to persons located in this State …

Checks all the boxes for me. But given the lackadaisical attitude of the Attorney General’s Office (and for that matter the Secretary of State’s Office) in matters charitable, CLF and its agents probably have little to fear. Just sayin’. 

I should point out that CLF, founded in 1992 not far from where I grew up New Jersey, is a real 501(c)(3) charity in that contributions to it are tax-deductible. CLF does some good work, although in my view not nearly enough given the money donated. The CLF page on Yelp contains some positive comments, but they seem wildly outnumbered by complaints.

But at least CLF is not a “faux charity,” which I frequently have written critically about over the past few years. A faux charity is a political action committee that masquerades as a public-spirited charity with a heart-tugging name that often spends all of the money raised on overhead and makes no political contributions at all. Contributions to PACs are not tax-deductible. You can see a list of my faux charities posts by clicking here.

Through the CLF website, I sent a long request for comment to the charity raising a number of the points above. I haven’t heard back but will update this post if I do.

I hope any response doesn’t come from Jake Williams. I’ve had enough gaslighting from him.

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