Give and Take

Give $100 to charity in Nashville, and as much as $100—or as little as nothing—may be going where you think.

Give a $100 check to the Tennessee Environmental Council, and $95 of it will actually be spent on lobbying and community education about the environment. Give $100 to the Springhouse Golf Classic, the golf tournament run, for the most part, by the Gaylord Corp., and about $3 goes to charity.

This week the Nashville Scene looks at 285 of Nashville’s not-for-profit organizations. Topping the list, which begins on Page 28, are the not-for-profit organizations that spend most of their money on “program expenses”—feeding children, putting on ballets, caring for babies, teaching adults to read, saving elephants, or advocating for various causes. At the bottom of the list are the groups that spend most of their money in other ways—fund-raising, maintaining big bank balances, paying staff salaries, or mounting elaborate special events.

The ranking does not mean that the organizations listed at the top are outstanding in every way. Neither does it indicate that none of the organizations near the bottom do good work. “Charity financial reporting is inconsistent, unclear, and often incorrect,” the American Institute of Philanthropy (AIP), a Bethesda, Md.-based charity watchdog, warns.

With that in mind, the Scene examined the IRS returns and the audits of every not-for-profit that has a charitable solicitations permit from Metro. We also looked at 100 other organizations that do not have fund-raising permits from Metro.

Neither Metro government nor the state Charitable Solicitations Board regulates how a not-for-profit agency spends its money. It is legal to take in $100 and spend zero on charity. But national watchdog groups caution that knowing how much is going to program expenses—as opposed to administrative expenses—is a useful tool in determining good management.

For an agency to get a passing grade from the National Charities Information Bureau (NCIB), a New York-based watchdog group, it must “devote a bare minimum of 60 percent of expenses to program services or charity activities,” says NCIB spokesman Dan Langan. Of the 300 national charities rated by NCIB, program expenses average 75 percent of total expenses. That level “is the sign of a charity doing its job,” Langan says.

In fiscal year 1996, MANNA, a local anti-hunger group, spent $1.8 million on a federally funded daycare food program, $22,000 to help people sign up for food stamps, $13,000 on community hunger outreach, $5,000 on management, and $2,000 on fund-raising. Using NCIB’s guidelines, MANNA rates high—99.6 percent of expenses spent on programs.

AIP sets a benchmark of 60 percent of total expenses spent on program activities.

The Council of Better Business Bureaus (CBBB) looks at program expenditures as a percentage of “total income”—all the dollars an agency gets from gifts, grants, events, interest, dividends, program fees, and other sources. The CBBB is also concerned about fund-raising costs. Its guidelines state: “Total fund-raising cost will not exceed 35 percent of total contributions. Of total fund-raising and administrative costs together, we hope that combined total will not exceed 50 percent of total income.”

More than 180 of the Nashville agencies examined by the Scene meet these national standards. Many far exceed the 60-percent standard.

The MR Foundation of Tennessee, an arm of the Knights of Columbus, raises funds for programs that serve people with mental retardation. The MR Foundation takes in $250,000 a year from Tootsie Roll sales and other events. Of that amount, they give $167,000 to charity, spend $41,000 on management, and $647 on fund-raising (not including the cost of the Tootsie Rolls, which are paid for by area Knights of Columbus chapters).

Using the NCIB method, MR Foundation spends 80 percent on programs. But because the group also put $42,000 in the bank, the CBBB would score them a much lower, but still acceptable, 66 percent.

On the other hand, the Nashville Fire Fighters Association contracts with a professional solicitations company, the Gehl Corporation of Florida, to put on a show and telemarket the tickets. In fiscal year 1996 the event brought in $842,111 at a cost of $658,733. After including all other revenue, which consists primarily of membership dues, fund-raising costs were 47.8 percent of income. To meet CBBB standards, 50 percent of donations received from a fund-raising campaign should go to the program mentioned in the letter or phone call.

When the Tennessee Highway Patrol Retired Officers Association calls, the phone solicitor poignantly describes the teddy bears given to children after accidents or arrests. In reality, 85 percent of the money raised by phone solicitation stays with Telcom, an Alabama-based telemarketing company. Of the money received by the retired officers association, a portion is spent on insurance and other member benefits, and a portion is spent on gifts to local child-abuse prevention programs. Little goes to teddy bears. Nor are donations to the THP Retired Officers Association tax-deductible. The group is a fraternal organization, not a charity.

Calls like these are not illegal, and their purpose is not even a secret. Ask the right questions, and Telcom tells the truth.

But asking the right questions and getting meaningful answers is the tricky part. “If you are not leveling with the public, you are abusing the public trust,” says Bennett Weiner, a vice president at CBBB. According to NCIB’s Dan Langan, “Public trust is the backbone of philanthropy.”