A worthy cause? Maybe. But unlikely if a charity spends more on fundraising than mission
‘Tis the season when many are writing checks to charities before the ball drops on a new year.
Ask around and you find that, for many, choosing which organizations to give to often comes down to two things: a mission that speaks to us personally and people we know who may be involved.
But many donors have a hard time determining whether their gifts to nonprofits are well spent. That can be particularly true when the charity is small, as the vast majority of U.S. nonprofits are. And knowing matters because most of us only have so much to give.
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Earlier in December, a reader who has donated to a small charity in Boone wrote wondering how to find out more about how it spent its donations. The Sleeping Angels Foundation was started in 2012 by Joey Droste, his family and friends, after he and his wife lost a baby girl three hours after birth.
Joey and Shelby Droste lost their daughter to trisomy 18, a rare condition that can cause deformities and other health problems. The donor said the charity is supposed to help others handle the costs that can come after an infant's death.
“When I try to find out who's managing the funds, and where the funds are going, I get nowhere. I'm told they can't reveal any of that, hiding behind HIPAA laws, which may or may not apply in this case,” the donor wrote, referring to federal patient privacy laws.
Many smaller charities overlooked by rating services, but there are other sources
You won’t find Sleeping Angels at Give.org, the Better Business Bureau’s service for helping donors give wisely. Charity Navigator doesn’t rate it, either. But you can find some information about it and other organizations that are eligible for tax-exempt donations by searching the IRS’ database, irs.gov/charities-non-profits/search-for-tax-exempt-organizations
If you examine the nonprofit's most recent Form 990 filing there, you see that it spent $24,341 on an annual golf outing and fun run to raise $60,067 from fundraising in 2021. Put another way, it raised about $2.47 for every dollar it spent on fundraising in 2021, the last year for which it has filed a public return (the filings often lag a few years).
Anyone can calculate a charity's fundraising effectiveness by dividing the amount raised by the dollars spent to raise it. Fundraising costs can vary widely, depending on whether an organization uses social media or direct mail, or stages raffles or events. Organizers often find sponsors to help cover costs or donate to the effort. But some top nonprofit trackers like Charity Navigator suggest organizations should spend no more than 30% of their total expenses on administrative overhead and fundraising costs.
With net assets in 2021 of just $44,868, Sleeping Angels spent 54% of what it had that year on fundraising. It's so small, it's run by volunteers. But the charity spends more on fundraising than it does on its actual mission.
In 2021, it spent $24,341 on fundraising and gave out $18,401 in grants to families, according to its tax return. In 2020, it spent $17,522 on the fundraisers and gave out $14,247 to families.
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Most charities listed on Charity Navigator ― 7 of every 10 ― spend at least 70% of their revenues directly on their programs or services. Sleeping Angels’ $18,401 in grants to families in 2021 amounted to about 30% of its annual revenues, listed as $62,064 on its Form 990.
Charity Navigator says nonprofits that spend less than a third of their budgets on their programs or services are likely failing to meet their missions.
Droste, a father of five, initially did not respond to a voicemail and Dec. 12 email seeking comment. On Dec. 16, the day this Watchdog column initially was published online, he emailed Watchdog to say he'd been recovering from COVID-19 "and I work for the railroad full time on call 24/7 and I’m not allowed electronic devices while on duty. My schedule is also very sporadic. I got your voicemail this morning at 5 a.m. but didn’t think you’d want a call back at that time. I found this email in my spam folder. I just got off work and will have my financial officer gather the documents you have requested."
However, Droste did not send any financial documents. He also did not respond to a subsequent Dec. 18 email asking him to clarify why the organization spends more on fundraising than it does on funds given to families, how many families the charity helps annually or what safeguards are in place at the charity for donated money so that the column could be updated.
Watchdog noted to Droste in the email that after more than a decade in operation, those who run the foundation should be able to say how many Iowa families they help each year. But no such information is available on Sleeping Angels' website or tax forms.
On Dec. 23, Droste posted on his charity's public Facebook page that he was told it was "too late" to respond to the Watchdog column questions. He also said Watchdog got many facts wrong. (The numbers quoted in the article were from the nonprofit's tax return, which Watchdog also posted online with this column.)
On Dec. 27, Watchdog sent Droste yet another email and voicemail to try to update the column. He called late in the day, angered that Watchdog did not wait longer to publish the column online.
He said he started the charity with his own money because people who lost children that quickly "couldn't get life insurance for 15 days."
"I put my own money into it for eight years before it took off," he said.
He said $17,000 of the fundraising cost was for T-shirts for the Fun Run and that the golf tournament cost about $5,000. He also said the charity had helped over 100 families have funerals for their children.
He said Watchdog should come to Boone to sit down with those who do his nonprofit's books. But then Droste declined to set up an appointment to do that and to sit down for an interview.
According to the National Council of Nonprofits, all public charities should embrace accountability and transparency as a matter of ethical leadership, as well as legal compliance. Tax-exempt nonprofits also are required by law to provide copies of their three most recently filed IRS Form 990 tax returns, as can the IRS.
But even David Repp, a Des Moines attorney who has worked with nonprofits since 1990, admitted he doesn’t always look at the tax forms before giving. “I feel like I do my vetting in other ways,” he said.
Repp said he gives mostly to established nonprofits with track records of fulfilling their missions, run by people he knows and trusts.
Question to ask when considering donating to a nonprofit
Angela Dethlefs-Trettin, chief community impact office for the Community Foundation of Greater Des Moines, which helps Iowans with their giving, suggests asking the following five questions when considering when to give to a small nonprofit:
Are they registered with the Iowa Secretary of State's Office and with the IRS?
How did you find out about the organization? Ask others how they learned of it and why they support it so you can gain a deeper understanding.
What is the cause and how do you know it's doing the work? Does the organization have a clear mission and plans that are publicly shared? How has it provided information on its impact and results in the community? Has it prepared an annual report or program results summary?
Have a conversation with partner organizations. Nonprofits generally work within an issue area, so others familiar with the topic can offer good insight into the programming the organization is doing.
Who is leading the work? Is there a board in place for the organization to ensure governance and oversight? You should be able to easily find a listing of the members, and they should include a variety of individuals from various perspectives who are representative of the community (i.e. not all related). Ideally there would be five or more leading the organization at the board level.
If the organization has a staff person leading the work, you should be able to easily identify who it is and to contact that person for information on the organization.
This article has been edited to correct how long after birth the Drostes' baby died.
Lee Rood's Reader's Watchdog column helps Iowans get answers and accountability from public officials, the justice system, businesses and nonprofits. Reach her at lrood@registermedia.com, at 515-284-8549, on Twitter at @leerood or on Facebook at Facebook.com/readerswatchdog.
This article originally appeared on Des Moines Register: How to determine whether a charity is effectively using its funds
