The Blinded Veterans Association says its goal is to "help veterans
and their families overcome the challenges of blindness," according to
its website. Services include helping them take advantage of Department
of Veterans Affairs services and employment training.
Go to the
Better Business Bureau's website and you'll feel assured the group is
worthy of your donations. It is both accredited by BBB's Wise Giving
Alliance charity-rating service and has the group's seal of approval.
American Institute of Philanthropy's CharityWatch, however, gives the
group an F. The other leading charity-rating service, Charity Navigator,
awards it zero stars out of four.
"There are 158,000 veterans
that are legally blind, but only 20% of (the association's) budget is
spent on field services to help blinded vets," says CharityWatch founder
and President Daniel Borochoff. "The rest was primarily used for
mailings and public service announcements. Is this really how a blinded
veteran, who can't find a job or even pay his gas bill on time, wants
his charitable aid to be spent?"
The differences between the
groups' ratings underscore one of the challenges facing BBB as its
100th-anniversary year draws to a close. Just as it was dogged by "pay
to play" allegations about its business ratings two years ago, some
question whether BBB's charity ratings really have teeth, and if the up
to $15,000 it receives annually from charities that pay to use its seal
of accreditation influences its decisions. The questions come as many
charities, particularly smaller ones, struggle to raise money as the
proportion of people's incomes devoted to charitable giving remains
As people decide where to send their year-end charitable donations, Borochoff doesn't think BBB's ratings should guide them.
"How can you be a watchdog when you are getting paid by the very groups you're supposed to be rating and monitoring?" he asks.
Borochoff was profiled last spring by the Chronicle of Philanthropy, which highlighted
his success in exposing the questionable finances of Greg Mortenson,
founder of the Central Asia Institute and co-author of the book Three Cups of Tea.
The article also noted that Borochoff's accusation that the Disabled
Veterans National Foundation was spending most of its money on
fundraising led the Senate Finance Committee to investigate the group.
Borochoff's "fiercely independent status" makes him a more believable
charity evaluator, he says. More than 95% of CharityWatch's funding
comes from individual contributions, which is mostly the $50 annual
membership fee, which includes access to its latest ratings and advice.
he was Connecticut Attorney General in late 2010, Sen. Richard
Blumenthal, D-Conn., reached agreement with BBB that it would stop
giving extra rating points because businesses were paying members. Now
he says BBB's financial relationship with the charities it rates
"unquestionably" raises concerns about "credibility and possible
conflicts of interest."
"State attorneys general should be
looking hard at this practice to make sure it is disclosed prominently
and transparently," says Blumenthal, adding that "there may be a role
for congressional oversight." "There's a very strong interest on the
part of state attorneys general and consumer protection agencies in
ensuring that contributors are not misled by ratings and by financial
Consumers searching at BBB's Give.org for a charity
would see a prominent accreditation seal if the charity paid the
licensing fee to use it. But they'd have to look for the link on the
homepage to learn how the charity seal program works.
charitable donor is forced to do some independent research to understand
what he or she is seeing," says Rick Cohen, former executive director
of the National Committee for Responsive Philanthropy, now the national
correspondent for Nonprofit Quarterly. "It's not that they are
withholding the information, (but) it does confuse the issue when you
have a seal, and when it is not clearly evident to consumers that the
seal was purchased."
Art Taylor, CEO of BBB's Wise Giving
Alliance, says its ratings are unaffected by its seal sales. In a
statement, he noted that the Wise Giving board of directors approves the
practice and is headed by David Ormstedt, who chaired Sen. Blumenthal's
charity bureau when he was attorney general.
"There is a strict
separation between the people who do the accreditations and the ones who
work on the seal programs," Taylor says. "The only way they can sell a
seal is if they get a notification that we have a new charity that meets
Charity monitors, including the Evangelical
Council for Financial Accountability here and many in other countries,
sell their seals, adds Bennett Weiner, Wise Giving's chief operating
"National charities that display the BBB Wise Giving
Alliance seal can do so with pride," Taylor is quoted as saying on the
Blinded Veterans website. "Not only are they attesting to their
organizations' adherence to sound standards, they are helping to
increase donor confidence and strengthen public trust in giving."
Long history, new changes
charity ratings date back to World War I when, Taylor said, the
business group was asked to also help people weigh the increasing number
of solicitations, especially for war relief. This service used a
variety of names over the years until, in 2001, BBB merged its charity
arm with the National Charities Information Bureau and began calling the
new entity the Wise Giving Alliance.
About 10,000 people make
small contributions to the Wise Giving Alliance and about 20 companies
give it "a little bit of money," says Taylor. The rest of its budget -
or 67% - comes from sales of the accreditation seal.
meet BBB's 20 standards for accountability, they are identified as being
accredited on its website. The charities can then pay a sliding scale
of up to $15,000 annually for the right to display the seal on their own
sites and marketing materials. The seal is a "very popular product" for
charities that want to "distinguish themselves," Taylor says.
the approximately 1,260 charities BBB attempts to evaluate, it accredits
about 500, and fails about 300. Most of the rest refused to provide
information despite BBB's requests, while about 80 other reviews are in
BBB has been working to improve its ratings, says
Taylor, who announced plans at a charity conference in October to review
the truthfulness of fundraising appeal letters. BBB is helping
consumers by looking beyond charities' financial ratios - which
CharityWatch focuses on - to include issues of governance and other
types of accountability, Taylor says.
While they give the issue
different weight, charity evaluators agree that it's key for donors to
know how much of their money goes toward more fundraising and how much
is spent on programs. It can mean the difference between feeding the
hungry or funding for-profit telemarketers.
This area is so
important that New York Attorney General Eric Schneiderman has been
reporting annually on how much of the money outside charity
telemarketers get of the money donated. The latest report, out this
month, shows many charities only get about 20% of the money raised by
"Donors expect that their hard-earned dollars
will make a difference and not line the pockets of for-profit
fundraisers at the expense of charity," says Schneiderman. "Our office
will continue to investigate these telemarketing campaigns to ensure
that contributions are being used to further charitable programs and
The New York attorney general's charities bureau found
two key problems. One was that charities were signing agreements where
they are guaranteed a low percentage, sometimes as little as 10%, of the
money raised - and nothing more. Another is when charities get charged
simply because a telemarketer makes contact with a potential donor, even
if they turn down the request.
But what can get even more
complicated - and be as controversial - is what charities categorize
under "fundraising." The three ratings groups treat a practice known as
joint cost allocation differently. This is the practice of dividing
fundraising costs, such as those for solicitation letters, between
education programs and fundraising on tax forms. Many charities say if
they send a letter asking for money that explains a problem and asks
people to do something about, it's fundraising and education.
Borochoff says it's only fundraising if it's asking for money. BBB and
Charity Navigator look at each case individually.
"deeper level of financial analysis best answers what donors most often
want to know - whether a charity is financially efficient and getting
most of its funds to bona fide programs," he says.
Berger, CEO of Charity Navigator, says he believes such solicitations
can qualify as education, but says "we have discovered some real serious
"What may appear to be technically legal, doesn't pass the smell tests," he says.
says it is the harder grader sometimes - refusing to accredit groups if
they don't meet any of its accountability standards. Some charities,
including the United Spinal Association and the American Institute for
Cancer Research, fail CharityWatch's ratings yet are accredited by BBB.
The Wise Giving Alliance refused to accredit groups including the Farm
Sanctuary and Conservation Fund, while CharityWatch rated each an A, and
Charity Navigator gave them three and four stars (out of four)
BBB says it refused to accredit the Conservation
Fund, for example, because it didn't have an effectiveness report or
policy and wasn't fully transparent about the cause-related products it
sells and how many must be sold before the charity makes money.
bad charities could easily generate effectiveness reports, Borochoff
says, and BBB doesn't evaluate the quality of the reports. Cause-related
marketing probably only matters to those who buy the products, he adds.
What donors really need to know about a charity, he says, is whether it
is being honest about how money is being used, that the money is
supporting true charitable programs and that financial statements aren't
using creative accounting.
Doing enough for animals?
of the groups that were rated poorly by CharityWatch - and often
Charity Navigator, but not BBB - did not respond to requests for
comments. The leaders of Blinded Veterans Association did not reply to
e-mails seeking comment. A woman who works in fundraising for the group
refused to give her name and said asking for a phone rather than
in-person interview amounted to entrapment.
Wayne Pacelle, CEO of
the Humane Society of the United States, however, was happy to discuss
what he says is misplaced priorities on the part of charity-rating
groups. Pacelle says "no group in the field of animal protection comes
close" to HSUS when it comes to impact.
The amount spent on
fundraising as opposed to actual programs is a "very interesting and
useful ratio to look at, but it falls far short of any serious-minded
analysis of a charity," Pacelle says. A better barometer, he agrees,
would be looking at a charity's influence.
Charity Navigator and
the Wise Giving Alliance are both working to come up with ways to rate
charities' influence, but CharityWatch has no current plans to take that
issue on. Cohen says this would get closer to answering the big
question most donors have, "Is my money really going to make a
Pacelle says HSUS' "size and experience" have
allowed them "to take on the pork industry, curb the Canadian seal hunt
and to shut down puppy mills."
But Borochoff says someone who
really wanted to help animals should contribute elsewhere. While BBB
accredits HSUS, which paid for its seal, CharityWatch gives HSUS a D in
large part because so much of every dollar donated goes to raise more
"If you like getting those mailings and want to pay for
more of them, support the Humane Society," says Borochoff. "It you want
to give more for programs or services that benefit animals and advocate
better rules and protections for animals, they are not a good target
because the portion of their budget they give to these programs is too
Nathan Winograd, an author and prominent advocate of
"no-kill" animal shelters, says the disagreement is emblematic of a
larger problem with HSUS.
"Only the leadership of HSUS could
contrive fundraising letters as program expenses," Winograd says. "If
they actually spent as much time, energy and money on saving animals as
they now only pretend to, not only would they not have to cover up their
failures to do so with these kind of mental gymnastics, they could
truly be the heroes they now only pretend to be."
Helping children around the world - or not
IRS fined the charity Food for the Hungry earlier this year and said it
needed to adjust its tax form because it stated the value of medicine
and other goods was about $76 million when the goods were actually only
worth about $92,000, the IRS said. Borochoff cites this as another
example of the kinds of fudging he calls the charities on.
Emergency Relief and its Children's Food Fund, which did not respond to
requests for comment, also gets an F from CharityWatch. Borochoff says
the group provides so little information about what it does on its tax
forms that they could be hiding what they are really doing in the
countries in which the groups operate.
"You can't trust
them - they are not being specific at all," says Borochoff. A potential
donor should ask, "Why are you hiding this information?"
acknowledges that he's been able to extend the reach of his paid-only
publication by being quoted in the media. Charity Navigator and Wise
Givings' ratings can be accessed for free. And Borochoff can be
quotable, calling Charity Navigator "robo-ratings" and BBB a trade
Berger bristles at the criticisms Borochoff
has leveled at Charity Navigator and even the BBB, though they're
actually competitors, too. The three groups together rate no more than
7,500 of the 1 million charities in the U.S.
"To throw stones is not productive," Berger says. "There's more than enough for all of us to do."
the small number of charities rated and their very different missions
and sizes, Cohen questions the value of ratings at all. And he worries
"people are often misled to think that the groups you should give to are
the groups that have these ratings."
"There are many, many
more charities that are quite valuable and quite productive," Cohen
says. "Use ratings as a tool, but nothing takes place of getting to know
the charities on your own."