Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, April 25, 1994 TAG: 9404260037
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: By JANE BRYANT QUINN THE WASHINGTON POST
DATELINE: NEW YORK LENGTH: Medium
Does it ask you to write to the White House in support of a particular law? Does it list four ``dietary guidelines to lower cancer risk''? Does it tell you how to recognize and report a drunk driver?
Believe it or not, such tips may be a substantial part of the charity's public education or advocacy program. They ``educate'' anyone who happens to open the fund-raising letter and happens to read it all the way through.
If you make a donation to one of these groups, you may think you're supporting environmental or cancer research, and some of your money may indeed go there.
But more of your money than you realize may be going into fund-raising costs, under the guise of public education. Sometimes that's legitimate, but sometimes it's an abuse of the donors' intent.
What prompts concern are some changes proposed in the accounting rules for charities. These changes are supposed to fix the problem but actually may make it worse.
As things now stand, a determined donor can discover what may be excessive fund-raising costs in national charities. Just write for the reports on these charities, prepared by two watchdog groups:
The National Charities Information Bureau (NCIB), Dept. 339, 19 Union Square West, New York, N.Y. 10003. Its Wise Giving Guide, plus reports on up to three specific charities, is free with a self-addressed, stamped envelope.
The Philanthropic Advisory Service of the Council of Better Business Bureaus (CBBB), 4200 Wilson Blvd., Arlington, Va. 22203. Its guide, Give But Give Wisely, costs $2; reports on specific charities are free.
One of the watchdogs' toughest jobs is to analyze fund-raising letters that include the kinds of tips or appeals discussed above. Part of the cost of such letters can be treated as a do-good program.
But what part? There's the rub.
Take the 1992 fund-raising mailings of the Center for Science in the Public Interest, which included educational material such as ``Ten Tips for Safer Eating.'' The center says that 89 percent of the cost of those mailings was not fund-raising, it was actually public education.
The NCIB disputes that percentage. In its view, more than half of the costs were for fund-raising and membership appeals. If costs were restated the NCIB way, the center would show unreasonably high fund-raising expenses, the NCIB says.
The center has challenged the NCIB's position. Its spokesman, Art Silverman, says, ``There are industry standards on how to allocate funds between fund-raising and education. ... We do what [our auditors] tell us to.'' He says they read each line of the mailing package and labeled it either ``fund-raising'' or ``educational.''
These industry standards are exactly the issue. There are so many gray areas that the American Institute of Certified Public Accountants (AICPA), which publishes the audit guidelines for charities, has proposed a new list of criteria to separate program expenses from fund-raising costs.
But the charities wouldn't have to disclose what they did to meet the proposed new criteria. So the watchdog organizations will find it hard to verify the annual audits.
Steven Arter, president of the National Association of State Charity Officials, has told the AICPA that its proposed rules won't work. The rules are too lax, he says, and likely to encourage even more creative accounting than exists now.
Gray areas are currently so rife, Arter adds, that some companies that charge high prices to raise money for charities use today's accounting rules to convince them ``that high fund-raising costs can be effectively concealed.''
The AICPA's Tom Kelley said the public has to rely on the audit process, just as it does with corporate financial reporting. But charities can shop for accommodating auditors.
The Council of Better Business Bureaus is trying to alert donors to what's going on. Starting in September, charities that mail educational material will be asked to state, right in the mailing, that those materials are part of the program that your donation will support. Groups that don't make this disclosure won't meet all of the CBBB's standards of good practice.
The National Charities Information Bureau says it may decide to ignore the American Institute of Certified Public Accountants and develop its own system for determining fund-raising costs.
by CNB