Considerations When Evaluating Public Charities

By CFN Staff

CFN–Memphis TN, October 2011

W

hen the extra dollars of hard working Americans are considered for giving to public charities, there is a few things that one should know and consider when making the decision to give.

There are a handful of popular standards that are used to make such evaluations. My research led me to review information contained in some well-known print and online publications as well as research compiled from expert sources.

The web is not full of various techniques to evaluate public charities and rightfully so. The manner in which public charities are evaluated depends on each individual charity. However, there are some basic well-accepted guidelines on how one can rate a charity. We call it the 80% rule.

The 80% rule simply states: 80% of monies raised should go towards the main tax-exempt mission of the charity.

Of course many charities skirt around this well-known standard and allocate far less to the mission, which provides them with their tax-exempt status.

We see a large window of opportunity for abuse in the programs of public charities that allocate less than 80% to their main mission.

Many well-known and very well run non-profit organizations subscribe to this 80% standard. Although not defining each and every non-profit, it is a good gauge as to whether or not an organizations dollars are mostly being spent on its tax exempt purpose.

Far too many public charities do not have in place effective policies along with firm systems of accountability and transparency. These charities are at risk of being isolated from public donations because of these inefficiencies Such charities often are run like private social clubs with a hand full of consistent supporters, but lack the full support of the general public.

CFN conducted a review of two Memphis TN based non-profit organizations. The Douglass Alumni Association Inc. (DAA) and the National Douglass Alumni Corporation (NDAC). Both based out of Memphis Tennessee and both have similar missions consisting of raising scholarship dollars for graduates of the new Douglass High School located in Memphis TN.

While both organizations are completely separate 501(c)3’s being run by the same group of people rotating in positions from the President on down to chairpersons of committees, they are also interconnected by unwritten administrative procedure. The lifeline of the NDAC runs through the DAA mainly due to a faulty structure of organization that has the NDAC relying on grants and fundraising efforts from the DAA

Geraldine Sykes is one such member. A longtime member and supporter of both Douglass alumni organizations, Sykes has served both organizations in key financial capacities and has a thorough working knowledge of both organizations and their organizational structure.

During CFN’s telephone interview Sykes expressed concern about the less than 80% levels of funding for both the DAA and the NDAC programs.

Sykes involvement in the DAA and the NDAC has been second to none. An accomplished educator, Sykes carries a big responsibility in guiding these organizations to greener pastures.

We asked Sykes to provide us with any additional information that may be used for the publishing of this piece. As of the date of this writing, we have not received a response.

Financial numbers when used to evaluate a nonprofit are always disputed. However, raw numbers tells it all and never lies. Because these raw numbers, as reported to the Internal Revenue Service, can be disputed we ask CFN readers to make their own conclusions and interpretations.

This is how the numbers stacked up:

Douglass Alumni Association (DAA)			National Douglass Alumni Corporation (NDAC)
	2009	2008	2009	2008
Scholarships Awarded	$15,000	$41,517	$18,280	$18,932
Total Revenue	$30,162	$60,498	$35,283	$62,243
% of every dollar that went toward Scholarships	49.7%	69%	51%	30%

(actual figures taken from IRS form 990 as submitted by each organization)

How a charity stacks up to its actual giving is a surefire way of evaluating its overall performance. There is no better way to evaluate a charity than comparing its dollars raised to the percentage of dollars that go towards its charitable program. Higher numbers reflecting better and more efficiently run charities,

While DAA’s membership at its peak was approximately 300 in 2008, membership today has dwindled to less than 150. This Membership drop occurred after the 2008 convention which was the biggest convention/fundraiser ever held for the Douglass alumni yet resulted in only 30% of dollars raised that actually went to scholarships.

Membership is well overdue for an injection of new members, and while the Principal of Douglass High, Janet Ware-Thompson reports that she is attempting to bring on board the entire 2010 Douglass class, this could be a major boost for the Douglass alumni should her efforts prove successful.

CFN has spoken with one parent who claims that their daughter is still yet to receive scholarship dollars as promised by the NDAC. Its national Scholarship Chairperson, Margaret Black has not been available for interview and has not returned emails or telephone calls regarding this subject.

The Douglass alumni has frantically launched multiple simultaneous events to raise cash, and it is alleged that they are attempting to make good on scholarships that were promised, have not been paid and are now past due.

While these two organizations may differ slightly in its mission, they encompass the entire Douglass alumni family. Each has had unprecedented access to one another’s internal structure and organization efforts. Each also has the opportunity to turn this alumnus around with better more organized leadership.