ANNAPOLIS – A Baltimore charity said it received more than $1 million in private contributions, but spent nothing to get the donations.
Meanwhile, in Montgomery County, another charity’s fund-raising expense was about 35 percent more than it received in contributions that year.
According to data maintained by Maryland’s Secretary of State, who compiles information on charities that register with the state, most Maryland charities say they spend no money soliciting contributions from the public. And the numbers suggest they may be underreporting their expenses.
Simultaneously, other charities reported high expenditures for fund raising that diverged from acceptable standards. Watchdog groups suggest charities spend no more than 35 percent of total contributions on fund raising.
Charities need money to spend on programs, but most have to spend it before they can make it.
In any case, it appears that fund raising is not a huge expenditure for Maryland charities, which must register with the state if they solicit funds in Maryland.
While 67 percent of charities received contributions from the public, nearly 75 percent reported they incurred no expenses to raise funds.
And of the Maryland organizations that received more than $100,000 from the public, 32 percent of them reported zero fund-raising costs.
One of them, the Center for Fathers, Families and Work Force Development, listed more than $1 million in public contributions at no cost.
According to the Secretary of State’s information, the center reported about $78,000 in management and general expenses, separate from fund-raising expenses.
Joe Jones, center president, said contributions are solicited through established relationships and submitted proposals.
“(Fund raising) costs staff time,” Jones said, “(But) we don’t have a position as a fund developer. We don’t hold any budget line items for fund raising.”
The low number of charities reporting fund-raising costs is consistent with other national reports on the issue, said Amy Coates Madsen, program director for the Standard for Excellence program at the Maryland Association of Nonprofit Organizations.
“I can’t say I’m surprised by the results,” Coates Madsen said. While the Secretary of State could not comment on the findings, the agency posts each charity’s finances, compiled from IRS forms, on its Web site for public inspection.
“Hopefully (the public) will go to the Web site so they can make a decision before they write a check,” said Deputy Secretary of State Mary Kane.
Maryland previously prohibited charities from incurring fund-raising expenses that amounted to more than 25 percent of the money raised.
The law was challenged and ultimately struck down by the U.S. Supreme Court in 1984, because it violated charities’ and professional fund-raisers’ First Amendment rights.
But now the underreporting of fund-raising costs has caught the attention of charity watchdog groups and the federal government, and appears to be a national trend.
The Urban Institute, a nonprofit research organization, studied 1997 and 1998 tax returns and found that nearly 35 percent of charities receiving between $500,000 and $1 million in contributions said they spent nothing on fund raising.
The Chronicle of Philanthropy, meanwhile, analyzed IRS forms from 1996 for charities that received more than $500,000. More than 25 percent said they incurred no expenses.
A federal report released last year had even higher statistics.
According to the report, 64 percent of charities that filed IRS tax-exempt forms between 1994 and 1998, reported no fund-raising costs.
The IRS also uncovered charities that underreported their fund-raising expenses and is considering ways to tighten its oversight of charitable expenditures, the federal study reported.
Because of increasing competition among charities for donations, groups are becoming more motivated to show the public how competent they are at running the organizations, according to an American Institute of Philanthropy report.
“Low fund-raising costs can mean a charity is being efficient,” said Bennett Weiner, chief operating officer of the Better Business Bureau Wise Giving Alliance.
But the institute’s report said declaring no costs to the IRS can also be a demonstration of negligent financial reporting rather than efficiency in raising money.
“There are a lot of organizations that continue to need a lot of assistance in (financial reporting),” Coates Madsen said.
On the other hand, there are many nonprofits in Maryland that do not have fund-raising expenses because they are volunteer organizations and solicit their contributions by word of mouth, Coates Madsen said.
Meanwhile, relatively few Maryland organizations, 3 percent, spend too much money to raise money.
Maryland Association of Nonprofit Organizations suggests that for every dollar invested in fund raising, a charity should raise three dollars.
That was not the case for the American College of Dentists Foundation, which spent $181,229 to raise money, but saw less coming back in. Meanwhile, it received about $134,000 in charitable contributions, said its controller Paul Dobson.
“We had a campaign where we paid someone to do the (fund raising) and it was not very successful,” said Dobson.
Dobson said the foundation’s expenses have been high for the past two years, but was much lower in the past and is likely to be in the future.
But while accounting for expenses is important, charity watchdogs are quick to point out that a charity’s finances only tell a part of the story. “We do encourage the public to look at more than dollars and cents,” said Weiner. “Just because a charity is spending less (on fund raising) it doesn’t mean it’s better.” About 3,500 charities registered with Maryland are based there. According to the Maryland Association of Nonprofit Organizations, there are more than 22,000 federal tax-exempt organizations in Maryland and nearly 19,000 qualify as charitable organizations.