13 INVESTIGATES: Non-Profit Accountability - Alabamas13.com WVTM-TV Birmingham, AL

13 INVESTIGATES: Non-Profit Accountability

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13 INVESTIGATES:  Non-Profit Accountability 13 INVESTIGATES: Non-Profit Accountability
BIRMINGHAM, AL - Keeping dozens of turkeys frozen, along with a warehouse full of other charity-bound meals, is not cheap.

Tracy Hipps, who runs the Christian Service Mission, claims the power bill alone for their massive freezer totals about $10,000 a month.

So every donated dime counts.

In fact, donations and grants make up about 92 percent of their funding.

“Our board is committed to everything going to serving the people we serve.  If people give to like, the Thanksgiving baskets, 100 percent of what comes in to that Thanksgiving baskets, goes to that project.  Any money that comes in for a specific project, 100 percent goes to that project,” Hipps pointed out.

As they gear up for the holidays, the Christian Service Mission, like hundreds of other Birmingham-area charities, needs your help.

So how do you pick the right charitable fit for your generosity?

Samuetta Nesbitt is the spokesperson for the United Way of Central Alabama.

They fund about eighty local non profits.

She advises donors to conduct their own charity investigation.

“You have three national organizations, that are also non-profits that actually look at charities and they dig deep,” Nesbitt said.

Those organizations are the BBB’s Wise Giving Alliance, GuideStar and Charity Navigator.

We took Nesbitt's advice and talked to Charity Navigator Vice President Sandra Miniutti over the phone in New Jersey.

She claims one thing to consider when evaluating a charity, is whether they spend enough on program services, the very mission-oriented programs which give them their tax-exempt status.

Miniutti said as a general rule of thumb, a charity should spend around 75 percent on program services and the rest on overhead and fundraising.

“When you come across charities that have that flipped, maybe they're spending less than a third of their budget on their programs and services, that's a real red flag and you want to run for the hills,” Miniutti stressed.

So to run a basic charity audit of our own, we searched GuideStar's web site.

We pulled up every 501-c-3 tax exempt organization in Birmingham with at least $1 million in revenue.

To find out how they spent your generous donations, we spent days studying the 'Form 990' every single one of those 155 charities filed with the Internal Revenue Service.

To calculate a program service percentage, we divided the amount spent on program services by the charity's total spending.

Then we plotted the numbers on a spread sheet.

The non-profit with the lowest percentage spent on program services?

The Christian Service Mission’s Form 990 stated they spent only 26.7% on program services last year.

When we asked Hipps why the amount was so low, he replied, “That's going to the people that we have serving in the community.  We raised, last year alone, 42,000 volunteers.  So that is the mobilized volunteers to do projects in the communities in which we serve.  So that's what I would say, a lot of our money, that's where it goes.  It goes to the community in the communities we serve.”

Hipps pointed out, among other things, maintaining their 80,000 square foot warehouse is costly, which includes that hefty power bill.

Lucinda Bollinger has worked in non profit accounting for the last thirty years.

“It is one of two things, in my opinion, a very, very poorly run managed organization, that is not focuses on its mission, or maybe the allocation of expenses has not been reviewed and possibly there has been an under allocation costs to program services,” Bollinger stated.

After examining the Christian Service Mission’s Form 990, Bollinger believes they may have understated their program service costs by $300,000-$500,000.

Basically, that means they may have put costs under management that likely should fall under program services.

On the flip-side, we found half a dozen charities which claimed they spent 100 percent of their money on program services.

That group included the Dannon Project, which claims it has helped more than 3,700 non-violent offenders transition from prison to society.

“For the Dannon Project, we are a real stickler for doing what we say we're going to do and to helping participants and if that means that every single dime will go where we will have to get out there and try our best to raise more money to make sure the participants' needs are met, we'll do that,” said Dannon Project Operations Manager Vanessa Brown.

While 100 percent on program services sounds like a perfect score, Sandra Miniutti with Charity Navigator claimed it is nearly impossible to operate a non-profit without some level of overhead costs.

“If we see a charity saying they spent a hundred percent of everything on programs we think that that is a red flag and we will issue a donor advisory.  We won't even rate them,” Miniuitti said.

When we first interviewed Brown, we showed her the Form 990 that we found on GuideStar and asked about the 100 percent it listed they spent on program services.

She did know why the organization did not list any overhead costs.

Then Monday, a week after we first published our story and two weeks after our interview with Brown, she contacted us to say our story reflected an outdated Form 990.  

She emailed us a new Form 990, which she stated was accurate, that states the organization spent 95 percent on program services last year.  It is unclear when the updated form was filed because there is no date at the bottom of the first page.  

We have included a link to the Form 990 which the Dannon Project claims is more accurate than the one the donating public has access to on GuideStar's web site.  

Finally, our research raised a few questions about the Village.

It is a residential and recovery program for the homeless and those struggling with drug addiction.

Their financial statement showed absolutely no spending on program services.

Bollinger characterized the form 990 as 'incomplete', a 'no-no' in the eyes of the IRS.

“They did not provide the information that the internal revenue service has required on the form 990,” Bollinger argued.

She claimed doing so can lead to penalties.

According the IRS, an organization can be fined $100 a day for not filing a Form 990 but, “The penalty can also be charged if the organization files an incomplete return, such as by failing to complete a required line item or a required part of a schedule."

Andrew Jenkins runs the Village.

He claimed it is tough for them to separate program services from overhead costs because all of their services are housed under the same roof.

“Our administrative staff meets with all of the residents regularly; our office is the facility where we house all the residents.  So I don't know how you would account where that percentage would break down this is only administrative and this is only program,” Jenkins stated.

Jenkins added, up to this point they have prepared their taxes on their own, but they plan to start using a certified public accountant, like Bollinger, who believes the Village's Form 990 gives potential donors the wrong idea.

“You can't determine what percentage of their dollars are spent on providing those services in those activities, you can't have confidence that your dollar is being spent that you intended to which is to further their mission,” Bollinger said.

Ultimately, though, both Bollinger and Miniutti agree that a potential donor should not base their decision to give solely on the Form 990.

“It's a piece of the puzzle but it shouldn't be the only thing that a donor looks at.  You also want to look at the impact the charity is having, their results and issues around accountability and transparency before you give,” Miniutti concluded.

Give every charity we checked out credit in the transparency department.

All three did not hesitate to answer all of our questions.  

As a whole, of the 155 largest Birmingham-area charities we examined, 83 percent spent 75 percent or more on program services.

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