Donors Beware: Some Veterans Charities Shortchanging Wounded Troops

One of the hidden costs of the wars in Iraq and Afghanistan is caring for the wounded troops returning from these theaters. In May 2007, the Department of Defense reported 25,090 wounded troops in Iraq since the wars began in March 2003. To help shoulder these costs, a number of veterans charities have raised millions of dollars to help care for the wounded.

However, a leading watchdog organization, the American Institute of Philanthropy, released a report last month suggesting that 12 of the 29 charities the organization studied earned a failing grade. The API has instituted a 60 percentile passing threshold, meaning at least 60 cents for every dollar raised is spent directly on veterans and charitable programs. The worst ratings went to the American Veterans Relief Foundation, which passed along 1 cent for every dollar raised, and the National Veterans Service Fund, which passed along 2 cents on the dollar.

There are no laws regulating the amount of money charities spend on overhead. The API report contends that 20 of the 29 charities have mismanaged their resources, whether paying high overhead costs or direct-mail fundraising fees to for-profit consultants. Furthermore, some of the higher overheads are due to six-figure salaries paid out to the charities’ leaders, including Help Hospitalized Veterans (HHV), which the Washington Post reports paid its founder and his wife a combined $540,000 in compensation and benefits last year.

This has drawn the ire of Sen. Chuck Grassley, R-Iowa, who has been a longtime critic of charities that are abusing their tax-exempt status. "Taxpayers are subsidizing that tax exemption," Grassley said in a statement. "Sitting on donors' money or spending too much on contracts and salaries doesn't benefit the public."

Daniel Borochoff, president of the API, also cited HHV, a charity that provides therapeutic arts and crafts kits to the hospitalized veterans, as an egregious example of abuse. The API reported HHV’s income at $71.3 million last year; the charity spent about a third of that on charitable work.

The charity was founded in 1971 by Roger Chapin, 75, who received $426,434 in salary and benefits the past fiscal year. His wife, Elizabeth, 73, received $113,623 in salary and benefits as a “newsletter editor.” The Washington Post reports that HHV, in its tax filings, reported paying more than $4 million to direct-mail fundraising consultants. The group also has run television advertisements featuring actor Sam Waterston, game show host Pat Sajak and other celebrities.

Borochoff points the finger at professional for-profit fundraising consultants and companies that charities hire. “The wool is being pulled over the eyes of the donating public by some F-rated charities,” Borochoff said in a statement while testifying before the House Committee on Oversight and Government Reform Dec. 13, 2007.

“Veterans and other charities often enter into contracts with professional fundraising businesses that may keep (for their profits and expenses) 80 percent or more of the contributions raised,” Borochoff informed the committee. “National Veterans Services Fund (NVSF) filed a 2004 contract with Bee LC that guarantees at least 15 percent of the gross revenues ‘for calling of individuals who have previously donated by telephone via this contract to NVSF.’”

The NVSF’s Web site states that the charity was founded in 1978 and is a not-for-profit organization located in Darien, Conn., that provides case-managed social services and limited medical assistance to Vietnam and Persian Gulf War veterans and their families, with a focus on families with disabled children.

Grassley also testified before the House Committee on Oversight and Government Reform at the “Assessing Veterans Charities” hearing. Grassley not only took veterans charities to task, but called for more rigid accountability and congressional oversight for all not-for-profit charities. “We need to ensure that the public continues to have confidence in these institutions,” Grassley said in a prepared statement. “Our veterans need to know that Congress is taking a hard eye at these charities to ensure that veterans are appropriately benefiting from donations.”

“Charities also receive billions of dollars in government grants, contracts and payments. Charities represent a bigger part of the economy than people might realize – just a little under 10 percent of the economy and the work force,” Grassley said in his testimony before recommending a possible solution. “So often, I see problems with charities because there is not in place basic governance – that is, independent, active board members – that are minding the store. Your committee should consider the possibility of requiring basic good governance structures and best practices – similar to those advocated by the Nonprofit Panel and watchdog groups such as the American Institute of Philanthropy – as a requirement for charities that participate in the Combined Federal Campaign or receive federal grants and contracts.”

Despite some of these failing charities, there are some that have helped benefit the wounded warriors returning from the wars in Iraq and Afghanistan. "In the rush to help, there's a lot of innovative work and good work happening, but there's also a lot of fraud and waste," Paul Rieckhoff, executive director of Iraq and Afghanistan Veterans of America, told the Washington Post. "There's never been a greater need for veterans charities in a generation, and I hope issues like this don't deter people from giving."

Two such groups, the Intrepid Fallen Heroes Fund (IFHF) and the Fisher House Foundation (FHH), received A ratings by the API.

The IFHF was established in 2003 and has provided close to $60 million in support for the families of military personnel who paid the ultimate sacrifice, and for severely wounded military personnel and veterans. IFHF claims on its Web site that 100 percent of the contributions go towards programs, while all administrative expenses are underwritten by the fund’s trustees. In January 2007, the IFHF completed construction of a $40 million world-class state-of-the-art physical rehabilitation center at Brooke Army Medical Center in San Antonio, Texas. The “Center for the Intrepid” serves military personnel who have been catastrophically disabled in operations in Iraq and Afghanistan, and veterans severely injured in other operations and in the normal performance of their duties.

The Fisher House is a program designed to provide military members and their families with services that meet a need beyond what the DoD and the Veterans Affairs would normally provide. Fisher House donates comfort homes that enable family members to be close to their wounded love ones during hospitalization for an unexpected illness, disease or injury. There is at least one Fisher House at every major military medical center, and the foundation has served more than 10,000 families and has made available nearly 2.5 million days of lodging to family members since the program began in 1990.

Jim Weiskopf, spokesman for Fisher House, told the Washington Post that one reason his charity has had a higher ratio of success and lower overhead is that it does not use direct-mail advertising. "As soon as you do direct mail, your fundraising expenses go up astronomically," he said.

Originally posted on "Iowa Independent"