When you donate money to a charity, you expect most of your money to go to help the cause, but how do you know where your money is really going?
The ABC15 Investigators spent months breaking down the details of one Valley charity’s financial history -- and found significant questions about how it spends millions in money donated by generous people nationwide.
INSIDE THE BREAST CANCER SOCIETY
When Pat Elliot of Phoenix received what she called an "aggressive" call from a telemarketer representing The Breast Cancer Society, Inc., she was concerned.
“It does not appear that patients with breast cancer are being served,” she said.
Elliot knows. She’s a 20-year breast cancer survivor-turned-patient advocate. She asked the ABC15 Investigators to help her find out if the charity is doing what it claims.
The ABC15 Investigators went with her for a tour of The Breast Cancer Society’s headquarters in Mesa.
We saw a warehouse that is supposed to contain items meant for breast cancer patients and their families. Patients can come to the warehouse and “shop,” according to BCS. They can take home as much as they want for free.
But, on the day we visited, Elliot was not impressed with the selection.
We saw some donated clothes, mattresses, used sheets, greeting cards and make-up. Even our guide pointed out some noticeably empty shelves.
“To be honest with you, right now, we don't have much in here,” the BCS representative said, “we're waiting on a shipment, I'm sure.”
But, Elliot says, “I would ask what relevance that has to a woman who is fighting for her life.”
Elliot is concerned the charity isn't truly helping Breast Cancer patients with their most important needs, including direct financial assistance.
“It deserves a closer look,” she said.
Charities like BCS have to file tax returns every year detailing how the money they take in from donations is spent. It’s one way for you to make sure the charity is spending your money the way you intended.
Those filings, called 990s, are detailed listings of how much money comes in, how much goes out, and where it goes.
The ABC15 Investigators examined BCS's filings for 2010 and 2011.
“Very little money is going to anything charitable,” according to Daniel Borochoff, President and founder of CharityWatch, a non-profit that analyzes charities’ audits and tax filings and grades them for the benefit of donors.
CharityWatch tackled BCS’s numbers in 2010 and came up with an ‘F’ rating.
Their conclusion? “Only 10 percent of the dollars are actually going to programs,” Borochoff said.
“What you're really doing here is funding the fundraiser,” he said.
FOLLOW THE MONEY
According to their tax records, in 2010 and 2011, BCS received just over $100 million in contributions and grants.
And the charity claims 75.7 percent of that money went to program services.
In the charity world, that makes it appear as if BCS meets the gold standard. Most charity watchdog groups would say donors don’t want to fund the charity, they want to fund the cause, and the less a charity spends on administrative costs, the better.
But take a closer look at BCS.
Out of the $100 million, BCS spent more than $25 million on professional fundraisers.
Records show employees were paid $1.7 million in salaries and compensation. That includes more than $600,000 going to the charity’s founder and executive director, James T. Reynolds II in 2010 and 2011.
But, by far, the largest chunk of contributions comes from nearly $70 million BCS says it gave away in non-cash items over those two years.
And it's one reason CharityWatch and the Better Business Bureau have warned against giving to the charity.
TRACKING NON-CASH CONTRIBUTIONS
Borochoff says non-cash items like the ones BCS claimed in their tax returns are hard to track.
In the case of BCS, they are medicines and other items donated to the charity, and then sent to help people out of the country. The charity puts a value on them for tax purposes.
But Borochoff says they can be valued much higher than they are actually worth, making the charity appear to be more charitable than it really is.
“It's very convenient for the charities because they can hide not only what the goods are but who specifically receives them,” Borochoff said.
And BCS is not the only charity claiming millions in non-cash donations. The Internal Revenue Service recently fined a different charity for claiming it had given away $75 million in non-cash contributions that the IRS said were actually worth just $93,000.
The IRS doesn't require much information about non-cash items on tax forms. And Breast Cancer Society doesn't give it.
Their tax filings state, among other things, the money is used for "medicines, medical supplies, hygiene items, treatment and personal care items."
The "medical supplies" were sent to Western Africa, Central America and the Caribbean, according to the charity’s tax records.
There are no names for the medications provided and no specific medical centers listed as recipients.
And, when the ABC15 Investigators asked Reynolds for receipts and records of all of $70 million in non-cash donations he says they sent out in the last two years, Reynolds said he did have them because IRS regulations require it.
But after initially agreeing to provide ABC15 with those receipts, he said in an email:
I have chosen not provide the level of detail I had originally agreed to. I believe that at some future point industry regulations will change in order to outline requirements for more detailed accounting of supply distributions for all non-profits. We welcome those changes. However, at present, I am hesitant to disclose details that may not comply to the best interest of our donors and health care organizations caring for our breast cancer patients and their families.
Read other statements made in Reynolds' emails to the ABC15 Investigators
In 2011, BCS claimed nearly $38 million worth of non-cash contributions in the form of these life-saving medicines in their tax filings.
The items were likely donated from the manufacturer, Reynolds said, to another charity, like World Help. Then, the items were procured by BCS and distributed to medical centers around the world.
Reynolds said the expenses to BCS in procuring, processing, recording and shipping those medicines was likely a little more than $200,000.
“We wind up paying usually a tenth of a cent to the dollar of what the medications are valued at on a wholesale value,” he said, insisting that BCS doesn’t inflate the value of their non-cash contributions.
“If anything we deflate the prices,” he said.
CHARITY FOUNDER DEFENDS CHARITABLE GIVING
Instead of receipts, Reynolds provided ABC15 with a chart of countries where BCS claims it sent shipments last year.
In a separate email about the value of the medicines and supplies, Reynolds said, "we adhere strictly to standards as established by AERDO / The GIK Affinity Group / The Accord Network,” in valuing its non-cash donations.
But CharityWatch says current standards that charities cite can be meaningless if they have not prevented charities from wildly inflating the value of non-cash goods. Without adequate records showing how much those medical supplies are worth and where they go, CharityWatch says BCS shouldn’t count that $70 million claimed in the last two years in their overall picture.
And if you take away the $70 million, CharityWatch says only a dime of every dollar goes to anything charitable.
Reynolds says he stands by all of his tax records and accounting but admits the charity is young and has made mistakes. He points to his lower salary and fundraising costs in 2011 as progress.
In BCS’s 2010 filings, Reynolds made $364,211 in total compensation. In 2009, his paycheck came to $297,030. It’s compensation he says is below national averages “for a charity of our size, mission and scope.”
“It’s like a family business,” according to Borochoff.
His father, James T. Reynolds, Sr. runs Cancer Fund of America, which CharityWatch also gives an 'F' as its most current rating. It’s a charity that the Better Business Bureau has warned against giving to -- and it’s where Reynolds, Jr. worked before he founded BCS in 2007.
Borochoff called both charities “woefully inefficient.”
“You’ve got to wonder why they do it other than to collect a salary,” he said.
DIRECT FINANCIAL AID
On BCS’s website, the charity differentiates itself as “one of the only national breast cancer charities in the U.S. with a primary focus on providing direct help and assistance to those suffering from breast cancer.”
And direct assistance - especially direct financial assistance - is exactly what Pat Elliot says breast cancer patients need the most. Many patients in Arizona, she says, have a hard time getting the insurance they need and can't pay their bills.
So, the most important question to her is simple:
“Are they supporting that patient?” she asked. “How are they supporting that patient?”
But that’s a question Reynolds had trouble answering.
The ABC15 Investigators asked Reynolds numerous times how much of BCS’s cash goes to breast cancer patients -- not including the tens of millions in non-cash contributions.
He talked about an in-home care program and a monthly cash assistance program, but said the actual amount that goes to those patients changes all the time. He never offered a number.
Without including the non-cash donations, “it’s just not a fair question,” he said.
But it's a question Elliot says is crucial when you consider supporting a charity.
“They are legitimate questions and they deserve legitimate answers,” she said.
CHECKING OUT A CHARITY
Here's how CharityWatch says you should check out a charity.
If you get a call or letter from a charity, make sure to do your homework before giving any money. Charity watchdogs say that means getting the charities annual report in writing. Make sure the charity uses at least 60 percent of donations for programs, and not administrative or overhead expenses.
Also, check to see how much the charity pays towards salaries and fundraising.
Here' s more about charities and how to know where the money really goes.
Copyright 2012 Scripps Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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