#1 on the list of America’s “50 Worst Charities” according to a collaborative report from The Center for Investigative Reporting and The Tampa Bay Times is the Kids Wish Network.

The Times/CIR investigation reveals that over the past 10 years this knock-off of the highly respected Make-A-Wish-Foundation, has “channeled nearly $110 million donated for sick children to its corporate fundraisers”.

By way of comparison, the Times/CIR review reports that “The Make-A-Wish Foundation of Central and North Florida is one of dozens of Make-A-Wish chapters across the country. Last year, it reported raising $3.1 million cash and spent about 60 percent of that, $1.8 million, granting wishes. The same year, Kids Wish raised $18.6 million, its tax filing shows. It spent $240,000 granting wishes – 1 percent of the cash raised.”

In addition, the investigators report that the Kids Wish Network paid its founder and the companies he owns at least $4.8 million in salary and fees and violated IRS rules by waiting four years to disclose the payment of those funds. (Mark Breiner, the founder, claims Kids Wish Network has recently completed an IRS audit and “they found no indication of private inurement or conflict of interest with the founders or the board”.  The IRS does not comment on specific cases.)

You can read the sordid details here and here.

Deja Vue All Over Again?

In reviewing the Times/CIR report’s data, publicly available online, I noted that one of the major fundraising contractors for Kids Wish Network was Brickmill Marketing Services, an affiliate of Quadriga Arts.

You may recall that in May, a year ago, CNN aired the first of what would be a series of investigative reports into the fundraising practices of the Disabled Veterans National Foundation (DVNF), reporting that although nearly $56 million had been raised for the charity, little or none of the money was ever used to help disabled vets, and that Quadriga Art was paid nearly $60 million. That report triggered an investigation by the U.S. Senate Finance Committee. After a year and a month the Committee has yet to issue a report.

So, here we are a year later. Another apparent scandal. Another Quadriga company. What gives?

I called Mark Schulhof, CEO of Quadriga, to get his take on the Times/CIR report that over the past four years Brickmill raised $19.6 million for the Kids Network and was paid $16.5 million, leaving $3.1 million for the charity.

Mark said he didn’t have much information on the inside workings of the charity, the issues around the founder’s behavior and other questions raised in the Times/CIR report, but as far as the direct mail program was concerned, he expressed confidence that the process of growing the donor base while generating net income was “working well”.

[As an aside, Mark also relayed that Quadriga has made changes in its  practices over the last year since the CNN reports on Disabled Veterans National Foundation. We agreed on a separate interview and I’ll cover that in a future post.]

I also wanted to know if it was simply a coincidence that the same spokesperson used by Quadriga in the Veterans story is now employed by the Kids Wish Network.

Melissa Schwartz, a crisis management specialist, wrote The Agitator last year in response to our piece on the Veterans National Foundation and on behalf of Quadriga, saying in part, “To be a successful direct mail program, charities need to build a donor base and continue to add names as some drop off the file each year, which in most cases costs more than $1 to raise $1. While this strategy has been debated for years – within the nonprofit and association communities, in Congress, and even before the Supreme Court, it has been a proven model for more than 50 years.”

Now, a year later, Ms. Schwartz is back, explaining the practices of the Kids Wish Network as follows, according to the Times/CIR report: “Schwartz said the charity has hired outside companies to do fundraising so that its staff can focus on wish-granting….She declined to answer detailed questions about Kids Wish’s fundraising operations or its payments to its founder, saying the charity is ‘is focused on the future’.”

Mark told me she wasn’t employed by or speaking for Brickmill.

Why Does This Happen Again and Again?

It would be a mistake to focus solely on the Kids Wish Network and its solicitors and vendors.  Clearly, according to the Times/CIR report there are at least 49 more!

In order to determine why this keeps happening, the investigative team interviewed regulators in more than 20 states and made the first national accounting of actions against charities and solicitors by piecing together regulators’ documents from across the country.

Of more than 8,000 violations, the Times/CIR team identified about 1,000 serious cases, and tracked what happened to the offenders in many of them.

Among the findings:

• “More than 35 charities and their hired solicitors have been caught breaking the rules multiple times but continue to take money from donors. The most frequent violators have been cited five times or more. One solicitor has been cited 31 times and is still in business.

• “Bans issued by state regulators are meaningless. Over the past decade, at least a dozen solicitation companies and charities have been forced out of one state only to continue raising donations elsewhere.

• “State regulators make it easy for operators to start over. Instead of targeting individuals, they often ban only the charity or the fundraising company, leaving executives free to move to a new organization. Regulators have not created a national list to track charity violators or a formal system to share information.

• “Charity regulation offices nationwide are consumed with paperwork. They collect reams of information on charities but don’t analyze it for signs of fraud. Florida has issued hundreds of fines for late paperwork but has blocked only a handful of charities from soliciting in the state over the past decade.

• “When states do take action, they typically issue a small fine and require no admission of guilt, even for the worst offenders. The most common penalty is $500, a small price for organizations that collect millions.”

And what happened to the Kids Wish Network in return for the 1% of the $110 million that actually went to grant wishes to kids? Two states, Utah and Mississippi, took disciplinary action – two fines and one consent agreement totaling $6,250!

For a view of some concerted/coordinated steps state regulators are now pursuing, check out this story and video from the Times/CIR report.

Who’s to Blame?

It’s easy to stand by and shake our heads at all this shocking data and commentary and note that a few bad apples ruin the barrel of good fundraisers. These ‘that’s-a-shame-but-what-can-I-do-about-it’ rationalizations amount to nothing more — or less — than the collective turning of our backs on the donor.

We must demand more accountability when sloppy, unethical, and perhaps even illegal activity is involved.

Equally, we must acknowledge and defend the importance, value and absolute necessity of skilled third party contractors and practitioners to the success of most nonprofits. No throwing the clean baby out with the dirty bath water.

We must ask questions and offer advice.

• What additional roles should and can professional organizations like the DMA and AFP play?
• Should we mount a campaign to arm the regulators with more teeth? To demand swifter, more meaningful enforcement?
• Why do the truly clean and transparent charities, agencies and consultants stand by in silence as others steal their names and reputations?

Why? Why? Why?

So many complex questions. So few easy answers.

Roger

P.S. An extra special Agitator raise goes to  the Times/CIR team and reporters Kendall Taggart and Kris Hundley for their monumental work.

P.P.S. If you’re suspicious of some charity, the Times/CIR team has set up a way to let ‘em know and they may be able to launch an investigation. Go here.