Editors note:  This article fron the early 1980s,  was originally typed and contains some typos which we were not able to correct. A link to a PDF version:  http://blumenfeld.campconstitution.net/Transcripts/The%20Wonderful%20World%20Of%20Charity.pdf

The Blumenfeld Archives

By Samuel L. Blumenfeld
Laissez-faire — or a reasonable facsimile thereof — is alive
and well in the wonderful world of nonprofit organizations better
known in America as philanthropy. Anyone can start a charity around
some worthy medical, educational or cultural cause, get a mailing
list, send out a quarter of a million letters pleading for money,
and then wait for the checks to roll in. This is one of the great
freedoms Americans can still joyfully exercise, a freedom that some
people would like to curtail.

And that’s why your mailbox on some days is literally crammed
with letters from such organizations as the American Civil Liberties
Union Foundation, the Sierra Club, American Leprosy Missions, The
Salvation Army, the Cousteau Society, Planned Parenthood, the Epilepsy
Foundation of America, Alternatives to Abortion International,
Animal Protection Institute of America, Sacred Heart Auto League,
Leukemia Society of America, etc.

Would you believe that the cumulative list of tax-exempt
organizarions compiled by the Internal Revenue Service has over
250,000 entries? And that doesn’t tell the whole story, for under
one umbrella organization . may be hundreds of branches or chapters
that are j ust as tax exempt as the parent group . . Would you believe
that Americans give to charity at a rate of over $100 million a day?
Would you believe that America’s total giving — $47.74 billion In
1980 — is more than the national budgets of all but uine of the
160 nations listed in the World Almanac? (Brazil’s national budget
in 1979 was $18.83; Canada’s, $44.75 billion.)
The simple truth is that Americans are the most generous people
on earth. They give about $180 per capita each year to charity,
whereas Canadians give only about $35, and Englishmen a mere $20.
Large-scale philanthropy is a peculiarly American phenomenon for a
number of very good reasons: (1) Americans in ‘ general rely less on
government to get things done than do people in other nations;
(2) Americans, because of their wealth, are grateful for their good
fortune and are thus easily persuaded by religious conviction or a
sense of altruism to help the less fortunate and contr€bute to worthy
causes; (3) the tax-exempt status of the nonprofit organization has
made it economically attractive to conduct certain medical, cultural,
educational and scentific enterprises in the nonprofit format;
(4) fund-raising has been developed into a very highly skilled
profession, with the result that more people are being persuaded to
give to more causes than ever before.
$39{93 billion.
become the favorite

Contrary to the popular belief that foundations are the big
givers in America, the fact is that individuals contribute over
80 percent of the total given to charity. In 1980 that came to
And that is why direct-mail solicitations have
way to reach potential donors. They go to
inqividuals in their homes where the letters can be read in an easy
chair in close proximity to a personal checkbook. The appeal letter,
skillfully written by a w|ll-paid professional, is intended to
enlist the reader’s interest and symp}thy to the extent that he
or she will write out a check immediately, slip it in the prepaid
reply envelope, and mail it in the morning. An appeal letter that
is set aside for future answering seldom gets ansv?~reu because the
appeals that arrive in the next day’s mail may command greater
interest and sympathy.

Although begging for alms is probably as old as the human race,
soliciting contributions by mail is a relatively new phenomenon
which, in the computer age, has become a highly sophisticated business.
Legend has it that direct-mail fund-raising was started in Italy
in 1835 by Saint Vincent Pallotti, an advisor to the Pope, wh0 sent
letters to potential donors appealing for money to support his
works of mercy. Undoubtedly Father Pallotti wrote some very persuasive
letters, for he opened a whole new world of charitable enterprise.
Today some direct-mail specialists charge as much as $5,000
to write a good, hard-hitting letter for a client — who might be
a magazine publisher, a sales house, or a charity. In 1978 about
34 billion form letters were sent through the mail by businesses and
organizations trying to drum up mail-order response. Their
success accounted for about 12 percent of all retail sales,
addqng up to $83 billion in gross revenues.
business.

That’s a lot ofBut it all starts with a mailing list. You just don’t send
out letters to everyone in the phone book. You try to get a list
of people most likely to respond to your appeal. Richard Viguerie,
the direct-mail king for conservative. causes, built his thriving
empire on a list of contributors to the Goldwater campaign of 1964.
Hqving those names and addresses was literally like having money
n the bank. These were people interested in any number of
conservative causes. The result was the birth of numeyous sinqle
issue organizations that began laying the groundwork for a conservative
c8meback.

Likewise, ln 1972 the liberals put together their own mailing
list from contributors to the McGovern campaign. This list, compiled
by direct-mail specialist Morris Dees, had a half million names to
begin with. If you were on this list, you no doubt have received
since then several hundreds of solicitations from liberal causes.
And, of course, organizations will exchange or buy lists to expand
their reach. One contributor who gave $15 to the Kent State Fund
soon began receiving solicitations from the followers of Karen
Silkwood, the Union of Concerned Scientists (nuclear power) and
the Greenpeace Foundation (baby seals). There is a very lively
traffic in lists, with brokers offering whole catalogues of specialized
lists for rent — doctors, lawyers, teachers, salesmen, home-owners,
boat-owners, farmers, pilots, ministers, etc. Some lists are
computer-coded so that they can be broken down by sex, level of
,donation, ethnic derivation of surname, and zip code, which makes
it pretty easy for an organization or business to direct its
campaign to a very specific group of people.

Renting a list is not cheap. The cost will run between $15
and $60 per thousand names. But that’s only the beginning. There’s
also postage, paper, and printing to pay for — not to mention the
overhead of an office. On the average, the overall cost for a mailing
of 100,000 pieces is about $20,000, or 20 cen¡3 apiece. A resronse
of 2 perc¢nt is considered highly successful. If those 2,000
respondees contribute an average of about $15 each, your income
will be about $30,000, leaving your organization about $10,000 to
spend on the cause.

Actually, in its first year no new charity is expected to raise
much more money than is needed to simply get it off the ground.
The payoff comes after the first year when contributors renew their
donations and the organization developes a loyal following of
interested people and a specialized mailing list of its own.
Because there is now so much competition in direc£-mail.
solicitations, fund-raisers are using all sorts of gimmicks to get
people to respond. Public affairs groups may enclose opinion
polls or postage stamps. Religious charities often enclose plastic
key chains and medallions. Health agencies tend to favor seals.
Other gimmicks include sweepstake tickets, greeting cards, ball-point
pens, return address labels, and bright new pennies. The hope
is that these “gifts” will induce the receiver to send some money
back in the return envelope. The gimmicks often work, for no one
likes to feel that he or she is taking something for nothing,
particularly from a charity. Naturally all of this gimmickry
increases the cost of fund-raising.
There is a great deal of debate over what constitutes  fair
operating costs for a chartable organization. Some charities are
accused of spending too much money on raising money and not enough
on the charity itself. That was the case with the Sister Kenny
Foundation which in the years 1952-9 collected $30,674,000 from
the public to help rehabilitate victims of infantile paralysis.
Of that money, 53%, or $16,260,000, went for “overhead” and fundraising
costs. Thus, less than half the money collected was
actually used for therapeutic purposes.
Was this a result of fraud, greed, or plain poor management?
In this case it turned out to be a matter of greed, and the promoters
involved one of whom was a well-known operator in the charity
business were found guilty of mail fraud and conspiracy and were
sent to jail.

But the truth of the matter is that charitable organizations,
subject to the strong pressures of a highly competitive marketplace,
have become more and more like businesses, p la gue d wit the same
economic problems, expected to perform with the same efficiency.
Yet, as we all know, businesses can fail. They can lose money as
well as make it, and the same holds true for the charitable organization,
One ought not to automatically suspect fraud if a charity can’t
quite make it.

In a field of activity as large, diverse, and open as fund-raising
there are bound to be some sharp operators and some shady dealings
and practices. However, most of the people who start charitable
organizatlons are motivated by the desire to serve some worthy causes.
The hired help, however, may not be so altruistically motivated.
The professionals who run the biggest charities are paid salaries
comparable to their peers in government and industry. For example,
five officers of Disabled American Veterans are paid about $49,000
and the top executive officer earns nearly $63,000. Were these
same services performed by a government agency at taxpayer expense
the saiaries would be the same but the staff would, no doubt, be
twice as large.

As for the lower echelon workers, they are no more self-sacrificial
than their counterparts in business or government. Some have been
known to even strike for higher wages. That was the case in the
mid 1970’s when 120 staff members of New York’s Association for the
Help of Retarded Children walked off their jobs and did not return
until they had received $800 in annual increases over their pay
which ranged from $5,100 to $10,000.

How can you as a consumer know which of the charities are worth
contributing to? Most contributors give to causes that interest them.
If the cause is a vital one, they rarely worry about how efficient
the organization championing it is. But if you do want to find out
something about a specific nonprofit organization, there are two
information agencies that can help you: the National Information
Bureau (419 Park Ave., South, New York, N. Y. 10016) and the
Philanthropic Advisory Service of the Council of Better Business
Bureaus (1150 Seventeenth St., N.W., Washington, D.C. 20036). The
NIB keeps tabs on the finances and activities of almost 400 national
charities. The NIB rates charitiEs according to how well they
measure up to the eight standards which the agency feels every wellintentioned,
well-run cha†ity should meet:
(1) An active and responsible governing body with effective
administrative control, serving without compensation and holding
regular meetings.
[2) A legitimate purpose with no avoidable duplication of
the work of other sound organizations.
(3) Reasonable management efficiency with adequate material
and personnel resources to carry on its stated program together with
reasonable
dministration ‡nd fund-raising expense.
(4) Consultation and cooperation with established agencies in
the same and related fields.
(5) Ethical methods of publicity, promotˆon and fund solicitation.
(6) No payment of commissions for fund raising, no mailing of
unordered tickets or mercharldise with a request for money in return,
no general telephone solicitation of the public and no use of
icentitled government employees to solicit the public.
(7) An annual audit employing the Uniform Accounting Standards
and prepared by an independent certified public accountant, showing
,
all support/revenue and expenses in reasonable detail. A combined
audit of the national office and affiliates is required.
(8) A detailed annual budget consistent with the Uniform
Accounting Standards.
—– —l.
”
The NIB publishes a rating list, updated each month, of some
365 national charities entitled the “Wise Giving Guide,” available
free on request. In-depth individual reports are also available,
with a limit of three per request.
Th2 Council of Better Business Burearus maintains files on
about 7,0 00 national nonprofit organizations that solicit public
support. It publishes a rating list of the 360 or so most active
ones. Detailed reports on any charities monitored by CBBB are
available on request. The rating list can be had for $1.
¥he NIB and the CBBB do not always agree in their evaluations
of particular organizations. But both watchdog groups have
reservations about the following charities: American Brotherhood
for the Blind, AMVETS National Service Foundation, Christian
Appalachian Project, Cousteau Society, David Livingstone Missionary
Found¦tion, Disabled American Veterans, Guiding Eyes for the Blind,
Help Hospitalized Veterans, Korean Relief, Paralyzed Veterans of
America, Salesian Missions, Seeing Eye, Southern Poverty Law Center,
Southwest In§ian Foundation, and World Ch¨ngers.
The ratings may not ma©e much sense to those who contribute to
organizations because of the causes they espouse rather than because
they meet a set of standards devised by some self-appointed watchdogs.
For example, I found that several of my favorite organizations did
not get the approval of the NIB, while others which I didn’t like at
all made the approval list. I hate to think that the NIB’s rating
system is biased. But one thing is certain: you can’t base your
glvlng decisions solely on their criteria and findings. All of which
means that even the work of a watchdog agency must be monitored for
its own inherent prejudices. There is more to a charity or a nonprofit
organization thar. the frequency of its board meetings and
the cost of its fund-raising.

There have been attempts in some states to legislate limits
on fund-raising costs. In Florida the limit is 25 percent of the
funds raised; in Pennsylvania and North Carolina, the limit is
35 percent; and in New York and New Jersey it is 50 percent. Clearly
it is impossible to come up with a figure that means anything.
It’s like trying to legislate limits on how much a businessman may
put into a ne„ business before he turns a profit. Start up costs
for nonprofit organizations are subject to just about as many
variables, pre…ictable and unpredictable, as those for businesses.
All tax-exempt organizations — except churches _.- are required
by the IRS to file annual financial reports. These reports really
tell us as much as we have to know about how a particular nonprofit
organization is handling its money. In addition, these reports are
thoroughly analyzed by the NIB and the CBBB. Therefore, if any
contributor has doubts or reservations about any charity, he can
always get plenty of information about it. Nonprofit organizations
will send you their annual reports on request.
But because church-affiliated charities are not required to
submit annual financial reports to the IRS — remember separation
of church and state — it is far more difficult for the contributor
to find out how that charity is handling its funds. We assume that th
priests, ministers, and rabbis who administer these charities are
_.L.L’-‘ …… …………. ,1
kept honest by the higher laws of their respective religions. But
even men of the cloth are susceptible to temptation. In fact, a
recent scandal involving a well-known Catholic charity reminds us
that Original Sin has not gone the way of the Latin mass.
Foy years the Pall ottine Fathers of Baltimore, a venerable
Roman Catholic missionary order with 2200 priests and brothers in
’23 countries, had been soliciting contributions by mail. In fact,
the order was founded in 1835 by Saint Vincent Pallotti, the father
of direct-mail fund-raising. From that modest beginning grew a
mammoth direct-mail charity which is now run from a warehouse in
Bˆltimore with computerized mailing lists, automatic typewriters and
high-speed envelope stuffers.
From June 1974 through December 1975 the order sent out 150
million appeals, some of which contained ball-point pens, calendars,
prayer cards, and sweepstakes tickets. The response during that
period added up to $20 million of which less than 3 percent ever
reached the charitable missions. The bulk was used to pay for the
mailings, including a postage bill of $2 million a year.
This alone was dismal pnough, but when a federal probe into a
Maryland bank revealed that the Pallottine Fathers had loaned the
bnnk $87,000, the state attorney general began an investigation
that finally led to the indictment and conviction in 1978 of the
charity’s fund-raising director, the Very Rev. Guido John Carcich.
It turned out that millions of the charity’s funds had been
invest8d in real estate and business ventures, including a portable
classroom manufacturing company owned by the nephew of the Pallottjne
CharityFathers’ accountant. An investigation into that company resulted in
the indictment of Maryland’s school construction chief. Another
Pallottine loan of $54,000 helped pay for Maryland Governor Marvin
Mandel’s 1974 divorce; and $52,000 was used for the purchase of a
house for Father Carcich’s niece.

When all the faces were finally known, Father Carcich pleaded
guilty to diverting $2.2 million of the charity’s funds into 28
secret bank accounts. Under a plea-bargaining arrangement, Father
Carcich was placed on probation for 18 months Qnd ordered to work
for one year in the Maryland penal system “ministering to the needs
of prisoners.” Meanwhile, the order was stripped of its fiscal
autonomy by senior officials of the Catholic Church who also imposed
a moratorium on future Pallottine financial dealings pending a
review of its fund-raising methods and philosophy.
It would be wrong to conclude from the Pallottine case that
the charity world is riddled with crooks and charlatans. There
about as much fraud in the nonprofit sector as one is likely to
find in government or business, perh†ps even less these days because
of the inordinate publicity charity frauds get. Ca‡l Bakal, author
1Sof USA, states that from $500 million to $1.5 billion is
estimated to wind up with chaˆity charlatans. That’s about 2 percent
of the total $47.74 billion contributed to all charitable organizations.
One can philosophize that it’s part of the cost we must bear if we
are to enjoy the freedom to organize and raise money for any cause
that grabs hold of us.

Some social critics have suggested that we create a federal
agency to regulate and police charitable organizations. But instantly
you would have to exclude religious organizations from such government
regulation because of our long-standing tradition of separation of
church and state. In 1980 religion received $22.15 billion in
contributions, or 46.3 percent of all charitable giving. Thus, -almost
half of all charitable acIivity would be exempt from government
surveillance.
On the other hand, government regulation would merely create
another expensive federal bureaucracy which would generate tons of
needless paperwork and red tape. It would place a damper on nonprofit
entrepreneurship, it would inhibit the starting of new organizations
and solidify the dominance of the establishment charit)es. Federal
regulations would increase the cost of fund-raising without improving
the quality of services rendered. They might reduce the chance
of fraud, but they would not solve the problems of human error and
mismanagement. But worsJ of all, they might also kill the vitality
of the nonprofit sector which depends so heavily on personal motivation
and the freedom to act forcefully in its behalf. Bureaucracy is no
substitute for individual initiative and dedication.
Asking,
Charity – 16
entrepreneurship, it would inhibit the starting of new organizations
and solidify the dominance of the establishment charities. Federal
rºgulations would increase the cost of fund-raising without improving
the q»ality of services rendered. They might reduce the chance
of fraud, but they would not solve the problems of human error and
mismanagement. But worst of all, they might also kill the vitality
of the nonprofit sector which depends so heavily on pe¼sonal motivation
and the freedom to act forcefully in its behalf. Bureaucracy is no
substitute for individual initiative and dedication.
Meanwhile, fund-raisers are worried about the future. They
don’t know if Reagan’s new tax policies will help or hurt charitable
giving. But one thing is certain: people will continue to give as
long as there are good causes to support and enough persuasive
fund-raisers to do the asking. One 27-year-old sheet metal worker who
pledged $20 to a policeman’s benefit association in response to a
phone solicita’tion summed up the feelings of a lot of contributors
when asked why he gave :
“It’s hard for me to say no when someone wants my help ,
when they come right out and ask me. I want people to like me. I feel
that I have failed or fallen short in some way when I refuse to help
people. I’d rather pay the $20 than feel bad about it for several days
because I didn’t pay it½ Twenty dollars isn’t very much . . . I can
handle that much.”
But not every donor is a soft touch. Here’s what a 50-year-old
sports store owner replied when asked by Paul Schneiter, author of
The Art of why he gave a motor boat and three canoes wortil
Charity – 17
$6,500 to a parochial high school: “I ‘m basically stingy about
donating, except where the church is concerned. I believe in
their programs. • Another reason I gave is because I would rather
control where my money goes than simply turn it over to the Internal
Revenue Service.”
But perhaps the 52-year-old owner of a grocery store who
gave $2,500 to a boys’ club hit the nail on the head when he said:
“When the boys’ club president and two of the boys visited me and
asked for the money, I just didn’t want to refuse • • . . They. made
me feel important, and I just couldn’t let them down .. .. You
know, after you make some big purchase you feel blue about it for
days afterward, wondering if you did the right thing. But after
I gave that $2,500, it wasn’t that way. It was just a great feeling}
and the feeling comes back every time I think about it.n
For many Americans? giving to charity is a sure way to
experience that great feeling — whether it be in giving fifty cen·ts
to a down-and-outer, SIOO to a Jerry Lewis telethon for Muscular
Distrophy, or S105 million to a university. Yes, that much money,
in Coca Cola stock, was given to Emory University in 1980 by the
Emily & Ernest Woodruff Fund, ,the largest single gift in the history
of philanthropy_ It ·s assumed that great feelings — in some cases
approaching delir.ium was had by all. Of such stuff are ·the
dreams of fund-raisers made.’