Giving to Diabetes Charities: Where Does the Money Go?

A couple of weeks ago, Bloomberg Magazine ran an article about some truly sketchy fundraising efforts being supported by some of America’s major charities, including the American Diabetes Association. I highly recommend reading the whole piece, which is simultaneously fascinating and disturbing — but here’s the gist: charities such as ADA often hire telemarketing firms, in this case InfoCision, to recruit volunteers by phone to send out fundraising letters to family and friends to raise money for the charity. Not only are InfoCision’s callers often quite aggressive (and inaccurately refer to themselves as volunteers, rather than paid employees), but they actively lie about one important point: very little of the money goes to the actual non-profit. How little? Allow me to quote from the article:

 “According to documents obtained through an open records request with the Ohio attorney general, the Diabetes Association approved a script for InfoCision telemarketers in 2010 that includes the following line: ‘Overall, about 75 percent of every dollar received goes directly to serving people with diabetes and their families, through programs and research.’

“Yet that same year, InfoCision’s contract with the association estimated that the charity would keep just 15 percent of the funds the company raised; the rest would go to InfoCision.”

Yes, you read that correctly: fifteen percent. What’s more, the ADA defended itself against the idea that this was sketchy by using the sort of semantic justification that I’m more accustomed to hearing from politicians. As the article reports, “Association Vice President Erb offers no apologies for the script, saying the association runs many fundraising campaigns and, overall, [my italics] about 75 percent of the money goes to its programs. He acknowledges that the contract with InfoCision estimated that the telemarketer would get to keep 85 percent of the funds it raised.”

In other words, as long as the telemarketer included the “overall,” then he or she was technically telling the truth. To his credit, Erb reportedly wasn’t pleased to hear that some of the recruited volunteers weren’t happy when they found out the truth behind the numbers — but he didn’t exactly exonerate himself.

“’Obviously, if people feel betrayed or that we’re not being honest with them, it doesn’t make me feel well,'” he told Bloomberg. “’But the thing is, we’re a business. There has never been a time or a place where we said, ‘Most of this money is coming to us.'”

I’m sorry, what? First, you’re a business? Tell that to the IRS. And second, the ADA and other charities (the American Cancer Society is another one mentioned frequently in the piece) frequently claim that most of the money is going to them. How often have you received a fundraising letter claiming that 70 to 85 percent of your money is going straight to research? And what about all those charity report cards that rank non-profits by how cost-efficient they are? 

Well, thankfully, that part is likely true. When charities raise money for themselves, via their own phone calls or fundraising letters, a much higher percentage of the money goes directly to them; the crazy numbers are when telemarketers are involved. The article is not suggesting that you scrap your charitable donations altogether.

So, if there’s such a risk to their reputation (and if it’s so not profitable), why do charities invest in this type of service? 

Basically, it’s to get potential donors’ names for future donations — by outsourcing the initial recruitment, non-profits are hoping to identify a pool of willing volunteers and donors that they can call upon down the line. And in one sense, that makes sense — signing people up is really hard work, and requires a lot of time and effort that the charity itself might not have the manpower to handle. Why not hire a separate company to do that initial work for you? 

The problem, as I see it, is that these telemarketing companies lie. And, by hiring them and approving the scripts, the charities become liars as well. A senior vice president at the American Cancer Society defended the practice by saying that it makes sense to invest in some outreach efforts that don’t immediately bring in money, since their goal is to “engage people in long-term, meaningful relationships.”

To which I say, has this man ever been in a relationship? How many people would really make a second donation, or volunteer more of their time, to an organization that has lied to them? Much like a marriage, charitable giving relies on trust. Break that trust, and it’s very hard to earn it back.

Here’s how one woman, recruited by the ADA to send out fundraising letters, reacted to the news of how little of the money actually went to the charity:

“‘It’s like a betrayal,’” Patterson [said], sitting in her kitchen in June, after being shown copies of the North Carolina report and the contract the association signed with InfoCision. “’I know I won’t donate again. It’s like they stabbed you in the back. It’s terribly wrong.’”

There are other sketchy things as well. For example, the contract with InfoCision includes a clause, which apparently charities don’t always read or understand, that allows InfoCision to rent out the list of donors to other charities if InfoCision isn’t fully paid for its contract. Translation: your name, phone number and address could be given out to other non-profits in order to punish the original non-profit for not paying its bills. Um, that’s a little f’d up, no?

InfoCision has many other big-name clients, including the American Lung Association, the ASPCA, March of Dimes Foundation and National Multiple Sclerosis Society. According to Bloomberg, InfoCision “brought in a total of $424.5 million for more than 30 nonprofits from 2007 to 2010, keeping $220.6 million, or 52 percent, according to state-filed records.” And even at its 15/85 percent breakdown, the ADA isn’t even the worst offender: 

“In fiscal 2010, InfoCision gathered $5.3 million for the [American Cancer Society — which hired them from 1999 through 2011]. Hundreds of thousands of volunteers took part, but none of that money — not one penny — went to fund cancer research or help patients, according to the society’s filing with the U.S. Internal Revenue Service and the state of Maine.

“Every bit of it went to InfoCision, the filings say. The society actually lost money on the program that year, according to its filings. InfoCision got to keep 100 percent of the funds it raised, plus $113,006 in fees from the society, government filings show.”

That last part about filings is apparently key, too, since apparently it’s very easy for non-profits to bury their telemarketing expenses in reports to the IRS, if they’re reported at all. “The nonprofits have become adept at hiding the money they spend on telemarketing firms,” says the Bloomberg piece. “An examination of hundreds of annual filings that nonprofits are required to submit to the IRS shows how charities can bury, and sometimes omit, their expenditures on telemarketing. . . . It’s an InfoCision filing with North Carolina that reveals that the Diabetes Association got just 22 percent of the money raised nationally by volunteers recruited by the telemarketer in 2011. That figure isn’t found in any public filing with the IRS.”

So, there you have it: your daily moment of outrage, brought to you courtesy of one of the main charities that is supposed to be helping raise money to fight your disease. Of course, it would be silly to dismiss the entire ADA by virtue of this one questionable practice. But considering that the largest legal penalty so far was a $75,000, one-time settlement paid by InfoCision (less than one tenth of one percent of its revenue from charity fundraising from 2007-2010, says Bloomberg), it seems that it might make sense for some of the people involved with these charities to complain directly to the charities themselves. For by approving, and even encouraging, lies, these non-profits are risking losing the trust of the American public. Lose that trust, and you lose your donations. Lose your donations, and you end up hurting the future of the very group of people whom you’re supposed to be serving. In the case of the ADA, that means us.

As a side note: you should also beware of “chuggers” — short for charity muggers — those young people with clipboards who accost you as you walk down the street and try to get you to sign up for recurring donations. I had a friend in journalism school who did an expose on the companies who run those campaigns, and the financial breakdown was very similar: much of the initial money goes straight to the marketing company. If you want to donate to a charity, it’s best to do so directly. That way you can be more confident that your money is actually going where you think it should be.

Catherine Price

Catherine Price (www.catherine-price.com) was diagnosed with Type 1 diabetes when she was 22 years old. She has written for publications including The Best American Science Catherine Price is a professional journalist who was diagnosed with Type 1 diabetes when she was 22 years old. Her work has been featured in publications including The Best American Science Writing, The New York Times, Popular Science, The Los Angeles Times, The San Francisco Chronicle, The Washington Post Magazine, Salon, Slate, Men’s Journal, Health Magazine, The Oprah Magazine, and Outside, among others. A graduate of Yale and UC Berkeley’s Graduate School of Journalism

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Catherine Price

Catherine Price was diagnosed with Type 1 diabetes when she was 22 years old. She has written for publications including The Best American Science Catherine Price is a professional journalist who was diagnosed with Type 1 diabetes when she was 22 years old. Her work has been featured in publications including The Best American Science Writing, The New York Times, Popular Science, The Los Angeles Times, The San Francisco Chronicle, The Washington Post Magazine, Salon, Slate, Men’s Journal, Health Magazine, The Oprah Magazine, and Outside, among others. A graduate of Yale and UC Berkeley’s Graduate School of Journalism