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Readers who pre-ordered the seventh annual edition of the ANIMAL PEOPLE Watchdog Report on Animal Protection Charities should have their copies in hand before the June 2005 edition of the ANIMAL PEOPLE newspaper goes to press.
The first printing of the 2005 Watchdog Report reviewed 125 charities for just $25, or a mere 20¢ per entry, including complete contact information, the most recent financial statistics for each organization, and summaries of major programs, program-related controversies, policy issues of note, and administrative issues or changes.
Among the 125 animal charities listed are the 83 U.S.-based organizations from which you are most likely to receive solicitations, including environmental charities that deal with wildlife habitat and biodiversity, plus 42 overseas charities whose activities we have either personally inspected or have had inspected by trusted colleagues.
The 2005 Watchdog Report will unfortunately be the last to include new observations from longtime contributor Bonny Shah, who died of leukemia in July 2004. Shah helped us verify the particulars of seven charities in India, Latin America, and the U.S., and added perspective to several other entries.
If you did not pre-order the 2005 Watchdog Report, use the form on page
18 to get yours now––or place your order through our web site,
www.animalpeoplenews.org.
Helps charities as well as donors
Fifteen years after ANIMAL PEOPLE began producing our annual “Who gets the money?” financial reports on animal charities, featured in each December edition, and seven years after The Watchdog Report began supplementing the numbers with further information, savvy animal charity administrators realize that being included helps them as much as it helps donors. If they are achieving program success, raising funds efficiently, and avoiding scandal, The Watchdog Report affirms their accomplishments to the most serious donors, who make the largest contributions and are often the most inclined to leave bequests.
If an animal charity doing national solicitation is not in The Watchdog Report, it is usually because the mission of the charity is not big enough, in our assessment, to warrant high-profile national fundraising. Non-listing means it is less likely to be on the short list of those that will receive the most carefully considered gifts, as opposed to the usually small spontaneous donations that direct mail campaigns typically seek to elicit.
The Watchdog Report is heavily used by the multi-organization donors who receive the most mailings. Watchdog Report readers are just a small percentage of the total animal charity donor base, but because they appear to receive a disproportionately high percentage of “cold solicitations” from charities with which they have no prior relationship, the influence of a Watchdog Report review on direct mail returns appears to be significant.
Even if a listed animal charity has major deficiencies, spotlighted by the Watchdog Report, in some cases the notice helps to bring the assistance that decision-makers at the charity need to rectify whatever is wrong. About once a year an executive director or board member mentions that a critical review helped to secure approval to make a necessary change.
This is an encouraging shift from the atmosphere when we started, when the prevailing attitude of animal charity administrators tended to be that the less donors knew about their operations, the better. At the time, we were almost the only regular reviewers of animal charity financial filings, which were relatively difficult to get through the Internal Revenue Service, state charities bureaus, and the British Charities Commission. We would typically have to fill out two forms for every current financial filing we received.
Now the easy accessibility of IRS Form 990 filings at <www.GuideStar.org> has produced a plethora of instant online charity analysts, most of whom do not have the ability or interest to do much more than crunch numbers––and many crunch them inaccurately, because the number crunchers fail to verify that the statistics reported on IRS Form 990 cross-check from line to line and section to section in a credible manner.
Neither do most of the other analysts compare IRS Form 990 data with copies of appeals, organizational web sites, and news reports, to verify that the program activity described on IRS Form 990 is actually what each charity is doing, and advertises that it is doing. Program verification is central to the work of ANIMAL PEOPLE, not only in compiling the Watchdog Report but in reporting the news about animal protection all year long.
The Watchdog Report exists, and ANIMAL PEOPLE itself exists in part, because people who care enough about animals to make substantial investments in nonprofit animal protection work want to get better information about where their money goes.
This is not just a matter of wanting to ensure that donations are not merely feeding direct mail mills and enriching overpaid executives, or that charities are fronts fo fraud. Certainly these are concerns, but they are only worst case scenarios for experienced donors.
Cold solicitations from high-volume mailers would not have a response rate of less than 1% if most recipients did not already recognize and reject look-alike appeals from charities with similar names, shocking photos and sob stories that have already been used for decades, gimmicks such as coins and souvenir merchandise included with appeal letters, envelopes designed to resemble bills or government documents, and the zillion other ploys that route mailings to the trash, unread.
Serious donors have questions that go beyond their letter-sorting response to the daily onslaught of appeals. In fact, donors tend to have questions similar to those of investors in the stock market, only slightly modified in recognition of the differences in purpose. Both animal charity donors and stock purchasers want to know about prospects for immediate results, longterm prospects, past performance, unique attributes or liabilities of the enterprise, the vision of the leadership, the stability of the management team, the ratios of assets to earnings, and the ratio of investment in promotion to product or service sales.
As with charitable fundraising, either too high or too low an investment in promotion relative to returns tends to suggest eventual failure.
If the charity or corporation is engaged in multiple activities, the donor or investor wants to know which activities are the most productive, which show growth potential, and which are obsolete.
In this regard, the differing responses of animal charities and corporations to such questions tend to demonstrate why corporate executives make more money.
To begin with, a corporation is sales-oriented. The first thing anyone in sales learns is that, “The customer is always right.”
Fortune 500 companies not only routinely and easily disclose the equivalent of all of the same information included on IRS Form 990, but go out of their way to make it accessible and available to potential investors. While they zealously guard their trade secrets, financial performance is typically an open book. A potential investor, business reporter, or even university student who expresses an interest in a Fortune 500 corporation will soon be inundated in quarterly reports that detail the company activity.
Only a handful of the 126 animal charities included in the Watchdog Report offer anything of the kind. About 25%––typical of all charities, according to GuideStar––omit essential information from IRS Form 990, or incorrectly report fundraising expenses. Foreign animal charities commit similar omissions in producing the balance sheets that they prepare in lieu of filing a document such as Form 990.
The value of itemization
The most egregious omissions and errors involve attempts to pass off the cost of high-volume, low-yield direct mailings and telephone solicitations as “program” expense, in the name of public education. But this is hardly the only major failure of accountability that we see. Nearly half the financial statements we review fail to itemize program expenditures in any meaningful way.
For example, the Animal Welfare Institute declares on Form 990 that about 75% of AWI program spending in 2004 went to “promote the welfare of all animals and seek to reduce the sum total of pain and fear inflicted on animals by humans.”
Founded in 1952 by the late Christine Stevens, AWI has never been credibly accused of any kind of financial impropriety. This hazy description of program activity is not an attempt to conceal anything––just a typical example of the failure of much of the animal charity universe to recognize the value of accountability as a fundraising device.
The IRS Form 990 filings of the North Shore Animal League contrastingly stood out immediately, from the first we saw, back in 1989. Where the sum of AWI program activity is covered in three terse lines, North Shore annually provides a veritable yearbook. Each major category of program activity is described in terms of expenditure, returns, objectives, accomplishments, and history. Some of the categories are broken down into sub-categories.
The North Shore filings are not glossy, like a corporate prospectus, but they have always been compiled by people who understand that to attract multi-million-dollar support, one must present program information that shows how it will be used.
Thirty-five years ago AWI was the larger organization. There are many reasons why North Shore now has 10 times the annual donor revenue, among which providing better program descriptions on IRS Form 990 almost certainly ranks fairly low.
But North Shore pioneered another use of accountability as a fundraising device that had a more demonstrable outcome. Instead of charging a flat-rate adoption fee, as is traditional, or setting adoption fees according to the anticipated level of adoption demand for each animal, as is increasingly successful these days, North Shore quit charging an adoption fee. Instead, adopters are presented with an itemized list of the costs involved in preparing an animal to be adopted, and are asked for a donation. After that approach was introduced, the typical return per animal rehomed from the North Shore shelter soared to half again what it was when a flat adoption fee was charged.
Then-North Shore operations director Mike Arms now heads the Helen Woodward Animal Center in Rancho Santa Fe, California, and is among the most popular speakers at the Best Friends Animal Society’s No More Homeless Pets conferences. Having supervised programs that have rehomed more than one million animals, Arms has a seemingly endless inventory of techniques to share, but none are more vital to increasing revenue than his discovery that adopters of “free” animals will generously respond to a specific invitation to help with specific line items, at specific amounts.
“Vague appeals bring vague response,” Arms emphasizes. “Be honest and tell the donor that spaying or neutering cost so much, vaccination cost so much, kenneling cost so much, etc. Maybe the donor can’t help you with all of the expense, but usually you will get some of it. Maybe the rest will come later. Give the donor a list, and it will be remembered.”
Hundreds of other animal charities are now using variants of the “itemized list” approach. Many ask donors to check off on a reply coupon a specific amount that will go toward a specific purpose.
So long as the money is verifiably spent for the purpose for which it is raised, itemizing requests can be especially effective in attracting new donors, including in parts of the world where donating to animal charities is a relatively unfamiliar concept.
For example, the Cat Welfare Society of Singapore recently distributed postcards to the Singapore business community, offering attractive photos of cats on one side, with educational single-sentence captions, and one the back, brief mentions of the society’s daily expenses for veterinary care, per cat cost of sterilization and vaccination, and per month costs of keeping a cat in foster care.
Whether the postcards are the right vehicle for bringing in donations remains to be seen, but the message is right. Business people understand contracts. A donation made in response to an itemized request is in effect a miniature contract, obliging the charity to do specific work. If the work is done properly, and is seen to be done, each transaction builds donor confidence, until eventually the itemized request is no longer necessary because the donor becomes willing to accept on faith that the charity is using good judgment and handling money in a responsible manner.
