Is it ethical to get rich by running a charity? Oral Roberts, Jimmy Swaggart, Jim & Tammy Bakker, and Tony Alamo, among others apparently thought so. Me, I don’t. In fact, it seems downright nefarious.
I just received my latest solicitation from Smile Train, the charity that repairs cleft
palates in children. The envelope carried a full-color photo of a child with the condition that would melt the heart of Bedford Falls Banker Henry Potter, along with this statement:
“MAKE one gift now and we’ll never ask for another donation again!”
That seems a little strange to me. If one thought this a worthy charity, why would that
offer be persuasive? Maybe it’s just me. AIP does report evidence that Smile Train does not always fulfill that assertion.
Now if ever there were a worthy cause, cleft-palate repair has to be one. I happen to
know that the cleft palate condition is indeed one that is very amenable to surgical
correction using proven techniques. But, The American Institute of Philanthropy in their latest ratings has given Smile Train only a grade of B, apparently because of excessive executive salaries and misleading advertising. The August issue of AIP’s rating guide lays out their critique, in part, as follows:
“In the past AIP has disputed the meaningfulness of Smile Train’s claim that
“100% of your donation goes to program – 0% goes to overhead.”
All non-program expenses, such as overhead and fundraising, are paid for with start-up grants from our Founding Supporters.” The problem with this reasoning is that any charity could ask a portion of its loyal supporters to use their donations to cover overhead. But overhead expenses will not disappear! Money is fungible (emphasis mine), regardless of its source; what is spent on one function is not available for another function. The bottom line is that more donations could go toward treating children with cleft palates if the charity were operating more efficiently, regardless of whether or not some donors earmarked their donations for overhead.
This AIP B rated charity with a fiscal 2009 overhead rate of 30% not only continues to make its “100% goes to program” claim but a recent teaser on a Smile Train solicitation envelope went so far as to quote Smile Train’s president as saying, “I run the most cost-efficient charity on Earth.” Brian Mullaney, the President and Co-Founder of Smile Train, moderated slightly his boast in his appeal letter inside the envelope by saying, “. . . in spite of the downturn in the economy–we’re probably the
most cost -efficient charity in the world.” The letter does not tell you that Mullaney’s total compensation skyrocketed 61% from $420,210 in fiscal 2007 to $678,058 in fiscal 2009–also in spite of the downturn in the economy.
I am all in favor of helping the unfortunate children of the world, but I for one intend to look for ways that do not include enriching the rich as well.
AIP is fiercely independent and accepts nothing of value from the charities it investigates.