June 2, 2018; Boston Globe
According to its annual tax filing, Food for The Poor (FFP) is one of the nation’s largest nonprofit organizations, annually raising about $1 billion to support its international aid programs targeted at the poorest and the neediest. Visit their website and you’ll quickly see that their name describes their purpose: “Imagine seeing your children slowly starving…and having nothing to feed them. For countless destitute families, this is a grim reality. For every $3.65 you donate you can feed a hungry child for a month.” And they proudly claim to be extraordinarily efficient as an organization, saying, “Over the last ten years more than 95 percent of all donations, including donated goods, have gone directly to programs that help the poor.”
A recent article in the Boston Globe asks us to consider whether effective marketing has become more important than transparency. It focused on the organization’s operations and the concern that it overstates how much of its resources end up as food for those in need. Despite its name and its claims, “the Florida-based group spent just seven percent of its cash donations on direct purchases of food in 2016, according to emails exchanged between a charity official and one of the organization’s critics, who shared the emails with the Globe.” Their claims of extraordinary efficiency have been challenged by state regulators in California and Florida based on accusations that the value of donated products has been seriously overstated.
The legal challenges to Food for the Poor’s accounting practices arose when regulators found that drugs were being valued as if they were being sold in the US rather than at their much lower costs in overseas markets. In May, Ruth McCambridge wrote a newswire on a suit brought by the California Attorney General against the group and found that in Food for the Poor’s case, the in-kind donations were largely pharmaceuticals that were too close to their expiration dates to be sold in the United States.
“Even in the countries to which they were shipped,” she wrote “they would be sold at a fraction of their original cost.” In one case the Globe cited, Food for the Poor valued a 2013 shipment of the antibiotic ciprofloxacin and the painkiller tramadol to Guatemala at $534,000 when, on the international market, the cost would have been less than $46,000.
The net result of this is to make Food for the Poor seem much larger than they were, thus reducing the proportionate size of their organization’s overhead budget, and to provide a greater deduction to the companies providing the drugs than they might otherwise have earned.
The overvaluing of donated materials and their commingling with cash donations in the calculation of the organizations claims of efficiency were also seen as misleading. According to the Globe story, California’s attorney general, Xavier Becerra, went as far as accusing the organization of filing “false and misleading” financial statements and federal tax forms.
Food for the Poor’s use of the 95 percent figure, Becerra said, is deceptive because it included both cash and noncash donations. But noncash donations, including Food for the Poor’s overvalued pharmaceuticals, did not pay for any overhead or fund-raising; only the cash donations did. Combining the two types of donations creates “a likelihood of confusion or misunderstanding in the minds of potential donors.”
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Critics see Food for the Poor’s behavior as more than an accounting problem; they believe it misleads donors and harms other nonprofits that work in the same space. Patrick Moynihan, president of The Haitian Project, a nonprofit organization that supports a private, tuition-free school in Haiti, told the Globe, “They are gaming the industry, because those of us who are not gaming cannot beat those ratios. Food for the Poor is very likely taking donations from compassionate, well-intentioned individuals of modest means in order to help corporations dispose of their trash.”
Patrick Moynihan’s wife, Christina, a teacher at the Louverture Cleary School near Port-au-Prince, said she has seen crates at the charity’s Haitian warehouse that contain winter hats, gloves, and scarves; Rachael Ray diet cookbooks; and 100-pound bags of beans that the school’s cooks found riddled with stones.
“That was so infuriating,” Christina Moynihan said. “What I saw in that warehouse was that there are businesses in the United States that are able to give donations and write their taxes off without any concern about an impact on the country that is receiving it.”
The other new aspect of this story covered in the Globe is the closeness of the organization to many churches where support is solicited from the pulpit through a program where FFP sends in guest priests.
News of the California cease-and-desist order came as a surprise to every clergy member and parish official in Massachusetts contacted by the Globe, all of whom praised the group.
“We’re very supportive of their work,” said Sue Grundy, parish administrator at St. Peter’s Episcopal Church in Cambridge, where a visiting priest has preached in support of Food for the Poor for nearly a dozen years. “As far as we know, they’re supporting the communities that they are involved in.”
Food for the Poor does not believe it has been misleading, either in its reporting or in its marketing. In its appeal to the attorney general’s decision, it said, “FFP’s solicitation materials did not contain any misrepresentations. The program expense ratio highlighted in FFP solicitations is true and accurate when FFP’s expenses are viewed as a whole.”
Inflating its size and efficiency may give Food for the Poor an undeserved image of success that makes it harder for others to compete for philanthropic support. For donors, the effort they think they are supporting may not be where their funds end up. Even with easy access to annual reports and IRS filings, it is very hard for a donor to dig deep enough to see that the numbers may not tell the whole story. Donors have a right to decide where they wish their gifts to go and must be able to have a clear picture on which to base that decision. Organizational leaders have a responsibility to weigh real transparency over effective marketing. Effective oversight of nonprofit organizations is needed to ensure this is happening.—Martin Levine