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American Institute of Philanthropy’s Skewed Standards Miss the Mark
By: Richard M JohnRecently Soldiers Angels has been attacked by a self proclaimed “watch dog” group. Be it on web sites, in the media, or in potentially misleading testimony before Congress, a variety of inaccurate information has been set forth by this group, ranging from claims that less than 40 percent of funds raised go to supporting the troops rather than the 64 percent (and climbing) that we currently provide, to false information on employees. At no point did this organization ever request documents from Soldiers Angels, yet curiously, it states that we do not comply with their “Open Book” policy. Unlike reputable organizations, such as the BBB Wise Giving Alliance, this organization provides no means of feedback nor any mechanism for addressing the concerns it raises.
This organization is run by a Mr. Daniel Borochoff and operates under the names of the American Institute of Philanthropy and www.charitywatch.org. The attacks against Soldiers Angels are based upon inaccurate facts and concocted subjective standards. Mr. Borochoff personally disapproves of charities that use direct mail fundraising and has created a rating system that picks and chooses among various statistical data to create a formula that allows him to rate certain charities poorly regardless of the progress the charity has made in carrying out its stated goals and missions. Soldiers Angels is an all volunteer organization that, through the dedication of its volunteers, has had phenomenal success in achieving its mission of providing aid and comfort to our deployed and wounded military personnel and their families. Mr. Borochoff’s attacks against Soldiers Angels are disingenuous, misleading, and just plain wrong.
These attacks inaccurately indicate that Soldiers Angels spends less than 40 percent of its donated funds on program services. In reality Soldiers Angels spends 64 percent of its raised funds on its program services and is continually striving to improve on this percentage. The calculations used by Mr. Borochoff are intentionally skewed through the use of questionable accounting practices that ignore in-kind donations and which assign a zero value to the use of direct mail. The concocted standards ignore the economic value of building a donor’s base and the policy of Soldiers Angels to contact large donors directly to provide them more information concerning the organization and to elicit support for Soldiers Angels. The standards also ignore the fact that Soldiers Angels receives significant amounts of in-kind donations and the countless number of packages and items sent by Soldiers Angels’ volunteers.
The inaccuracies of the report are not surprising since Mr. Borochoff used no objective standards in reaching his conclusion and, unlike other “watch dog” organizations, he requested no information from Soldiers Angels prior to issuing the report. Additionally, Soldiers Angels contacted the American Institute of Philanthropy concerning the inaccuracies in the report and it was immediately referred to a New York law firm that represents the American Institute of Philanthropy. Soldiers’ Angels responded to the “report” and addressed each of the issues described in it. Soldiers Angels requested that the response be posted on the American Institute of Philanthropy’s website to allow its side of the story to be presented. This request was denied.
In comparison to the American Institute of Philanthropy, the BBB Wise Giving Alliance, a non-profit affiliate of the Better Business Bureau, uses standards which review: a charity’s governance and oversight; its effectiveness in achieving its mission; its financial accountability to ensure that the charity spends its funds honestly, prudently and in accordance with statements made in fund raising appeals; and its fundraising and informational materials to ensure that a charity's representations to the public are accurate, complete and respectful. The analysis by the BBB is performed through the use of twenty separate standards. These standards are used to give potential donors a wealth of information concerning the charities and how they operate. The purpose is to give the potential donor a complete review of a charity and to allow the potential donor to make an informed decision. It is notable that the American Institute of Philanthropy, through a convenient disclaimer, even admits that its own standards are not a complete review of the charities, “Because many factors determine a worthy charity, we at AIP suggest that you use the ratings on this page not as the sole determining factor in your decision, but rather as an aid.”
The attacks against Soldiers Angels by Mr. Borochoff have been through his website and a “Report Card” that is published by the American Institute of Philanthropy. This “Report Card” is included in its Charity Rating Guide and Watchdog Report which is sold on the website for the American Institute of Philanthropy. Unlike other “watch dog” organizations which provide their reports to the public for free, the American Institute of Philanthropy sells its reports in the Charity Rating Guide and Watchdog Report for $3.00 each. Memberships can be purchased for $40.00 per year. To promote its “Report Card” the American Institute of Philanthropy issued an attack against Soldiers Angels entitled “Soldiers Angels Lose Their Halos”. This so called “watch dog report” contained no objective standards and demonstrated a complete lack of understanding of Soldiers’ Angels mission and of the manner in which the military operates.
The “Report Card” has never been provided to Soldiers Angels nor has Soldiers Angels ever been given the opportunity to respond to it. Mr. Borochoff has used the “Report Card” to attack several military charities and has used it as a basis to push a public relations campaign against such charities into the mainstream media. Mr. Borochoff has also used the inaccurate, misleading, and subjective “Report Card” in testimony before the Congressional Oversight Committee.
In formulating his “standards for review” Mr. Borochoff created an analysis that ignores the achievements of the Soldiers Angels, ignores its structural integrity, ignores its accountability, and ignores its missions and goals. Instead of using standards that accurately reflect the whole picture of the work performed by a charity, Mr. Borochoff created a standard which focuses upon a charity’s costs of generating donations. The American Institute of Philanthropy states “charities which get high grades from AIP for putting 75% or more towards program costs while generally spending $25 or less to raise $100.”
In the acclaimed book Forces for Good, the authors performed an in depth analysis of the worlds most successful charities and concluded that efficiency in raising money has no direct correlation to accomplishing the charity’s mission. The reasoning behind this conclusion is based upon the facts that there is more to a charity than the collection of donations and that direct mail marketing accomplishes more than just raising funds. The book stresses the point that there is more to a successful charity than just transferring money from one hand to another.
In testimony before Congress, Mr. Borochoff informed the committee that the American Institute of Philanthropy makes “adjustments” for in-kind donations. These “adjustments” are based upon Mr. Borochoff’s subjective assumption that the value given to in-kind donations by a charity are inaccurate. This assumption, of course, is applied across the board by Mr. Borrochoff, without any research or information concerning a particular charity, the manner it uses to calculate the value of in-kind donations, or the type of in-kind donations received by the charity. Rather than do the proper leg work, Mr. Borochoff uses a standard that intentionally undervalues or completely discounts in-kind donations. It is also interesting to note that the use of what Mr. Borochoff states is a “distinction between cash and donated goods” is not mentioned in the organization’s Criteria as listed in its website. Like the rating standards used by the American Institute of Philanthropy, much of Mr. Borochoff’s testimony before the Congressional Committee was by way of generalized characterizations and oversimplifications of complex business and economic considerations.
An example of such oversimplification is the standard used by Mr. Borochoff to determine the percent of money spent on charitable purposes. The American Institute of Philanthropy, makes the subjective decision that “all direct mail and telemarketing solicitation costs are fundraising expenses.” Mr. Borochoff supports this selective discrimination on the economically naive assumption that direct mail fundraising serves no purpose other than to raise money. While this may sound good in sound bites, from an economic analysis it makes absolutely no sense. Such criteria, ignores, in a wholesale fashion, that direct mail fundraising serves a multitude of purposes.
Direct mail fundraising has a significant public relations role. Businesses, politicians, and churches all use direct mail as a way of effectively spreading their messages. Similarly it allows a charity to get its “message out” to a large audience for a comparatively inexpensive price. It allows a charity to educate a large audience about its cause and gives those receiving the mail the opportunity to learn more about the organization. It allows a young charity, such as Soldiers’ Angels, to build a strong base of donors who will support the organization for years. It also allows the charity to locate individuals, who upon personal solicitation, will ultimately make very large gifts to the charity. The standards used by the American Institute of Philanthropy purposefully discount money spent on direct mail fundraising to achieve a particular goal. By doing so Mr. Borochoff has created a standard that may sell memberships and reports, but that is intellectually dishonest.
In addition to using standards that ignore significant aspects of a charity’s work and which purposefully skews a charity’s financial analysis, the “Report Card” issued by the American Institute of Philanthropy also contains incorrect and false information concerning Soldiers’ Angels. It should be noted that Soldiers’ Angels has never been provided a copy of the “Report Card” nor has it ever been given the opportunity to respond to its conclusions.
In the portion of the “Report Card, provided to the media (but not the charities it rated) by the American Institute of Philanthropy, it claims that Soldiers Angels does not have what is described as an “Open Book Status.” On its website the American Institute of Philanthropy states that “groups also receive an ‘open book’ credit from AIP for willingly sending financial documents we request.” It is interesting that Soldiers Angels would be given a rating indicating that it did not have an “Open Book” since there has never been a request from the American Institute of Philanthropy to Soldiers Angels for any documents of any kind whatsoever. Soldiers Angels presently has and always has had an open book policy. The Board of Trustees for Soldiers Angels strives to be fiscally responsible and to good caretakers of the donations made to Soldiers Angels. Soldiers Angels undergoes an Annual Audit by an independent accounting firm and has never denied information requested of it. The IRS filings and annual audits can be found here.
The “Report Card” inaccurately indicates that Soldiers Angels spends only 36% of its donated funds on program services. In reality Soldiers Angels spends 64 % on its program services and is continually striving to improve on this percentage. As stated above, the percent indicated by the American Institute of Philanthropy is intentionally skewed through the use of accounting practices that ignore in-kind donations and which assign a zero value to the use of direct mail. Additionally, the American Institute of Philanthropy’s skewed standard ignores the economic value of building a donor’s base and the policy of Soldiers Angels to contact large donors directly to provide them more information concerning the organization and to elicit support for Soldiers Angels. This particular standard also ignores the fact that Soldiers Angels receives significant amounts of in-kind donations.
The last standard on the American Institute of Philanthropy’s “Report Card” lists Soldiers Angels as having employees who receive salaries under $50,000.00. Again this standard ignores the fact that Soldiers Angels is an all volunteer organization and has no salaried employees at all. Tens of thousands of volunteers make up the fabric of Soldiers Angels and all have served dutifully without any payment whatsoever. As with the other standards used by the American Institute of Philanthropy, this one misses the mark.
Just as political polls can be skewed to produce a desired result, so have the standards used by the American Institute of Philanthropy. In his testimony before the Congressional Committee Mr. Borochoff made clear that he opposed the use by charities of direct mail and telemarketing solicitations. To support his personal subjective belief he ignore accepted accounting practices and created so called standards that manipulate the facts to fit his point of view. In the process, Mr. Borochoff has cast a wide net of dispersions upon many charities that are extremely well run, highly accountable, and very effective at helping our deployed and wounded service members.
Continuing the time honored tradition of civilian support of American soldiers, Soldiers’ Angels sponsors numerous programs which provide support to American soldiers and their families. Soldiers’ Angels’ programs include, but are not limited to, first responder packs, support, and laptop computers to wounded soldiers who are receiving treatment at American military hospitals; care packages, letters, and support to deployed soldiers; armored blankets to military ambulances; items shipped for deployed soldiers to give children in the war zone; and memorial trees for the families of soldiers who have died in the service of their country . The success of Soldiers Angels’ programs result from the hard work and dedication of its volunteers. The dispersions cast upon these volunteers by Mr. Borochoff’s subjectively, biased so-called standards of accountability are unwarranted, unfair, and insulting.