U.S. House panel probes spending by veterans charities

The Washington Post on Dec. 14 reported that the House Committee on Oversight and Government Reform is investigating nonprofit organizations that raise money to help servicemen and women but spend most of the money raised on fundraising activities and considering establishing federal oversight of nonprofit organizations..

Allegations of poor financial stewardship at some of the largest veterans charities led to findings that three charities with missions to raise money to help wounded troops spent between 78 and 91 percent of donations on fundraising activities, enriching private telemarketing and direct-mail consultants. A fourth charity, Help Hospitalized Veterans, was charged with concealing millions of dollars in payments to fundraisers while its founder and president and his wife collected $540,000 in compensation and benefits last year.

The congressional hearing was convened after a watchdog group found that about a dozen veterans charities spent relatively little of the money they raised on the troops themselves. The panel discovered that the American Veterans Coalition, American Veterans Relief Foundation and Disabled Veterans Association spent 78 percent, 86 percent and 91 percent, respectively, on fundraising expenses. The recommended standard is about one third.

The heads of two of those nonprofits told lawmakers that hiring consultants was the only way they could raise enough money to run their programs. “We have no other means of raising money on our own,” said Pamela Seman, executive director of the Disabled Veterans Association.

Daniel Borochoff, president of the American Institute of Philanthropy , a leading watchdog group, testified that veterans charities are among the worst in the nonprofit sector because they rely heavily on expensive direct-mail fundraising. Diana Aviv, president of the Independent Sector, a coalition of nonprofits, told the newspaper she recommends federal measures, such as requiring that all nonprofits file electronic tax forms to make it easier to audit their finances.

The committee is to hold a second hearing on Jan. 17.  Committee member Rep. Dan Burton (R-Ind.) said legislation might be necessary to improve accountability in the nonprofit sector.