Charitable edonations

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Roger Chapin is a man with a cause. A whole bunch of them.

You mail your $1,000 donation to what sounds like a worthy cause. What's at
the receiving end? Sometimes a tightly run organization that puts almost
every dollar spent to work curing disease or feeding kids--one like Juvenile
Diabetes Research Foundation or Children's Hunger Fund. Sometimes an outfit
that is not so efficient. To get a glimpse of what goes on in the latter
kind of charity, let's drop in on Roger Chapin, a 74-year-old businessman
turned fundraiser in San Diego.

Chapin calls himself a "nonprofit entrepreneur." In the world of charity
that normally would be an oxymoron, but for him it is a considerable
understatement. Over four decades Chapin has launched upwards of 30
nonprofit charitable or advocacy endeavors, which have, collectively, raised
$400 million. His causes have gone all over the board--disabled veterans,
assorted illnesses, decisive action in Vietnam, afterschool programs,
government deficit reduction and antidrug efforts. Most have been
IRS-certified nonprofits, but some have been little more than a letterhead
or a trademark application.

Despite obvious passion that Chapin brings to his cause of the moment, all
but two have faded away or merged into others, usually after no more than a
few years of existence and modest fundraising. "I shut it down when I
believe that I am not having the impact I hoped for, or it is not
economically viable," Chapin says, sounding like the for-profit entrepreneur
he once was.

Chapin's biggest venture is Help Hospitalized Veterans, a Winchester, Calif.
charity that hauled in donations of $71 million for the year ended in July.
HHV's primary mission, as stated on its Web home page: providing free
therapeutic arts-and-crafts kits to GIs recovering from injuries. The hobby
sets are evidently much appreciated by these veterans. But of every dollar
spent in the fiscal year only nine cents went for the kits, plus another
five cents for associated overhead and for counselors to visit hospitals and
nursing homes. Forty-seven cents of every dollar of spending went toward
mailings.

Is sending out junk mail a charitable activity? Up to a point, yes. At
least, accounting rules allow Chapin to classify much of his direct-mail
operation as furthering "awareness," so that the expense can be chalked up
to the charitable mission, as opposed to management or fundraising. This
educational mission--costing considerably more than the kits, overhead and
counselors combined--is not mentioned at all on HHV's home page, although it
is listed elsewhere on the site and in filings.

After inquiries by FORBES and before the latest financials were issued, HHV
paid for an outside study of other patriotic-themed nonprofits that
concluded HHV could allocate a lot more of its direct-mail costs away from
fundraising. Chapin's outside accountant agreed. The efficiency numbers also
got a boost from a one-time in-kind donation of communication services. This
donation allowed GIs in the Middle East to check via telephone on sports
scores. The donation is valued--using retail prices--in HHV's financial
statements at $20 million. Not exactly assistance to the wounded but still
counted as both gift revenue and charitable-purpose expense.

Result: Thanks significantly to accounting, HHV's fundraising
efficiency--the percent of donations remaining after fundraising--jumped
from 59% two years ago to 73% in fiscal 2006. That's still the sixth lowest
on the FORBES list, starting on page 202, of the 200 largest nonprofits
(overall average: 90%) but finally above the 65% minimum acceptable to the
Better Business Bureau. HHV's ratio does top those of other veterans groups:
Disabled American Veterans (72%), Paralyzed Veterans of America (69%) and
Veterans of Foreign Wars (63%).

More at: http://www.forbes.com/free_forbes/2006/1211/198.html