Sunday, January 11, 2004


State probes fund-raiser’s
activities and how group
disclosed its costs

On the surface, the National Federation of the Blind Hawaii looks like it gave a generous $92,686 in 2001 to "program services" that most donors would think went directly to help the blind in Hawaii, according to its federal tax returns.

The returns show that NFB Hawaii spent more than 75 percent of the contributions it raised from the public on direct services to the blind.

But a closer reading shows that NFB Hawaii paid a whopping $73,449 of those program services to its telemarketer, David Modansky, and his company, Ultimate Contact Management. Modansky could not be located for comment, and NFB Hawaii's board and lawyers declined to talk to the Star-Bulletin.

The only known services Modansky and his company performed were making phone calls to Hawaii residents.

The way NFB Hawaii classified fund-raising expenses and program service costs on its 990 forms filed annually with the Internal Revenue Service raises questions about the accountability of charities: Should a charity that hires a telemarketer who charges high percentages and then classifies a share of that effort as "program services" be held accountable?

Deputy Attorney General Hugh Jones has confirmed that Modansky's fund-raising activities and NFB Hawaii's method of reporting on its tax returns are being investigated.

In a telephone campaign, Modansky raised $104,702 for the charity. The tax return looks as though NFB paid them $30,707 for raising that money. But NFB, also according to its tax return, paid Modansky for "program services," which meant he received a total of $104,156 for raising $104,707.

NFB Hawaii classified the additional money it paid to Modansky of $73,449 as "community outreach."

Jones confirmed that the "community outreach" Ultimate Contact performed consisted of calling people to tell them about the needs of the blind.

"As a whole their fund-raising script was calculated to get contributions and not provide public education," said Jones.

"It's too easy for charities to disguise fund-raising costs as public education and therefore part of program services," said Daniel Borochoff, president of the American Institute of Philanthropy, a Chicago-based charity watchdog.

Borochoff said, "Basically anything can be called a program service. Someone calling you to raise money for an organization can tell you not to drink and drive, and that's public education and therefore a program service. Some groups have e-mailed information cut and pasted from the Internet to schools and said they have education programs in schools, and that's a program service."

Borochoff said donors should find out what a charity is designating as a "program service" to determine if that is an activity they want to fund.

In the wake of charity scandals in the past several years that have shaken the confidence of donors, charity watchdogs have established standards for what percentages of a charity's spending should be spent on fund raising, program services and management.

One of the key watchdog groups is BBB Wise Giving Alliance. Recent studies by the group show that 56 percent of donors want 80 percent or more of a charity's expenditures to go into program services, not fund raising or management.

The BBB Wise formed standards saying that charities should spend at least 65 percent of the money raised from fund-raising activities (telemarketing, special events, corporate or foundation giving, etc.) on program services and no more than 35 percent on fund raising.

According to the way NFB Hawaii classified its expenses on their tax returns, it looks like a poster child of economic efficiency by BBB Wise measures. On its tax returns, it appears that 75 percent of what NFB Hawaii spends goes to services and that less than 30 percent goes into fund raising.

But if the amount paid to Modansky for fund raising and program services is counted, then 99 percent of what was raised went to its fund-raisers.


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