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Vast and largely unexamined, the world of American charities accounts for fully 10 percent of economic activity in this country, yet operates with little accountability, no real barriers to entry, and a stunning lack of evidence of effectiveness. In With Charity for All, Ken Stern reveals a problem hidden in plain sight and prescribes a whole new way for Americans to make a difference.
Each year, two thirds of American households donate to charities, with charitable revenues exceeding one trillion dollars. Yet while the mutual fund industry employs more than 150,000 people to rate and evaluate for-profit companies, nothing remotely comparable exists to monitor the nonprofit world. Instead, each individual is on his or her own, writing checks for a cause and going on faith. Ken Stern, former head of NPR and a long-time nonprofit executive, set out to investigate the vast world of U.S. charities and discovered a sector hobbled by deep structural flaws. Unlike private corporations that respond to market signals and go out of business when they fail, nonprofit organizations have a very low barrier to entry (the IRS approves 99.5 percent of applications) and once established rarely die. From water charities aimed at improving life in Africa to drug education programs run by police officers in thousands of U.S. schools, and including American charitable icons such as the Red Cross, Stern tells devastating stories of organizations that raise and spend millions of dollars without ever cracking the problems they set out to solve.
But he also discovered some good news: a growing movement toward accountability and effectiveness in the nonprofit world. With Charity for All is compulsively readable, driven in its early pages by the plight of millions of Americans donating to good causes to no good end, and in its last chapters by an inspiring prescription for individual giving and widespread reform.
- Sales Rank: #147578 in eBooks
- Published on: 2013-02-26
- Released on: 2013-02-26
- Format: Kindle eBook
From Booklist
Stern, corporate executive and former CEO of NPR, tells the story of how the charitable sector in the U.S. has lost its way because of the absence of market mechanisms that reward good work and punish failure. His research uncovered organizational and service failures in charities that refused to evaluate their programs and ignored poor results. There are approximately 1.4 million charities in this country with a workforce of 13 million and volunteers numbering 61 million; revenues total more than $1.5 trillion annually. “Charitable activity accounts for 10 percent of the economic life of this country,” says the author, seeing hope in a small movement that is currently rethinking how charities operate, and he is optimistic that tools will be developed so that contributors to charities will become investors rather than donors. Stern emphasizes that social investing takes work and urges donors to look beyond clever marketing campaigns for organizations that are transparent and accountable to stakeholders. Important and thought-provoking analysis. --Mary Whaley
Review
“Ken Stern, former chief executive officer of National Public Radio, includes surprise after surprise within the pages of With Charity for All….Color him more exasperated than mean, more provocative than shrill, and counterintuitive instead of purveying stale conventional wisdom. Stern's advice is consequential, because if followed it will alter the charitable realm.”
—USA Today
"In this provocative exposé, the former CEO and COO of National Public Radio takes a critical view of today’s nonprofit world, calling for reform and a redefinition of what constitutes a charity. For anyone who has given time or money to not-for-profits, Stern’s critique will prove both disturbing and thought-provoking ... An engrossing read, this look at the evolution and current state of the charitable world is sure to stimulate debate."
—Publishers Weekly
"[Stern] fills the text with insightful, vivid examples ... A trove of useful insider wisdom."
—Kirkus Reviews
"Important and thought provoking analysis"
—Booklist
About the Author
Ken Stern is a media and nonprofit executive best known for helping to build National Public Radio into a global news and information power. He is currently the CEO of Palisades Media Ventures, a Washington D.C.-based public affairs company.
Most helpful customer reviews
33 of 35 people found the following review helpful.
Challenging the way we think about charitable giving
By Paul Mastin
After a decade at National Public Radio, Ken Stern learned a few things about the weird world of the American nonprofit sector. In his new book, With Charity for All: Why Charities Are Failing and a Better Way to Give, Stern bemoans the state of charitable activity today, arguing that most of the nonprofit sector is financially inept at best, and downright unsavory at worst.
Some charities obviously are fraudulent. Every now and then we read about them. When the salary of the CEO and money spent on phone banks dwarf the tiny percentage of revenues, if any, that go to the supposed beneficiaries of a charity, it's easy to call foul. But it's not always so easy to identify this type of non-charity. Getting charitable status from the IRS is a breeze, state oversight is weak to non-existent, and plenty of donors are swayed by words like "veteran," "children," "hope," "beneficial," "cancer," and other key words. Investigating the financials of charities can be time-consuming, frustrating, and near impossible.
Other charities, while more above-board about their financials and activities, probably should not be classified as charities. Two examples Stern explores are non-profit hospitals and college football bowl games. In terms of treating needy patients, non-profit hospitals as a whole are no more charitable, and in some cases less, than their for-profit competitors. Yet they enjoy a variety of tax benefits that give them a competitive advantage. With the bowl games, it's even harder to say that they are "charities" with the money they spend on golf outings, high salaries, travel, and entertainment. Similarly, Stern points the finger at opera companies, charities which exist primarily for the benefit of--their donors! Wealthy people donate to the opera so that wealthy people can go to the opera. Hmmm . . . . Stern makes a good argument with these examples that the very concept of charity has been stretched.
The greatest concern is not for flagrantly fake or unethical charities, or for non-charitable charities. It is the matter of effectiveness. Like any other enterprise, charities are market driven, with the donor as customer. Whether they accomplish what they set out to do becomes secondary; they know a good anecdote brings in more contributions than a spreadsheet of results. "Charities know that they at rewarded not for finding cost-effective solutions to problems at all--but for finding ways to personalize, humanize, and convey needs." Stern calls for the charitable sector to "shift from a donor mentality to a charitable investment mind-set" by creating systems that distinguish among charities, even something like charitable mutual funds, in which analysts measure and evaluate the effectiveness of charities.
Stern has some great ideas which I anticipate will be met with mixed reviews by fund raisers and charity professionals. I can see many thinking they are the exception to Stern's thesis. It's always easier to see others' shortcomings than one's own.
Two things I wish Stern had spent more time on: religious charities and the effectiveness of government versus private work. Religious charities and their donors are driven more by conviction than by effective measures. That is not to say they are exempt from the requirement that they remain fiscally sound and prudent in their programming. But a comparison of religious and nonreligious charities and the way the solicit donations, measure results, and spend their resources would have been interesting.
Stern also shows a rosy view of government's role in the charitable sector. He points out that as a result of President Johnson's Great Society, "the federal government had become the largest single funder of the charitable sector." Given Mr. Stern's previous experience at NPR and his involvement in Democratic politics, it would come as no surprise that he when he envisions a more effective charitable sector, the federal governed plays a large part I'm his vision. I'll buy his call for results-oriented evaluation of charities, but to centralize such evaluation in the hands of government is self-defeating. He points out that the private sector was more effective than government or charities in responding to Hurricane Katrina, and gives examples of private groups that evaluate charities, but he seems too eager to jump to the federal government.
All in all, Stern's arguments should be a clarion call for the entire charitable sector.
Thanks to Edelweiss and the publisher for the complimentary electronic copy!
14 of 14 people found the following review helpful.
Excellent Research -
By Loyd Eskildson
The mutual fund industry employs over 150,000 people to rate/evaluate for-profit firms. Nothing remotely comparable exists to monitor the non-profit world. Private corporations respond to market signals and go out of business when they fail; non-profits answer to often naive/far-removed donors and boards that typically value system peace over anything else, and once established, rarely die.
There are about 1.1 million charities in America, and that's not counting local chapters. The number grows by about 50,000/year, and the sector employs about 13 million. In addition, over 61 million volunteer for charities, contributing the equivalent of about another 5 million FTEs. The charities take in over $1.5 trillion/year (about one-third from governments) and have assets of $3 trillion.
Assistance provided from non-profits can be 'amateurish,' as the American Red Cross' efforts post Katrina in Mississippi were described by the head of logistics for the British Red Cross. Volunteers were assigned tasks without training or adequate skills, supplies transported and donated that were useless (eg. card games, stale and perishable foods, radios without batteries), and pilfering was common. Little documentation existed of who got what, when. These failures were replicated throughout the areas affected by Katrina, and similar to the post 9/11 response the Red Cross provided earlier. Walmart's responses noted by many as faster, more useful, and much better managed/documented.
Charities forgo necessary investments for organizational effectiveness to keep overhead costs down. Few can demonstrate measurable success. A group of 8 analysts at Bridgewater Hedge Fund (assets of $160 billion) in 2006 decided to review the sector to find the best charities to donate to. They began by consulting Charity Navigator, a reputable rating agency, which rates charities based largely on ratios of overhead to program spending - the Bridgewater people found no relationship to effectiveness; even more embarrassing, Charity Navigator depended on self-reports from the charities, often gamed. When pressed by the group for more information, the charities often responded with confidential internal reports that showed the Bridgewater group that the charities themselves didn't know if they were helping or hurting. Others simply refused, and a few even accused the Bridgewater requesters of spying for competing charities. After six months the Bridgewater group gave up and simply guessed where to best donate money.
In 2007, two of the original group left Bridgewater to set up GiveWell, an organization dedicated to identifying demonstrably effective charities. Stern points out that the GiveWell staff are not muckrakers, nor is it their purpose to expose the failed, hopelessly muddled - simply to drive donations to the most measurably effective charities and create incentives for others to adopt similar standards. It now has a staff of at least seven, and has produced over 500 investment grade reports, but only been able to identify eight charities that can fully document effective impact and efficient use of funds. They've now focused only charities that publish meaningful self-evaluation data on their websites - only 15 of 400 screened passed. The Carter (Habitat for Humanity), Jeffrey Sachs (Millennium Village Project) and other well-known entities either stonewalled or were unable to provide useful data.
Providing clean drinking water is a common focus of charities. However, the World Bank estimates that about one-third of water infrastructure projects in South Asia have been abandoned due to lack of maintenance, and about half in eastern Africa - despite hundreds of millions (perhaps even billions) already spent - much from charities. Sanitation, food quality, and hygiene are also important to public health, and water plays an important role there as a cleansing agent. Bringing a water source into the home allows for frequent cleaning of hands; providing a public water point does not. Charities usually ignore both this and the maintenance issue, instead providing colorful photos of exaggerated short-term and limited victories that provide good marketing.
PlayPumps offers another example of problematic charity efforts to provide water. Their model provided a merry-go-round powered pump - thousands were installed across Africa, often replacing adequate hand pumps. But these new pumps were expensive, often broke down, and could not be repaired at the local level; in addition, the children preferred to pay soccer, leaving the women to turn the heavy wheel.
D.A.R.E., taught by police officers with at least 80 hours of special training, reached 75% of U.S. school districts recently. President Obama even declared a National D.A.R.E. Day in early April. Unfortunately, virtually every piece of quantitative evidence has shown it doesn't work. In 2005, the Surgeon General categorized the D.A.R.E. program as 'Does Not Work,' a designation it still holds. A 2001 study estimated the program consumed the time of 7 - 8,000 FTE officers and cost $1 - 1.3 billion/year. worse yet, its near monopoly boxes out other potentially more effective programs. Those involved place more faith in anecdotal evidence, and the program continually claims to be updating methods, thereby rendering the studies irrelevant.
21st Century Community Learning Centers (21st CCLC) provides another, even worse, example. An outgrowth of various after-school programs, it became formalized as part of the NCLB effort. An Education Dept. review published in 2005 involved following over 2,000 students in 26 centers over a three-year period. The results for academics showed participants did not have better grades, test scores, or even higher rates of homework completion. In most behavioral categories, participants were more likely to exhibit negative effects than their control-group peers, surprising but consistent with the findings from a Cambridge-Somerville program for at-risk youth begun in 1938 in which participants were followed into the late 1970s. Those involved did far worse in delinquency, criminality, job retention, and health. Those analyzing the program concluded that it had facilitated 'deviant peer contagion.' The Bush administration tried to curtail 21st CCLC, but was overridden by advocacy groups pleading their case before Congress.
Charitable hospitals have become some of the most aggressive debt collectors in the nation, some even using 'body attachments' to bring in debtors. These practices are made even more appalling by their also seeking much higher payments from the uninsured ('rack rates') than similar patients with insurance. Ironically, unpaid bills reflecting these much higher rates are then reported as charity care. Their CEOs are paid up to 47 million/year (Cleveland Clinic), with up to $14.6 million in exit packages (2006 - Northwestern Memorial in Chicago). The Wall Stree Journal in 2008 reported 77% of nonprofit hospitals were profitable, vs. 61% for for-profits. Acension Health, a Catholic nonprofit with MidWest hospitals, reported net income of $1.2 billion in 2007 and cash on hand of $7.4 billion. The 39 largest children's hospitals (all charities), reported over $1.9 billion in profits in 2009, and combined net assets exceeding $23 billion. On average, the top-tier children's hospitals reported < 2% expenditures in free medical care, with Texas Children's in Houston at less than .5%.
College bowl games (eg. Rose, Orange, Sugar, Sun, Cotton, Fiesta) are also non-profits/charities that contribute less than 2% of revenues to others. The Sugar Bowl's top three execs received over $1.2 million in 2009 salalires, 10% of revenues. John Junker (former Fiesta Bowl CEO) took in $592,418 in 2009, for 21 hours/week and lots of benefits. The bowl itself only brought in $17.5 million in annual revenue. Arkansas and Ohio State each pocketed about $18 million in 2911 to appear in the Sugar Bowl.
After Katrina, the FBI estimated 2,400 fake charity Web sites were set up. The U.S. Navy Veterans Association was founded in 2002 to support needy naval veterans. It boasted 41 state chapters, 66,000 members, and raised over $100 million in a ten-year period - mostly through telemarketing. Reality - it's all a mirage, with only one real employee and no members. Less than 1% went to veterans, and its still listed as a charity by the IRS. Stern cites several other examples.
The IRS typically examines 0.1% of all charitable returns, and then conducts little more than a document check. Meanwhile, a credible study of non-profit activity for 2006 projected $40 billion in theft from non-profits that year.
The good news is that there are success stories - one being Dogwood Village/Youth Villages which checked up on the effectiveness of its programs, found them wanting, consulted on better ways to do things, and now has much better results.
Bottom-Line: Eye-opening, scandalous, and interesting.
13 of 14 people found the following review helpful.
What Happens When Causes Are Unworthy
By Kristine Christlieb
I have been a fundraiser for more than 25 years; I've worked in small organizations, big hospital systems, elite higher education--I've even been at an organization that went bankrupt. I know the non-profit sector. Ken Stern is dead on. It is remarkable that such an important part of our culture and economy could be so dysfunctional. I'll give one example: I do not have the statistics, but in my experience there are few fundraisers who would say they are working with a healthy, functioning governing board. And likewise, I'm guessing there is a comparable amount of disrespect for fundraisers from board members. Penelope Burke has research on this in connection with the high turnover in the fundraising profession. Fundraisers blame their board members; board members blame the fundraisers. I don't know . . . maybe every industry is like this.
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