The Stamford Advocate
January 29, 2006
STAMFORD -- A Darien charity that gained national prominence for helping Vietnam veterans exposed to Agent Orange has given less than $11,000 of the millions it has raised in the last seven years to the veterans it was formed to help, according to its financial reports.
Although the National Veterans Services Fund, founded in Stamford by local Vietnam veterans, has increased its annual fundraising from $306,000 in 1998 to $4.4 million in 2004, it has used most of the $9.3 million it raised to pay fundraising costs. In 2004, the group spent 97 percent of the money it collected on fundraising. Officials in two states and representatives of two groups that track charities say that because of its financial position, its lack of a larger governing board with expertise in nonprofit management, and the small amount of the money raised that actually goes toward its mission, NVSF is among the least efficient charities they have seen.
"Certainly this organization and its filings attest powerfully to the importance of consumer awareness and information when people contribute," state Attorney General Richard Blumenthal said.
The numbers may not indicate anything improper, but they call into question the group's continued use of paid fundraisers, said Blumenthal, a frequent critic of the practice.
"I'm troubled by the fact that 97 percent of the money raised goes to fundraising expenses rather than to any programs or services," Blumenthal said. "The key question is: how much is spent advancing the mission and purpose? How much goes to help children or cure disease, or to actually solve problems?"
The NVSF's mission has expanded beyond Agent Orange victims to helping veterans and their families turned down by other government programs or charities. In addition, the group tries to educate the public about veterans' needs -- something fundraising mailings help to do, NVSF President Philip Kraft said.
Kraft wants to wean the group from its reliance on paid fundraisers, but said it's difficult because he is the only paid employee. Raising money himself would take him away from helping veterans, Kraft said, so he relies on what he gets from paid solicitors.
Kraft said he has used the money to help disabled veterans pay bills that the Veterans Administration does not cover, buy wheelchairs for people who can get around just well enough that they don't qualify for VA reimbursement and to help veterans and their families make mortgage and utility payments.
"Yes, the share is small. Yes, I wish it were bigger, but they're (paid solicitors), not a charity. We are," he said. "They're professionals who do the job better than we can do."
That explanation doesn't satisfy Daniel Borochoff, president of the American Institute of Philanthropy, a charity watchdog organization that gave Kraft's group an F in its ratings of nonprofit organizations.
"Americans have a fixed budget for giving, and if they give to this, it's not available to give to some other charity," Borochoff said. Spending most of the donations to pay professional fundraisers and for mass solicitation mailings is a waste of donors' money and good intentions, he said. "If this group wants to tell people that they're not going to get 90 percent of what the fundraiser takes in, if they want to be up front with people, then I have no problem with it."
Contributors should always ask what portion of their donation will be used to raise more money, and charities should demand better deals from paid fundraisers, Blumenthal said.
He said high fundraising costs defeat the good intentions of people such as Kraft.
"I've known Phil Kraft for a long time, and he is a thoroughly dedicated and committed person, so I am in no way questioning his integrity," Blumenthal said.
Still, even among groups that raise money using paid solicitors, NVSF compares poorly. In Connecticut, charities that used paid fundraisers kept 32 percent, while those that raised money nationwide kept 12 percent, according to a report Blumenthal issued last year.
South Carolina Secretary of State Mark Hammond ranked NVSF the worst performing charity registered in that state last year because it spent 97 percent of what it collected on fundraising and only 2.2 percent on its mission. Hammond compiles an annual list of the best and worst charities based on the percentage of expenditures on programs.
The numbers compare poorly with other national charities, whose average fundraising expense is 9.7 percent, said Sandra Miniutti, spokeswoman for Charity Navigator, another watchdog group.
Charity Navigator rated NVSF as one of the five worst-performing veterans' charities of the 22 that it tracks, based on several factors, including what percent it spends on its mission and its overall financial stability. Because of its $600,000 deficit, NVSF ranked sixth on Charity Navigator's list of 10 nonprofits in "deep financial trouble."
If Kraft wants to get out of financial trouble and restore his credibility with donors, Borochoff said he must expand his organization's governing board beyond himself and the two other members it has now, and stop using paid fundraisers.
"I think if he's got the recognition in the community, he should reach out and come up with a plan to fund this," he said.
A fight for recognition
Originally called Vietnam Veterans Agent Orange Victims, the organization was formed in 1978 by Stamford resident Paul Reutershan and other area veterans who wanted the government to acknowledge the link between their health problems and Agent Orange, the herbicide the military used to kill the dense vegetation on the battlegrounds of Vietnam. Agent Orange contained dioxin, a toxic chemical linked to serious health problems including liver damage and several forms of cancer.
Reutershan sued the government and the makers of Agent Orange, seeking $10 million. His case became part of a class-action suit that resulted in a $240 million settlement for disabled Agent Orange victims and families of those who had died. Reutershan died in 1978 of cancer that he blamed on Agent Orange, six years before the settlement agreement.
Other founders included Stamford resident James Sparrow, a Marine veteran of the Vietnam War, and Army veteran Frank McCarthy. Sparrow, McCarthy and Kraft, as well as other leaders of the group, came to represent the public face of veterans' causes in southwestern Connecticut and beyond.
"They were a big advocate for Agent Orange legislation," said Bob Genovese of Naugatuck, president of the Veterans Who Care Committee, which helps needy Connecticut veterans. Genovese, who has suffered from cancer that he blames on Agent Orange exposure during his Vietnam service, worked with Kraft's group over the years. "If they're having problems, it's hard to believe, because he's a pretty good administrator." he said. "I just hope it works out. They do good work."
"It was not a matter of what they did for the cause; they were the cause," said Hank Schieb , a former Navy helicopter door gunner from Winsted who joined the group after his daughter was born with birth defects that he blamed on his exposure to Agent Orange. He also blames his own health problems, including two bouts with cancer, on the chemical.
"Without them, Agent Orange would not be in our dictionary. They brought it to the public's attention. They did all the groundbreaking and the backbreaking and the heartbreaking work, until it broke them. I can never say enough good about them."
When a "guardian angel" helped Schieb pay his daughter's medical bills, he worked with Sparrow and McCarthy to set up a fund for children of veterans born with birth defects.
Over about five years, Kraft said the group used the money, and grants from the lawsuit settlement fund, to help as many as 3,000 families.
"It was at times the most depressing job I've ever had, and at times the most rewarding," said Kraft, an Army veteran who served in Vietnam in 1970 and joined the group in 1989 as a counselor.
That fund still exists, but it is now run by Veterans Who Care. Among NVSF's donations to other veterans' groups in 2004, Veterans Who Care received $1,000.
Genovese said he argued against the group's use of paid fundraisers.
"Hire veterans, get a phone bank and get veterans to do it," he said.
Little direct aid
NVSF raised $4.4 million in donations in 2004, but gave only $6,416 in direct aid to veterans or their families, according to documents filed with the Internal Revenue Service. It spent $4.25 million on fundraising and paid Kraft -- its only employee -- $60,000. According to its financial statements, the group spent $95,000 in 2004 on services related to its mission, including part of Kraft's salary.
The aid it provided, according to the documents, included paying $1,154 for car repairs for the family of a jailed Marine and donating $1,000 to a patient-activity fund at the West Haven Veterans Administration.
According to its 2004 annual report, NVSF also fielded more than 1,500 phone calls on Agent Orange and Gulf War-related illnesses, conducted training for labor union veterans' counselors, and referred hundreds of veterans, widows and family members to the proper agency or information source.
Of the $4.25 million NVSF spent on fundraising in 2004, more than $900,000 -- 20 percent -- went to Direct Response Consulting Service, a fundraising firm in McLean, Va. Another $3.2 million paid mailing expenses for fundraising materials.
Dan Flaherty, an attorney for Direct Response Consulting Services, said the company gets none of the money associated with mailing expenses. It pays for postage and for vendors who print the mailings, stuff the envelopes, open return envelopes and deposit the checks, he said."We can have a debate on the relative merits of different means of fundraising, but all those dollars are not going to Direct Response," Flaherty said.
He said NVSF owns the mailing list and can use it however it wants, as long as it doesn't share the list with his client's competitors. Direct Response coordinates the fundraising campaign, designs the mailings and establishes the mailing list, among other services, he said.
"We certainly think that they're getting good value for the fundraising expenses that are paid to us," he said.
Flaherty acknowledged that direct marketing, whether by mail or telephone, is one of the most expensive ways to raise money, especially when an organization is trying to establish a national donor base for the first time.
"As time goes on, the efficiency of the charity improves," he said. "It's certainly our hope that the efficiency of the National Veterans Service Fund improves over time as well."
On whether donors are getting a good value, he said, "Our obligation is to our client."
Kraft said the fundraising mailings include educational information, too, from how to prepare care packages for troops overseas to where to get help with different health issues.
"All of that got missed (in the report) and lumped into fundraising fees, instead of being part of education, which is the mission," he said.
"In this instance, he may be a victim of the accounting rules and the categories of information," Blumenthal said.Kraft said any money donated directly to the organization outside of direct mail campaigns would be used solely to help veterans or their families.
He also said, the group has donated more than $50,000 since 2004 to other veterans service groups and at least $30,000 in direct aid to veterans. The Advocate could not verify that number, because the group's 2005 report has not been filed yet.
The NVSF may file an amended report for 2004, and the 2005 report -- for which the group has requested a filing deadline extension -- will show much more favorable numbers, including a reduction in the deficit, said the charity's Kansas City-based attorney, Errol Copilevitz.
"It is disturbing to see that it took $4 million coming in to give us the ability to do this on the limited scale that we're doing it," Kraft said. "On the other hand, if it wasn't us doing it, where would these people go?"
But many other veterans' charities are much more efficient, said Charity Navigator's Miniutti. If Kraft can't do better, he should join one of them, she said.
"I think that if donors were really aware of what was going on, they probably wouldn't be giving any money to this charity," she said.
The Agent Orange settlement had another effect, Schieb said -- it made people think the Agent Orange problem was solved. Volunteers and donors became scarce, increasing the need to rely on professional fundraisers.
"When we started, we were going great guns," he said. "Once the suit got settled, the shine was off the apple. We lost all our help and we lost 99 percent of our income."
Kraft took over the fund's leadership in 2001, after Sparrow retired as president, and after the fund embarked on its national fundraising effort.
Sparrow did not respond to requests for comment.
Under Kraft, who also has been active in other veterans groups in the area, the group has aimed to help veterans and family members who had no other agency or charity to help, although Kraft said that has always been part of its mission.
The group operates a Web site, nvsf.org, where it lists documents and studies related to Agent Orange and other veterans-health issues, and includes links to other veterans' organizations. The group offers to send documentation for free to people who request it. Unlike many charity Web sites, it does not include a link for viewers to donate online, although Kraft said he would consider adding one.
NVSF's 2004 annual report raised concerns about the organization's future, noting it had $600,000 more in liabilities than assets, and blaming the problem on the nationwide fundraising campaign that started in 2000.
Even before 2000, the group's financial stability began to waver.
Copies of financial documents submitted to the IRS show the organization began accruing debt as early as 1997. By 1999, it was $89,000 in debt. By 2003, the deficit had reached $635,000.
Schieb, the former Navy helicopter door gunner, said he doesn't know how Kraft will get the group out of what he called a maddening Catch-22: "You can't get the money until you've got people to get it, and you can't get people to get it until you get money to pay them."
Last year, Kraft approached Copilevitz, who represents several nonprofit organizations, after NVSF was featured in a Hartford Courant report about high fundraising costs for veterans' groups.
Copilevitz suggested hiring in-house staff, including a development director, to handle fundraising, and hiring an accountant familiar with nonprofit organizations.
"I don't know how he can survive on his own," Copilevitz said.
Borochoff agreed, suggesting that Kraft could do much more with less money from donors if he did hire in-house staff.
"He could raise $500,000 -- if he just spent $100,000 to do it, he would be way better off," Borochoff said. "I just don't see how he rationalizes it."
Kraft meanwhile, points to the group's recent efforts as evidence that more people should donate.
He said he has helped wounded Iraq war veterans with mortgage payments and persuaded others' creditors to postpone payment schedules.
He said wounded reservists get into financial trouble because they are kept on active duty -- often at a much lower pay than their civilian jobs -- until they recover.
He said he hoped the bad news about his group's finances would at least increase donations, but he feared the opposite.
"Every time we did an article and said, 'here's all the good that we do, and what we really need is funding.' You know what the response was? More people calling saying they needed help," he said.