Spending of Detroit area charities earns high marks

Jennifer Chambers
The Detroit News

Metro Detroit’s charities are among the nation’s most respected for spending the money they raise on programs and services — not staff salaries.

A national study gave 23 metro charities four stars, including Oak Park-based food bank Forgotten Harvest.

Detroit’s philanthropic community ranked No. 1 in the nation in the percentage of cash it spends on the programs and services it delivers, and had the lowest administrative expenses in the U.S. among 30 metropolitan areas, according to a study by Charity Navigator.

The region ranked No. 2 in the nation in its fundraising efficiency (the amount spent to raise $1 in charitable contributions, which was 8 cents in Detroit), and in fundraising expenses (what a charity spends to raise money).

In its 11th year, the annual study by Charity Navigator, an independent charity evaluator, rates nonprofits on their financial health, accountability and transparency. It compares factors such as fundraising and administrative expenses, executive compensation, and whether nonprofits post certain financial documents online.

Twenty-three of the 79 Metro Detroit charities examined by Charity Navigator earned its highest rating of four stars, while eight received the lowest, a one-star rating.

Forgotten Harvest, an Oak Park-based food bank that has fed the region since 1990, earned four stars. John Owens, communications director for the nonprofit, said the charity is very proud of its rating and knows it’s important to donors and consumers.

“A lot of people look us up before they make a donation. Many donors are very astute about it,” Owens said. “I’ve heard people say ‘I’ve looked you up on Charity Navigator.’ It’s good for consumers to look.”

For the 2015 study, Charity Navigator used data from the fiscal year ending June 2013 — the year Detroit filed for bankruptcy.

Revenue growth reached 7.5 percent that year, compared to less than 2 percent in 2012 — a huge jump, said Sandra Miniutti, vice president of marketing and CFO for Charity Navigator, said referring to Detroit’s jump in revenue growth.

A puppy walks down a training slide at the Leader Dogs for the Blind.

“There has been a lot of talk about investing in nonprofits in Detroit as of late and there has been a big jump in growth,” Miniutti said.

In an overall score that considered a combination of financial, transparency and accountability metrics, Detroit ranked 18th among the 30 largest metro areas in the U.S.; that was six spots higher than its place in the 2014 report that was based on 2012 data.

Overall, the Houston area ranked No. 1, with 89.46 points; Detroit scored 86.6 points. Among major Midwest areas, Detroit was bested by Indianapolis (sixth); Cincinnati (seventh), Cleveland (eighth), Minneapolis/St. Paul (11th), Milwaukee (13th), and Chicago (14th).

Detroit had ranked No. 1 the last two years of the study in program expenses, administrative expenses and primary revenue growth.

“When donors look at charities, they want to know ‘how much of my investment is going into programs and not costs,’ ” Miniutti said. “It gives donors great comfort that leaders in the nonprofit sector are working really hard to get that return on their investment.”

For the 2015 study, Forgotten Harvest earned a financial score of 94.58 out of 100 and an accountability and transparency score of 100. It spends 95.8 percent of its expenses on its programs and services, has a 0.9 percent administrative cost and saw 34.1 percent in primary revenue growth.

Its so-called 990 form — an annual reporting return that tax-exempt organizations must file with the IRS — and its website provide key data on audited financial, its whistle-blower policy, documents with board meetings minutes and other information that make the charity an open book to the public.

Kristen Yandora, CFO of Forgotten Harvest, said less than 1 percent of charities earn the four-star rating.

“We have to constantly go out and ask donors to contribute financial(ly) to the organization. We are not reliant on government funds so every year we starting over,” she said. “We are proud (that) because of our efficient operations we can focus on relieving hunger.”

The Charles H. Wright Museum of African American History in Detroit received a one-star rating in the study.

Its financial score was 53.11 out of 100 and its accounting and transparency score was 85 out of 100. The charity spent only 56.1 percent of its expenses on its programs and services, had 27.7 percent in administrative expenses and primary revenue growth of a negative 10.9 percent.

Ted Canaday, chief marketing and development officer for the museum, said the museum’s fiscal health has improved dramatically since 2013, the year data was used in the current study.

The museum ended its most recent fiscal year — June 2015 — with a $500,000 surplus and ended fiscal year 2014 with a $265,000 surplus, he said.

In the past year, Canaday said the museum has focused on integrating new trustees, cultivating and improving donor relationships, expanding its audience, increasing community engagement and programming, especially for children and families; and laying the groundwork for renewed strategic planning to prepare the museum for its next 50 years.

“We, like most of the institutions, suffered through the recession. We did everything possible to reduce cost. We laid off staff. We had salary cut back. We didn’t let that impact our programs,” he said.

“We’ve increased programs and partnerships every year for the five years I’ve been here. That’s really important to us.”

One charity, Cancer Support Services, which has an office in Dearborn, received a donor advisory rating after the Federal Trade Commission and law enforcement officials across the U.S. in May charged it and three other cancer charities and their operators with bilking more than $187 million from consumers. The rating acts as a recommentation to consumers to determine for themselves whether they want to donate to an organization.

FTC officials said the case remains under investigation. Attempts to reach the Dearborn charity were unsuccessful.