Growth in Donated-Goods Programs Worries Some Long-Time Recipients

For decades, donations of clothing, appliances, and other goods were the province of just a few non-profit organizations, including Goodwill Industries and the Salvation Army.

But in recent years, many more charities have started to seek such gifts as a way to survive amid increased competition for cash contributions. In some cases, charities have been lured by commercial outfits that seek to profit by running goods-donation programs.

The growing popularity of donated goods has caused some traditional recipients of non-cash gifts to worry that donors may be unaware that they are supporting operations that do little to benefit their communities.

Joanne K. Hilferty, president of Morgan Memorial Goodwill Industries in Boston, which has collected used goods since its founding a century ago, is disturbed about programs that collect such items in the name of charity while devoting most of the revenue to their own operations.

She points to organizations like Savers, a national thrift-store chain run by a company in Bellevue, Wash., and the for-profit Global Thrift Store in the Boston suburb of Waltham. For the past two years, that thrift store has been collecting clothing and household goods in the name of Child Quest International, a charity in San Jose, Cal., that tracks down missing children. Because the goods are collected to benefit charity, gifts are entirely tax-deductible, even though the charity gets only a small fraction of the operation’s revenue.

Last year, Child Quest received about $20,000 — or about 6 per cent of the $340,000 the company took in. In addition, the thrift store gave some clothes and other items to several Massachusetts shelters for the homeless, says the store’s manager, Harold Fontenot.

Much of the rest went to pay rent for the store and three donation sites, as well as salaries and benefits for the store’s 20 employees. “It’s a fairly labor-intensive process,” notes Mr. Fontenot.

By contrast, the Boston Goodwill not only plows all the money raised through sales of donated appliances, books, clothing, dishes, toys, and other household goods into its charitable programs, but also makes use of the goods themselves in support of its mission. The charity employs disabled people to sort, label, and sell the items in its thrift stores and at its monthly auction, for example, and all proceeds help finance its job-training program, youth camp, and other services.

For-profit businesses have run thrift stores for years, Ms. Hilferty observes. But only recently have more of them capitalized on the competitive advantages of enlisting charities to solicit donations for them — which means their donors’ contributions can be tax-deductible.

“What’s different now is that more charities are collecting for for-profits,” Ms. Hilferty says. “That’s the real change that most donors are unaware of.”

Richard Allen, who heads the Massachusetts Attorney General’s division of public charities, says state regulators have little say over what percentage of items collected in the name of charity wind up benefiting its programs.

“The state had laws on that, but those laws have been cut back,” says Mr. Allen, referring to Supreme Court rulings a decade ago that bar states from limiting the percentage of donations that can be spent on fund raising, and from requiring solicitors to divulge how much of the money they raise goes to charitable organizations.

“We hate it” that donors often do not know how little of their gift ends up with charity, Mr. Allen says. But the state and charities can do little more than try to educate donors about the thrift-store industry, and to encourage them to ask better-informed questions before making their gifts.

“In the past, if someone donated clothing or household goods, the person making the gift assumed that it went for good works,” Ms. Hilferty says. “They can’t make that assumption anymore.”

She adds: “We strongly feel that the public needs to know what happens to their donation. It’s one thing to donate when a small percentage goes to a non-profit, and another to donate when 100 per cent goes to the non-profit.”

Ms. Hilferty’s organization has steered away from an increasingly lucrative class of donated goods: used cars. But other charities that traditionally have collected used clothing and other goods have extended their fund raising to include vehicles.

One of the country’s oldest car-donation programs began in Washington, during a nationwide gasoline shortage in 1978, when the Davis Memorial Goodwill Industries started a campaign to “Give your gas guzzler to charity.”

Started as an opportune gimmick, the program succeeded beyond anyone’s expectations: The Goodwill organization now sells about 50 or 60 cars a week — more than any commercial dealer in the District of Columbia, says David C. Becker, the charity’s president. The cars sell at auction for an average price of around $600, netting the charity about $1-million annually toward its $17-million budget. About one-third of the vehicles are sold to other dealers or salvage-yard operators to be stripped for parts.

Cars bring in much less than the Goodwill’s traditional stock in trade — clothing, appliances, and household goods — which raise some $8-million through sales at 15 thrift stores the charity operates in the metropolitan area. But the car operation has proved to be a consistent money maker for the Goodwill, which runs the program itself and spends more than $60,000 a year on newspaper and radio ads.

For the program’s first decade, the charity would accept only vehicles that could be driven to its lot in Southeast Washington. But competition from other charities forced Goodwill to go an extra mile to attract donors: It now will pick up vehicles that are not in running condition.

“We get something out of everything,” Mr. Becker says. “Even a car sold as junk is break-even for us.”