Unclear Connections

Undisclosed links among several Arizona charities in the federal government’s charity drive raise questions

Several antihunger and health groups in Arizona have taken a controversial approach to seeking contributions

through the federal government’s annual charity drive. Their key officials have worked together over the years to create or run a dozen independent charities that seek donations through the Combined Federal Campaign without making it clear to donors that the organizations have anything in common.

The officials — some of whom know one another from working with a religious organization in Phoenix called the Don Stewart Association — say a key reason for setting up or operating so many organizations is to gain more opportunities to grab the attention of federal workers who browse the annual catalog of more than 1,900 charities that seek donations nationally: The more listings in the directory, the greater the odds of landing a gift.

The organizations, which have similar-sounding names — such as the Cancer Aid and Research Fund and the Children’s Cancer Aid and Research Institute — have been very successful in their quest for money from federal workers.

The dozen groups have altogether raised several million dollars through the federal campaign in recent years, and in some years contributions from federal workers appear to make up most of the total cash contributions received by several of the groups.

But the government’s catalog of charities does not tell potential donors which charities have common origins. In fact, the 12 Arizona charities do not mention their commonalities in their fund-raising appeals or other materials. The Chronicle pieced their identities together after it reviewed the records of many nonprofit organizations that solicit donations through the federal-employee charity drive.

The arrangements, which some people call cloning or creating niche organizations, raise questions:

• Do the names and self-descriptions of niche organizations sometimes lead donors to be confused or misled about the groups’ actual work?
• When federal workers decide on charities to support, counting on government officials to screen qualifying charities, is it important for them to know which organizations are legally independent but may have these kinds of common connections?
• Should federal regulations require their disclosure?
• Is the practice of creating niche organizations to get more exposure in the government’s charity drive unfair to other organizations that don’t do it and find themselves outnumbered in the federal catalog of eligible charities?

Federal employees planning to contribute through the Combined Federal Campaign would not know, without doing extensive research, that officials of the Don Stewart Association and others with a long relationship with the association have been involved in starting or running many of the niche groups.

In fact, two longtime officials of the association and their wives and sons have been compensated in recent years by five of the 12 Arizona organizations, sometimes making about $100,000 or more annually for what was reported as “20″ or “20+” hours of weekly work, according to the groups’ Form 990 federal informational tax returns.

The 12 Arizona charities say they are independent of the Don Stewart Association, which is named for the evangelist who leads it. The association says it coordinates an international effort to help people who are hungry and troubled, by working with nonprofit organizations and governments. It also says it oversees “feeding centers, mobile health clinics, and orphanages” and has an affiliate group, Feed My People Children’s Charities.

Mr. Stewart, a minister for more than 40 years, has “ministered to the sick and suffering” in more than 75 countries, according to his association’s Web site, which says that many people have testified to miraculous healings in response to his prayers.

One of the 12 Arizona organizations has listed the association’s address on government forms as its own address; 10 of the other 11 charities have at one time or another used the home addresses of people who work with the association as their headquarters.

Donated Goods

Questions also arise about what some of the Arizona groups actually do with donations from federal workers in the Combined Federal Campaign and with goods that the organizations receive from other contributors.

The tax returns filed by the 12 organizations show that most of their work involves obtaining donated goods and providing those goods — which they describe on their federal informational tax returns in general terms, like medical equipment, nutritional supplies, food, clothing, and school supplies — to charities and projects in the United States and in other countries.

A close look at six of the Arizona charities shows that they provide most of their donated goods to the same handful of recipients, even though the Arizona organizations have an assortment of names and missions: the Breast Cancer Research and Assistance Fund; the Cancer Aid and Research Fund; the Children’s Cancer Aid and Research Institute (formerly called the Children’s Cancer Research Fund); the Diabetes Aid and Research Fund; the Childhood Diabetes Research Institute (formerly the Children’s Medical Assistance Fund and Children’s Miracle Medical Network); and the Childhood Leukemia Research and Assistance Fund.

Over the past three years, those six charities reported contributing goods worth a total of $22.5-million to other organizations.

About $17.2-million, or 76 percent, of the gifts were medical, surgical, and nutritional supplies that the charities said they provided to two organizations for which little public information is available: Missionaries of the Poor Sisters, in the Philippines, and Ministerio Esperanza de Vida, or Hope of Life Ministry, in Guatemala.

Both organizations are nonprofit groups with programs that focus on tuberculosis, diabetes, malnutrition, cancer, and other ailments, according the Arizona charities’ spokesmen, who declined to be more specific.

Missionaries of the Poor Sisters is described by colleagues as a religious organization that helps poor people in Naga City.

The six Arizona groups also reported providing substantial amounts of donated goods to other organizations, including $925,000 in medical equipment to Oasis of Hope Hospital in Tijuana, Mexico, a facility that provides alternative care for treating diseases, such as the use of Laetrile for cancer, according to the hospital’s Web site; $399,500 in flax-seed nutrients that went to an unidentified program in South Africa; and $3,164,110 in food, food supplies, educational materials, and books to an unidentified American Indian-reservation program.

Describing Their Missions

Federal workers could have trouble grasping the scope of the six charities’ work by reading the 25-word descriptive statements that each organization prepares for the annual Combined Federal Campaign catalog for donors.

For example, the Diabetes Aid and Research Fund for several years has described itself this way in the catalog: “Awards scientific research grants. Children’s camp sponsorships, support groups for patients and families. Diabetes information, educational, nutrition and self-management programs. Together achieving a healthier lifestyle.”

But over the past three years, the diabetes organization reported on its tax returns that most of its work involved providing donated goods to other groups: more than $11.1-million compared with the total of nearly $1.3-million it made in cash grants.

About 63 percent of the diabetes organization’s gifts of goods took the form of medical, surgical, and nutritional supplies for Missionaries of the Poor Sisters and Hope of Life Ministry.

In addition, 28 percent went to an unidentified American Indian reservation program, and about 8 percent was medical equipment for Oasis of Hope Hospital in Tijuana.

From 2003 through 2005 the Diabetes Aid and Research Fund said on its tax forms that it provided more than half of its cash grants to its fellow Arizona niche organizations.

On its Web site, the diabetes-aid group describes itself as an international organization that “provides research grants to hospitals, medical clinics, and other qualified programs to assist with their work in the field of diabetes and related disease treatments.”

Program grants are “also made available for providing medical supplies used in the treatment of diabetes and related diseases to hospitals and medical clinics,” the charity says.

It adds: “DARF constantly looks for more cost-effective ways to provide the vital educational materials about nutrition and self-management skills that will help individuals combat diabetes and other degenerative diseases.”

Oasis of Hope

Of the $3.2-million in total cash gifts that the six Arizona organizations reported making over the past three years, the largest share — $1.6-million, or 50 percent — went to other charities in the overall group of 12 Arizona organizations.

The six Arizona groups also altogether provided:

• $324,300, or 10 percent of all their cash gifts, to Oasis of Hope Hospital in Tijuana.
• $219,500, or 6.7 percent, to the AIDS Research and Assistance Institute, in Mansfield, Tex., which says it provides education about AIDS prevention and supports research on “all-natural immune-system building supplements.” The organization participates in the Combined Federal Campaign and has donated cash to Feed My People International, a name used around the world by Feed My People Children’s Charities.
• $145,800, or 4.5 percent, to the American Indian Children’s Hunger Fund, in Laveen, Ariz., which does not file a tax return because it is classified as a church. The organization, which seeks funds through the federal charity drive, says on its Web site that it provides food, clothing, and “spiritual education” to families in North and Central America.
• $138,500, or 4.3 percent, to the Alternative Cancer Research Fund, in Phoenix, which says on its tax return that it works to educate the public about “therapies which have proven medicinal qualities.” The organization participates in the Combined Federal Campaign, and its president is the son of the chief financial officer of the Don Stewart Association.
• $116,500, or 3.6 percent, to the Children’s Corrective Surgery Society, in Escondido, Calif., which says on its tax return that it provides free plastic and reconstructive surgery to children with birth defects. The organization participates in the federal charity drive.

Marc Owens, a Washington lawyer who formerly ran the division of the Internal Revenue Service that oversaw nonprofit groups, said he would have questions about some of the six Arizona organizations if he were an IRS agent reviewing the groups’ federal filings. At times, he said, the descriptions provided in the federal charity drive’s 25-word statements “seem to have relatively little in common with the actual uses of the donated goods,” he said. Sometimes, he added, “there seems to be little specific linkage to the types of diseases for which funds are being raised and the uses of the money.”

‘Due Diligence’

For more than a year, officials of the 12 Arizona charities have declined repeated requests for interviews with The Chronicle. But spokesmen for them said that the Arizona groups have done nothing wrong, have been truthful in public statements, and are involved in projects that do great good.

“The charities we represent conduct due diligence on their gifts and cash expenditures, and ensure that such expenditures are used to sponsor and serve the needs of humanitarian programs and projects,” Philip S. Haney, a lawyer who is a spokesman for the dozen organizations, wrote The Chronicle.

Mr. Haney represents 10 of the 12 Arizona groups, including the Children’s Emergency Medical Fund; Feed My Hungry Children; Feeding America’s Hungry Children; Food Providers of America; and the Christian Children’s Education Fund. Mr. Haney said his correspondence with The Chronicle was reviewed by two charities he does not represent: the Childhood Leukemia Research and Assistance Fund and the Children’s Christian Hunger Network. Mr. Haney also is a lawyer for the Don Stewart Association and Feed My People Children’s Charities.

“The charities I represent have a long history of being connected with Christian ideals and causes,” said Errol Copilevitz, a Kansas City, Mo., lawyer who was hired in April by the Breast Cancer Research and Assistance Fund, the Cancer Aid and Research Fund, and the Children’s Cancer Aid and Research Institute.

His client charities’ “combined goal,” he said, “is to provide relief to those who are unable to provide for themselves. In many cases, this involves providing medical supplies, medicines, and clothing to children and adults in third-world countries.”

Mr. Copilevitz said the practice of organizations seeking funds through niche or cloned groups is not deceptive to donors and that the organizations’ names are not misleading.

Federal employees are well served by the opportunity to select a charity that focuses on a specific illness, such as breast cancer, so they can support the cause they care about, he said, especially when the cash gifts help the charity obtain and deliver goods to other organizations.

“Virtually any donor would be thrilled to learn that every dollar they have given through the Combined Federal Campaign, or by any other means, to these organizations results in medical supplies 10 times or more in value actually being delivered,” he said.

“At the end of the day,” Mr. Copilevitz said, “as a donor I’m concerned that my money goes to the purpose that I’ve pledged it to and that the money is being used in a relatively efficient manner to advance the cause that I want to support. The fact the organizations all have the same lawyer or all know each other or any of these things is really rather secondary to accomplishing what I hope to accomplish with my contribution.”

Mr. Copilevitz said his client charities keep track of their donated goods in accordance with generally accepted accounting principles, known as GAAP. “There are very specific requirements and standards,” he said, “and I am satisfied that these organizations are in full compliance.”

Challenging Task

Conveying to donors exactly what a charity does is challenging given the limits of the 25-word statement, said James E. Raftery, the auditor and accountant for the 12 organizations. “Most nonprofits struggle with this 25-word statement on exactly how to convey to potential contributors exactly what it does in 25 words to make them stand out from other organizations,” he said. “A 25-word statement is not nearly enough to convey who, what, why, when, and how much in any detail.”

Nevertheless, he said, the boards of the groups “all work toward the goals of fulfilling the mission as stated in the 25-word statements” provided to federal workers in the Combined Federal Campaign catalog.

Gifts made by some of the Arizona charities to Oasis of Hope Hospital and to other international and national organizations are in line with the missions of the Arizona groups, Mr. Raftery said. The Tijuana hospital, he said, “has done significant research and made significant advances” in alternative therapies.

The 12 Arizona groups make cash gifts to one another, said Mr. Raftery, “if they feel it is in the interest of their own mission.” Said Mr. Copilevitz: “There is an expense to the acquisition and transportation of these supplies.”

In addition, he said, “These funds are used to leverage the distribution of medicines and supplies to third-world countries for people in dire need.”

Possible ‘Overlap’

Mr. Raftery said the missions and objectives of the 12 charities “may overlap to some extent” because the individuals involved with them “have extensive experience in health and welfare charitable activities through their employment or other past association” with the Don Stewart organization.

The Arizona organizations that focus on diseases “have no dealings” with the Don Stewart Association, Mr. Raftery said, while the antihunger groups “do network other implementation on some of their projects with Feed My People Children’s Charities,” the affiliate of the Don Stewart Association.

On their federal tax returns, the six antihunger charities altogether report providing a total of $15.3-million in donated food or other goods over the past three years to programs around the world — including Africa, Kosovo, Mexico, and the Philippines.

Missionaries of the Poor Sisters, in the Philippines, received a total of about $1.4-million in medical and school supplies.

In the United States, recipients included churches, schools, and food banks.

Altogether, the six organizations said they made cash grants of $1.6-million over the three years. Of that sum, $314,191, or 20 percent went to Feed My People Children’s Charities and Feed My People; $647,055, or 40 percent, was provided to Feed My People International; and $156,591, or 10 percent, was given to the Don Stewart Association and the “Don Stewart Church.”

Seeking Efficiencies

Mr. Copilevitz said it is unfair to raise questions about his Arizona charity clients for turning to the Combined Federal Campaign for the source of most of their cash gifts that they then use to pay for their donated-goods program.

“Do my clients have grass-roots fund raising going on? No,” he said. But if these charities instead sought funds through “telemarketing and that’s all,” he said, “people would yell and scream that they were inefficient because 90 cents or whatever out of that money was going to the fund raiser. Well, they are not doing that.”

In response to The Chronicle’s request for details about how much of the organizations’ cash income is raised through the Combined Federal Campaign, Mr. Haney said the Arizona charities “do not provide to the public [any] information pertaining to CFC participation, federal employee donations, private donors, or other specific sources of support.”

In addition, he said, “We advise the public charities we represent not to disclose to newspapers or reporters any additional financial, operational, or compensation details not properly reported on annual Forms 990 filings. The Forms 990 speak for themselves.”

Charities have no legal obligation to publicly release the names of their donors or information about them.

Mr. Haney said that the organizations also provide the public with information about their programs on their Web sites and through other types of communications.

Mr. Raftery said some of the organizations use the same official address because “the administrative work needed to be done on these charities is conducted at offices that in some instances are located at the residences of the officers and/or directors” of the organizations.

Said Mr. Raftery of the organizations’ work: “I know it is somewhat confusing how they network together on some programs, but they are all helping a lot of less-fortunate people and I hope you can respect that.”

Federal Standards

Under the rules of the Combined Federal Campaign, charities are allowed to form separate organizations to increase their chances of raising money if each organization meets 11 eligibility criteria, including status as a charity under Section 501(c)(3) of the Internal Revenue Code; proof it provides “real services” in at least 15 states or one country outside the United States; and certification that it is “directed by an active and responsible governing body with no material conflict of interest and a majority of whom serve without compensation.”

The regulations do not require participating charities to disclose their relationships to other groups in the annual catalog that lists the organizations that federal workers can support, or in other public material. The government simply allows each organization to place in the catalog a statement of 25 words describing what it does and why donors should support it.

Federal employees who peruse the catalog, therefore, do not necessarily realize that organizations scattered throughout the booklet’s listings have anything in common, unless the groups have very similar names.

The U.S. Office of Personnel Management, which runs the federal charity drive, does not evaluate charities to determine whether they are clones, said James S. Green, the agency’s special counsel to the general counsel.

“Who thought about coming up with the charity — or whether the charity is very similar to any other charities or is totally different — isn’t something that OPM has a direct responsibility to determine,” said Mr. Green. “I don’t want to make it sound like OPM is oblivious to problems because clearly we have an audit function, and we would like the program to be successful without controversy. But under the law, and under the executive orders that created the CFC, our responsibility is to determine that an organization meets the eligibility criteria. If it’s a 501(c)(3) organization — and we have nothing to do with the IRS blessing it or not as a 501(c)(3) — you have gotten through the gate,” and have met the first criteria for participation in the Combined Federal Campaign.

Informing Donors

The government’s 11 criteria for charities as a whole are “intended to give the federal donor a high level of comfort that an organization is a legitimate organization and that it is financially viable,” Mr. Green said.

“It is not OPM’s role to say, ‘We think there are too many cancer organizations, heart organizations, or religious organizations, or faith-based organizations,’” he said. “We have neither the requirement or the mission to do that.”

In fact, Mr. Green said, because of legislation and court decisions, “we cannot keep organizations in or out based on what we view as appropriate subject matter of their program or focus. So we are very careful not to say, ‘Gee, this year we’ve got an awful lot of organizations in the Phoenix CFC that have the word “cancer” in it; let’s look into that’” to see if they are cloned, he said, or to say, “‘We think the motivation for starting six or seven charities was to beef up your chances to get money.’”

In the end, said Mr. Green, decisions to give are up to workers.

“It’s the federal donor who ultimately has to read that 25-word statement and say, ‘I’ve got enough information to give my money to that organization,’ or, ‘You know what, that sounds pretty superficial or pretty blithe or pretty cutesy, I better do some more research.’ That’s really the federal donor’s ultimate responsibility.”

But people who take the additional step of looking at charities’ Form 990s still are not likely to see that one organization has anything in common with another.

The tax form requires organizations to note if they are “related” to another organization, and defines the term to mean if more than half of the members of an organization’s board of directors serve on the board of another group. Because none of the 12 Arizona organizations met this criterion, none of them checked the related-organization box on their informational returns.

Federal workers who looked at the Web sites of the dozen Arizona groups would find varying amounts of information.

Most of the organizations make a point of saying they work with other groups to help accomplish their goals, although none of them mention by name the Missionaries of the Poor Sisters or Hope of Life Ministry.

Some Web sites don’t offer many details — for example, the Cancer Aid and Research Fund provides just four paragraphs of general descriptions of its work. But other organizations, including the antihunger groups, provide a great deal more.

For instance, one health charity, the Childhood Diabetes Research Institute, explains that its family-support groups and child-camp sponsorships are in the Philippines and that it works there with Feed My People International, and in Mexico with Oasis of Hope Hospital. And Food Providers of America lists 16 “regional food banks and food-rescue organizations” that it said received its donations and the exact number of pounds of food that it delivered.

‘Unusual’ Lack of Detail

Mr. Owens, the Washington lawyer, said that to the extent that some of the groups’ tax returns are vague about the nature and recipients of the donated goods, if he worked for the government today, he would want to take a look at the way the groups put a value on their noncash gifts.

“It seems unusual there is not more information provided on their 990s,” he said. Mr. Owens added that “in-kind contributions moving between organizations may be susceptible to inflation of their value,” noting that the Senate Finance Committee has said generally that it has concerns about whether donors are taking inappropriate write-offs on their income-tax returns.

Mr. Owens also said that regarding the Arizona charities making grants to one another, he would want to take a look because the practice is uncommon and worthy of a review. He said such grants may be completely legitimate but can raise a question about whether the money ends up being used for charitable purposes.

Mr. Owens said his opinions are his alone and do not reflect any views he may have had about the Arizona organizations during his tenure at the tax agency. He did not discuss the Don Stewart Association with The Chronicle.

In 1997, the IRS moved to revoke the tax-exempt status of the Don Stewart Association because it said the Arizona organization had improperly enriched Mr. Stewart and some family members.

The Don Stewart Association denied any wrongdoing and sued the government. In 2001, without public explanation, the IRS and the Don Stewart Association reached a settlement in which the organization lost its tax exemption for one year.

Mr. Raftery, the accountant for the Arizona organizations, said that some of the groups’ officials learned how to create spinoff or niche organizations, and how such groups can interact to effectively “network” together on programs and fund raising, in part from Patrick Maguire, a prominent consultant to umbrella groups of national and international charities, known as federations, that help with employee-giving campaigns.

In recent years, the federations that Mr. Maguire advise have claimed nearly $1 in every $4 donated through the Combined Federal Campaign. In the fall 2006 campaign, 10 of the 12 Arizona charities were members of federations that are clients of his company, Maguire/Maguire.

“Donors want their money to be used for the purpose that an organization sets forth in its name and 25-word statement” in the federal catalog, said Mr. Maguire. “If their money is used for that purpose, then the charity and the CFC have kept faith with donors. If their money is not used for that purpose, then charities are taking advantage of the system.”

Mr. Maguire said that annual applications for the Combined Federal Campaign that are filed by Arizona groups that are members of his client federations are carefully screened each year by the federations, with help from his company.

Under federal rules, applications of charities that belong to federations generally are screened by the Office of Personnel Management itself only for the first year that charities participate; federations do all subsequent screening, except for spot checks by the federal agency.

The Office of Personnel Management itself screens the annual applications of charities that are unaffiliated with federations.

Mr. Maguire said that his client federations rely in part on charities’ auditors, such as Mr. Raftery, to dig into organizations’ workings and to sound alarm bells if something is amiss.

“If we smell a rat, we say so,” he said. “And that hasn’t happened for any of these guys.”