(not quite) exposing the Ice Bucket Challenge scam (because it doesn’t exist)…

Two friends of mine from completely opposite ends of the political spectrum shared links with more or less the same information today.  Given the rarity of such an occurrence, I decided to take a deeper look.

The gist of the posts was that all of you naive yet well-meaning folks taking part in the ALS Ice Bucket Challenge have been duped.  While everyone is celebrating the $100 million or so that has been raised as a result of this shocker of a social-philanthropy phenomenon, the foundation that is benefitting is, allegedly, not doing with the money what you think it’s doing.

Here’s the post from PoliticalEar:

ICE BUCKET FRAUD:  ALS FOUNDATION ADMITS THAT 73% OF DONATIONS ARE NOT USED FOR ALS RESEARCH!

We’ve been duped. America is filled with fun-loving and caring people. The viral ice bucket challenge has combined both our sense of responsibility to our fellow human with fun. And it has been fun! Who didn’t love seeing Sarah Palin doused?

But wait? Ice Bucket Challenge donations are nearing $100 MILLION. Where is that money going?

According to the ALS Foundation, not towards ALS.

Over 73% of all donations raised are going to fundraising, overhead, executive salaries, and external donations. Less than 27% is actually used for the purpose we donated for.

The site also includes this handy pie-chart for reference —

als-association-donations* it should be noted, the numbers above add up to only 99% due to rounding

The misrepresentations abound.  Let us begin with the title.

Saying the ALS Association “admits” that 73% of donations are not used for ALS research implies that this was some dirty little secret that has only come to light because the organization was forced to reveal its underhanded operations by the Internet’s never-ending troop of intrepid investigators.

Here’s a little Not-for-Profit 101:  the ALSA is a 501(c)(3) corporation, so-called for the portion of the IRS code that allows for tax-deductible donations.  Such organizations are required by law to make annual disclosures of their financial activities.  Illustrating their expense breakdown by category isn’t “admitting” anything, it’s simply exercising the basic principles of good governance.  The ALSA has not hidden this information.  It’s not a secret.  They have made it publicly available and easily accessible.  In fact, do you know where the handy pie-chart above came from?  The ALS website.  Specifically, the page titled ‘Financial Information’… which is linked to from the website’s ALS Ice Bucket Challenge – FAQ (featured on their homepage) under the question “Where can I read more about the finances of the ALS Association?”

Then there’s the (admittedly nit-picky) fact that the breakdown is characterized thusly:  “Over 73% of all donations raised are going to fundraising, overhead, executive salaries, and external donations.” (emphasis added)

Wrong.

The combination of non-research spending the ALSA does not constitute 73% of donations but 73% of their total annual operating budget (which, for reference, is just above $25m).  And that operating budget is formed from more sources than just charitable contributions.  Though, just to make a point, donations to the ALSA during the period being reported were $8.412m… which would suggest that roughly 86% of donations raised went towards research.  Except that’s not how donations work — unrestricted donations can be used for any aspect of the organization’s operations.  But any donor can declare that their donation is restricted for a particular purpose, and the organization is legally obligated to abide by that (ie, if you want 100% of your donation to ALSA to go towards research, it is actually your obligation to tell them that).

Now, let’s move on to what the writer believes this 73% is comprised of:  fundraising, overheard, executive salaries, and external donations.  Sounds like a lot of things, right?  Except that “executive salaries” is included in “overhead”, not separate from it.  And both administrative overhead and fundraising together comprise what are called Supporting Activities. By this chart, the ACLA’s Supporting Activities make up a completely reasonable 21% of the overall operating budget.

Now, I have no idea what the writers mean by “external donations,” but I assume they’re referring to the remaining portions of the expense budget, which comprise the ALSA’s two non-research program activities.

The ALSA makes very clear that its approach to the issue of amyotrophic lateral sclerosis is three-pronged.  Their mission statement —

OUR MISSION: Leading the fight to treat and cure ALS through global research and nationwide advocacy while also empowering people with Lou Gehrig’s Disease and their families to live fuller lives by providing them with compassionate care and support. (emphasis added)

Research, then, is but one of three primary activities the organization engages in.  This does not undermine the importance of research.  It simply acknowledges that there is a broader range of actions that can be taken to aid those suffering from ALS — such as public advocacy and education, as well as patient and caregiver support (and as someone who has worked as a caregiver for individuals with neurodegenerative diseases, I can attest to the importance of this).

When understood this way, it becomes clear that the ALSA’s primary activities (which include but are not limited to research) amount to 79% of its operating budget, which puts in line with the vast majority of not-for-profit organizations in this country (according to Charity Navigator).

Not only is this amount exemplary by not-for-profit standards, it represents an increase over the last few years, as demonstrated by their annual reports from not just 2014, but also 2013 and 2012 (which includes comparison data from 2011).  And, should you have the chance to look at the last four years of financial data, you’ll notice that while the Program Activities portion of the budget (which includes research) has increased over the last four years, the Supporting Activities (overhead/fundraising) has remained stable over the same period (thus representing a progressively smaller percentage of the overall budget).

And to make one final quibble — we are looking at this organization’s four previous fiscal years.  The ALSA’s fiscal year ends Jan 31.  And the handy pie-chart above is taken from the Financial Report for the Fiscal Year Ending Jan 31 2014.  So when the writers of PoliticalEar’s piece are trying to alert the world that the majority of Ice Bucket Challenge donations aren’t going to be used for research, they’re basing it on last year’s budget.  Those numbers do not reflect, nor have any bearing on, the current year during which the Ice Bucket Challenge donations are being received.  Yes, the ALSA administration now faces the challenge of deciding how to optimize the truly astounding amount of financial support the organization has received this summer.  But the decision will have to be made openly and transparently (especially given the spotlight/microscope that has been focused on them as a result of the Ice Bucket Challenge).

In sum:  the writers from PoliticalEar are, for some reason, claiming that the ALSA only intends to use 27% of Ice Bucket Challenge donations for research.  But, upon examination, this claim has absolutely zero basis in reality.

*****

There is at a positive moral to this story, however, which is that all of us should strive to be informed donors.  That means taking the time not just to visit an organization’s website, but to dig into the not-so-sexy details.  What do their financial statements look like?  What are the trends from year to year?  Do they even make multiple years’ worth of statements available on their website (hint: if they don’t, that’s a big red flag).  What is their overall mission, and is it one you are actually interested in, and committed to, supporting?

*****

Scrutiny is important.  Vital, even.  But there is a wide gulf between those who wish to do their due diligence, and those who are simply determined to find fraud and deceit around every corner.

 

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2 Comments

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2 responses to “(not quite) exposing the Ice Bucket Challenge scam (because it doesn’t exist)…

  1. This is a pathetic article- why not do the actual due diligence and pull the tax returns? You can see the itemization of expenses- this charity is incredibly irresponsible for the past 4 tax years(most recent available) they have less than 30 cents on the dollar spent on research and grants. But that isn’t a fair characterization of their greed and/or irresponsible attitude toward the cause they champion? Now with 100 million new dollars from all the rubes out there you propose that the ALSA will suddenly “do the right thing”? Do it proper and analyze the tax returns. They contradict your data.

    • Hey, thanks for commenting!

      You are correct, I did not look at the organization’s 990s; I relied on their financial reports, which should reflect the same information as the tax filings. You seem to be suggesting that they don’t match up, which is a pretty serious allegation of tax fraud.

      Also, you say the tax filings reveal they have “30 cents on the dollar spent on research and grants” — how, exactly, does that contradict the chart above that shows 27% of the organization’s budget is devoted to research?

      There are a couple of other points that I think didn’t quite come across:

      – The ALSA is very clear that funding research is just one of three activities the organization engages in. With that being the case, it makes sense that research expenditures would be balanced with those for the organization’s two other program activities.

      – It’s not so much a matter of the ALSA “doing the right thing” as you put it. It’s more that not-for-profits in general are under enormous scrutiny for how they spend their funds. That scrutiny will be even greater considering how much attention the Ice Bucket Challenge attracted. I consider that a very good thing — the ALSA will be under even greater pressure to justify the breakdown of their budget. And, as I said, any donations that were made as “restricted” will have to be used for research — that is a legal obligation the organization bears.

      Finally, keep in mind that my main point was that the original piece is entirely misleading — it uses budget numbers from a previous year to make claims about how the ALSA will use donations in the future; and claims that a chart illustrating the overall budget actually represents the apportionment of donations. Both, frankly, are idiotic.

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