Review of National Veterans Foundation Financial Documents

by Janet, Editor

We have now received and reviewed the requested financial information from National Veterans Foundation. They provided their IRS Form 990 for 2008 (fiscal year ended 6/30/2009), and audited financial report for the same period.

This provides a perfect illustration of why it is so critical to review the actual financial documents of a veterans charity (or any other charitable organization) prior to deciding whether to donate to a particular charity.

This review is lengthy and complicated, and we apologize for that. But to understand what the documents say, you will need to read through the whole thing. Charity expense reporting is a complicated task.

Read our original comments regarding National Veterans Foundation.

National Veterans Foundation Financials for 2007

The numbers given above, provided by GuideStar from NVF's 990, are for 2007 (their fiscal year ended June 30, 2008). You can review these documents for yourself at GuideStar, but you will be required to create an account and register (free) before being able to access them.
It merely repeats the aggregate numbers.

Looking at the details provides a far different picture.

In that year, NVF reports no professional fundraising fees. However, in Part II-A for the Form 990, where the organization is required to report the compensation paid to the five highest-paid independent contractors for professional services (and each contractor paid more then $50,000), NVF lists:

Fullmix Marketing, Beverly Hills: $203,748
Bold New World, West Hills, CA: $96,881

What type of service did they provide? Education/Promotion -- in other words, marketing.

What is the purpose of such education/promotion? Are they educating veterans that their services are available, or are they educating the public that they exist so they can generate donations? Probably some combination of the two, but we'd bet the lion's share of it goes to educate the public that they exist (so you'll make a donation).

According to the allocation made by NVF, they had a total of $404,248 in expenses for "Education/Promotion." Of that total, $363,823 was allocated to Program Services, and only $40,425 (magically, a very convenient 10%) was allocated to Fundraising.

Using the figures from GuideStar's report, it would seem that of total expenses of $1,217,419, a total of $1,045,920 (seemingly 86%) went to provide program services to veterans.

However, the reality is not what most donors would expect. Out of the total of $1,045,920 allocated to Program Service Expenses, we see from the Form 990 that amount includes:

Education/Promotion: $363,823
Insurance: $12,454
Office Expense: $89,150
Storage/Moving: $20,610

Totaling those amounts, that means at least $486,037 (46%) of the amount that NVF called program services did NOT go to providing services to veterans, as donors would expect the amount for "program services" to do. With those numbers backed out, that leaves just $589,883 (56%) for program services. And there's no way to know how much of other amounts allocated to program services would fall into categories most donors would consider to be overhead or administrative expenses. So rather than the 86% it appears was used for program services in 2007, we think that number was in actuality less than 56%.

Those number do not address salaries, employee benefits and payroll taxes, most of which are allocated to program expenses. We have an idea that most of those expenses DO go to workers involved in providing services, so we're not taking exception to that allocation.

But it gets FAR WORSE for 2008 (the fiscal year ending June 30, 2009).

National Veterans Foundation Financials for 2008

When we reviewed NVF's Form 990 for 2008 (fiscal year ended June 30, 2009), we were outraged.

For that year, NVF reports total functional expenses of $5,043,167, with total program expenses of $3,577,170. Those numbers, at first glance, aren't the best, but don't seem too bad. That's exactly why they need additional scrutiny. Follow along, and prepare to be as outraged as we were.

The list of highest-compensated independent contractors shows:

Quadriga Art, Inc, NY, for direct mail and consulting: $2,128, 213
Bold New World, CA, for education/awareness/promo: $140,248
Brickmill Marketing Services, NH, for direct mail and consulting: $236,689

That total is $2,505,150 for fundraising and marketing. (And remember, the contractors on this list are only those paid more than $100,000.)

BUT, for "Professional Fundraising Services," reported on line 11e of the Statement of Functional Expenses, NVF reports $1,323,050.

Then, under "Other Expenses," it lists $2,821,623 for "Education/Awareness/Promotion." Guess how that amount is allocated? You guessed it:
$2,804,075 for "program services," and just $17,548 (just ONE PERCENT) for "fundraising expenses."

There's another $57,560 for "outside services," of which $34,536 is allocated to program services and $23,024 to fundraising expenses.

And $49,473 in "other expenses," allocated $44,498 to program services, $1173 to administrative expenses, and $3,802 to fundraising. There's no way to tell what those expenses were for.

So, taking the aggregate numbers from NVF's Form 990, they reported:

Total functional expenses of $5,043,167, allocated thusly:
Program Services: $3,577,170 (71%)
Administrative Expenses: $69,726 (1%)
Fundraising Expenses: $1,396,271 (28%)

Not too bad, you say? Keep reading!

Line 25 provides a place to list joint costs from a combined educational campaign and fundraising solicitation.

That line shows a total of $3,969,190, allocated $2,646,140 (a neat 67%, or 2/3) to program services, and $1,323,050 ("just" 33% or 1/3) to fundraising expenses. The amount allocated to program services is almost exactly twice (plus $40) the amount allocated to fundraising.

Those numbers look bad enough, but here's that part that will blow your mind:

Schedule G, which is required for organizations that report more than $15,000 in professional fundraising expenses, contains supplemental information regarding fundraising activities.

National Veterans Foundation reports fundraising activity conducted by Quadriga Art, Inc. (New York). Through direct mail (the only form of solicitation reported), Quadriga generated $3,969,191 in donations.

Of that amount, Quadriga retained $3,915,644 and forwarded to National Veterans Foundation a paltry $53,547 (ONE percent)!

These documents can be reviewed on the GuideStar web site after you register, or you may request a copy directly from NVF.

This is by far the most egregious instance we have uncovered in our review of veterans charities thus far.

We don't care how it's allocated, that's almost $4 million donated by Americans to help our nation's veterans, and of that amount, a shockingly small $53,547 actually went to the organization. Of that amount, who knows how much actually went to assist veterans?

And how does that figure relate to the $2,128, 213 that NVF says it paid to Quadriga on its list of most highly-compensated independent contractors for professional services?

Hoping for answers, we looked to the audited financial statement. It provided us with very discouraging information.

Note 4 states: "In July 2008, the Foundation contracted with an outside vendor to conduct and manage direct mail campaigns for the next five years in order to increase awareness among the general public of the needs of veterans and resources provided by the Foundation that assist veterans and their families. The campaign also included fundraising.

"In accordance with AICPA's (American Institute of Certified Public Accountants) Statement of Position 98-2, Accounting for Costs of Activities of Not-for-Profit Organizations and State and Local Governmental Entities That Include Fund-Raising, the costs of the direct mail campaign for the year ending June 20, 2009, have been allocated to program service expenses and fundraising expenses as follows:

Program services: $2,646,140
Fundraising: $1,323,050
Total joint costs: $3,969,190

"Under terms of the contract with the direct mail vendor, the costs of the direct mail campaign will be paid from donations received from the campaigns. The Foundation will received revenue from the direct mail campaigns once the costs of the campaigns is recovered by the outside vendor. The Foundation is not responsible to pay expenses of the campaigns if donations are not sufficient to cover the vendor's costs. . . . "

This is Outrageous

National Veterans Foundation has sold out our veterans, to the tune of almost $4 million, in order to net a measly $53,547 in revenue.

And with a five-year contract, it's not likely to get any better in the next four years.

National Veterans Foundation received an endowment of $4.9 million from an individual donor's estate in 2005. NVF is permitted to withdraw all income and up to 5% of the endowment principal each year. That means they will have sufficient resources to stay around for a long time.

Too bad they've chosen to funnel donations intended to help veterans into the pockets of a greedy third-party fundraiser. Imagine how much assistance they could provide to veterans with that money.

Our vote: Send your donations to another veterans charity. However beneficial the services provided by NVF, we just can't justify the diversion of almost $4 million intended for veterans into the pockets of a for-profit direct mail fundraising organization.

And if you're as outraged as we were, send NVF a letter telling them how you feel. We did.

Comments for Review of National Veterans Foundation Financial Documents

Click here to add your own comments

Mar 29, 2012
NVF - How does this continue?
by: Anonymous

What is being done about this? Does it just go on business as usual?

Anon, from what we can see, very little is being done about it. There was a Congressional committee investigating veterans charities in late 2007. Haven't seen any improvements as a result (I know, what a surprise, right?)

There are only three things I know of that an individual can do about it:

1) Investigate before you give and stop supporting charities that don't use their funds for the intended purpose;

2) Write your Congressional representatives and insist that something be done to stop the wholesale ripoff of the American public in the name of our veterans by tightening the requirements on 501(c)(3) organizations (see below); and

3) Write the IRS and demand that it tighten the requirement for the percentage of donations that charities are required to use for the stated purpose. Right now, that number is 5% or less in certain situations. Also demand that they investigate and shut down obvious shams and ripoffs, with lots of publicity about it, and refuse to allow those responsible to start new organizations with 502(c)(3) approval.

One of the biggest changes that is needed is to require charities to publicly account for their funds in a way that most donors will understand, accurately reporting fundraising expenses and NOT hiding fundraising costs as program expenses.

Until donors demand transparency and stop supporting those groups that are not good stewards of their money, it will continue, unfortunately.

May 11, 2011
One day you will be judged!
by: Mary Ann Hogan

I, in good faith, solicited from other veterans and friends to help support the National Veterans Foundation. How low can you get when you deprive people who give their lives to keep us safe?

It's no wonder our Country is hitting the skids, because of dishonest and corrupt people like you...and others in our government.

God help us!

Apr 04, 2011
no donation for NVF
by: Anonymous

Shame on you all.

You have the nerve to call Viet Nam Vets and ask them to donate? They have already paid dearly.

Then to call widows of vets, what has happened to this country?

I for one will not support your executives and their leeches.

I will find a different charity for vets to contribute to.

Mar 10, 2011
by: Anonymous

I am president of a Vietnam Veterans organization local chapter in Ohio.

Several weeks ago I received in the mail a request for donation to the National Veterans Foundation from a friend and fellow Vietnam vet.

After making a small donation I received a follow-up letter from NVF asking for more donations. The letter had a post office box in Washington, DC, in their letterhead. The donation return envelope was addressed to a New Hampshire address.

I thought this unusual so I called the toll free number listed on the letter. The person who answered explained that they do NOT have an office in Washington DC or New Hampshire, that these are only marketing and money collections services. He went on to say that they only have an office in Los Angeles, CA.

When I explained that I too was involved in veterans assistance issues and wanted to know what services they provided, I was told that they "make referrals" to other agencies. He knew of no individual cases of direct support of a veteran or a veteran's family.

If it walks like a duck and quacks like a duck, it's a duck. And this is a scam.

Mar 09, 2011
by: R.Lomax

Amazing how gullible ths U.S. public is now compared to the compassionate interest shown for veterans of Korea and/or Vietnam.

The greed mongers are now taking advantage of an unsuspecting public for their own avarice.

Jan 31, 2011
Quadriga Art and charities
by: animal lover

A previous post asked if NVF owns Quadriga Art -- it often works the other way around.

Quadriga Art will underwrite a start-up charity through a long-term contract [Disabled Veterans National Foundation has a 7 year deal; the charity I've been researching, SPCA International, has a 10 year contract].

The charity justifies the deal by claiming they will wean themselves off the commercial fundraiser by the end of the contract. But in the meantime, millions and millions of donated dollars from well-meaning Americans go to waste.

As for National Veterans Foundation, not only does Quadriga Art take a big bite but their subsidiary, Brickmill Marketing (aka Brick Mill Studios), also feeds at the trough.

Jan 19, 2011
Thanks for the gift
by: Anonymous

How can I return the calculator and calendar NVF sent me? If I can't return it I will take it to our local Veterans Home and donate it to a vet who can really use it.

This is the third "gift" of this sort that I have received from your organization and I don't appreciate it. I am a retired military officer.

Please remove my name from your mailing lists.

Sir, thank you for your service. You may be interested in our page with instructions about how to be removed from charity mailing lists.

Dec 11, 2010
Shame on NVF
by: Fred S

I have given $40 to NVF this year. It will be the last I give.

I asked to be removed from future mailings. I will give my money to deserving organizations.

Dec 05, 2010
Disabled veteran
by: Dorie Perez

Spell OUTRAGEOUS in capital letters!

Does the NVF own Quadriga Art? How can they possibly justify this?

Americans are generous philanthropists and most actually want to help others.

How unfair to those who could benefit from these charitable donations, that millions of dollars is diverted in such a shady fashion.

And what happened to the guy who founded NVF? Did he sit on his conscience?

Nov 30, 2010
Stop This
by: Bill from CA

I agree that 1% of 4 million dollars is nothing but a shame.

It seems that people are making a "dishonest" living using donations to worthy causes as a "shell game". These people mail out t-shirts and bags so you will donate, this is a red flag when I hear about these so if you receive one be aware.

Thanks for doing such a great job. What I can't understand is why a major network doesn't make a big deal of this on TV, giving the American Public a heads up.

Thanks again,
Bill, CA

Nov 15, 2010
How Dare you!
by: Devil Dog / Leatherneck

I've seen the work of this organization, and feel they are a more than worthy veterans organization. They may not be as big as some of the others but they are not a fly by night charity. They are the link that is needed to bridge the gap from the battlefield to the home front.

How dare you badmouth an organization that exist only to help our brothers, sisters, mothers, fathers, & friends, what are you doing...

Devil Dog, did you read the information taken directly from their federal income tax return?

A for-profit fundraiser collected almost $4 million from Americans wanting to support our veterans. The fundraiser kept 99% of the funds collected, and sent only one percent of the money donated to the charity.

How can you call that anything other than an exploitation of our "brothers, sisters, mothers, fathers, & friends" to rip-off of the American public?

I'm glad to know you think they did good work with the paltry one percent ($53K) they received from their middleman fundraiser who siphoned off $3.9 Million. Just imagine how much more good they could have done with the other $3.9 million that was intended to help our veterans!

What am I doing? I'm educating the people who have money to donate and would like to support our veterans that there are charities to whom they can donate and have their money actually go to the cause they intended. Sadly, National Veterans Foundation is not one of them.

You're certainly entitled to your own opinion, but if you think this is supporting our veterans, you need to do better research and educate yourself. No wonder you chose to hide behind a pseudonym.

If you were a REAL MARINE, you would have done your research before popping off, and you'd be as outraged as we are!

Oct 09, 2010
Not a fair assessment
by: Anonymous

Lots of assumptions and half truths in your analysis.

This is neither assumption nor half-truth:

"National Veterans Foundation reports fundraising activity conducted by Quadriga Art, Inc. (New York). Through direct mail (the only form of solicitation reported), Quadriga generated $3,969,191 in donations.

Of that amount, Quadriga retained $3,915,644 and forwarded to National Veterans Foundation a paltry $53,547 (ONE percent)!

Those figures came directly from the tax return.

If you have details you'd like to share to back up your accusation, please provide them, but not anonymously! We need to know who you are and where you got your information. We don't see how any information you could provide can change the figures quoted above, but we'd be happy to examine any information you'd care to share.

Sep 15, 2010
National Veterans Rip-Off Foundation
by: Paul R. (retired vet.)

Shame on the National Veterans Foundation - diverting at least 99% of contributions that people think are going to deserving vets to ad agencies and other money grubbing middlemen.

Potential donors, stay away from this scam -- send your contributions elsewhere. Check the scorecard of worthy organizations.

Aug 17, 2010
RMC, USN (Ret.)
by: T. E. Donovan

As a veteran of WWII, Korea and Viet Nam, I wanted to do what I could to help the Veterans of the latest wars.

After reading your financial statement, I feel it's disgraceful that NVF represents itself as an organization to help our Veterans. It would be better served if I was to give my $12.00 to any one of the current and authentic Vets organizations.

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