Haiti Relief: Texting Wyclef Jean May Be a Waste of Money

Donating by phone seemed a pretty cool way to give money, so with this inspiration, I decided to check out how to make a mobile donation. First, however, I wanted to make sure that the organization would use the money wisely. I have heard too many stories about charities that have gone astray to send my donation to just any organization. The United Way scandal in the early 1990s comes to mind and last fall there were the revelations about the fraudulent activities of the United Homeless Organization in New York. Many of us do want to help, but are uncertain over how best to help or which of the thousands of charities are able to put our donations to best use.

I was particularly alert after my PD colleague Donna Trussell reminded us to be careful where we make our contributions. I also noted that the Internal Revenue Service warns that potential donors should be aware of charities that abuse their tax-exempt status by diverting donations toward non-exempt activities. The IRS says that enterprises that are out to make a profit may attempt to take advantage of the tax deductibility of contributions to charitable organizations. Former IRS Commissioner Mark Everson even testified before the Senate Finance Committee in 2004 on the importance of preventing abuse.

Ironically, just as I was typing this sentence, a story came on the radio about the questionable practices of one foundation. The story concerned the Yele Haiti Foundation, the charitable relief organization founded by Haitian native and rap singer Wyclef Jean. Going in Jean's fundraising favor is his celebrity status. He will co-host with George Clooney a "Hope for Haiti" all-star telethon on January 22. Jean's organization has already raised more than $2 million largely through mobile-phone based giving.

But, celebrity-status can sometimes be a two-edged sword, as that celebrity has drawn attention to his charitable organization and some groups have questioned how Jean's foundation spends its funds. According to the New York Times, one Virginia-based organization reviewing the group's tax returns found that its expenses exceeded its revenues by $411,000 in 2007. Another group looked at the Foundation's tax return and found that it had given more than $400,000 to Jean and a business partner for concert services. (For more on Jean's charity and a look at an extract from the foundation's tax return, click here). While I believe that Jean is spending the $2 million on Haitian relief rather than on personal expenses, I decided to look for a different organization.

I am not interested, for example, in donating to organizations that spend a large share of their contributions on administrative and overhead expenses.

Since I wanted to make my donation immediately, I sought ways to do so through my mobile phone and via a list on The New York Times, I came across a group known as "Mobile Giving." This seemed a good way to start, so I looked at the organizations they support and found six organizations listed. I chose to learn more about the International Rescue Committee (IRC) after seeing that it had received an A+ from the American Institute of Philanthropy (AIP).

I learned that the American branch has existed since 1933 and that it has some famous board members, including Jean Kennedy Smith, Liv Ullman, Maurice "Hank" Greenberg, and Michael Gerson. I also learned that it has provided relief in areas as diverse as Hungary, Vietnam, Lebanon, Chile and Burma. So far, so good.

I was now interested in how the IRC used its donations. The AIP recommends that charities spend at least 75 percent of their budget on program services and no more than $25 to raise $100. It also gives top ratings to groups that do not hold excessive assets in reserve and that disclose the basic financial information and documents to AIP. Program services are a vital part of an organization as those are the expenses that go towards furthering an organization's exempt purpose while management and general expenses are largely made up of administrative and overhead costs not related to the tax exempt purpose. The IRS reports that charitable organizations devote 86 percent of total expenses on their programs and 12 percent on management and administrative expenses.

The IRC has a lot going for it. First, it provides a link on the website to its financial statements so that potential donors can verify their figures. The independent auditor KPMG provides its opinion on the financial statements. These statements showed that in 2008, IRC spent $244 million, or 90 percent, of it $272 million expenses on program services, while it spent $16 million on management and general expenses, and $11 million on fundraising. I particularly liked the fact that the IRC put a link to its tax return on its website. Thus, the A+ rating the AIP gives to the International Rescue Committee seems justified to me.

To see how Wyclef Jean's foundation measured up to the IRC, I took a look at its tax return (which was not on its website but some extracts were available through The Smoking Gun.) The numbers did not look so good. The Foundation, which does business as the Yele Haiti Foundation, spent just 72 percent of its budget on program services and an extraordinary 22 percent on management and general expenses. Given the unfavorable comparison with the IRC's numbers, my decision was made.

It took me just a few seconds to text "HAITI" to 25383 to donate $5 on behalf of the International Rescue Committee. I soon received a message asking me to confirm my donation and, after doing so, to receive a "thanks!" for my $5 donation, which will be charged to my phone bill. Thus, in a matter of seconds, I joined the millions who are helping contribute to the Haitian relief efforts. (Note: In the interests of full disclosure, while reading through the notes to the International Rescue Committee's financial statements, I saw that in April 2007, the IRC had entered into a fiscal sponsorship agreement with Not On Our Watch, Inc (NOOW). IRC has given $6,598 to NOOW. This relationship ended in 2008. One of my Politics Daily colleagues, Alex Wagner, works for NOOW.)

Oddly, just minutes after texting my donation, I received a message from "Karen Irving" asking me to be her Facebook friend. Minutes later, I received the following message from her:

Subject: YELE 501501 TEXT MESSAGE DONATION

"WYCELF JOHN IS HAITI RELIEF "YELE IS HIS SITE PG, HE IS ON THE GROUND IN HAITI HIS HOME COUNTRY HE ALSO HAS A TV RADIO STATION SET UP TO HELP THE PEOPLE OF HAITI. CNN IS ALSO ON THE GROUND IN HAITI,BLESSINGS AND LUV"