Charity Navigator issues “donor advisory” about HSUS & coplaintiffs’ $15.7 million settlement with Ringling

Replaces “three star” rating of HSUS with “donor advisory”

            WASHINGTON D.C.––Responding to the May 15,  2014 agreement by the Humane Society of the United States and codefendants to pay Feld Entertainment Inc. $15.75 million,  in settlement of a lawsuit accusing HSUS and the codefendants of racketeering, the online nonprofit evaluation agency Charity Navigator has replaced a “three star” rating of HSUS with a “donor advisory.”

The donor advisory partially summarizes the settlement, but incompletely describes the litigation leading to it. The settlement resulted from a lawsuit originally brought against Feld Entertainment in 2000, alleging that the Ringling Bros. and Barnum & Bailey Circus, owned by Feld, abuses elephants in violation of the U.S. Endangered Species Act. The original plaintiffs were the American SPCA,  the Fund for Animals,  and the Animal Welfare Institute. HSUS inherited the long string of litigation that followed after absorbing the Fund for Animals in 2005.

“Charity Navigator, as an impartial evaluator of publicly reported financial information, takes no position on allegations made or issues raised by third parties, nor does Charity Navigator seek to confirm or verify the accuracy of allegations made or the merits of issues raised by third parties,” the donor advisory said. “However, Charity Navigator has determined that the nature of this/these issue(s) warrants making this information available, so that donors may determine for themselves whether such information is relevant to their decision whether to contribute to this organization.”

The Charity Navigator donor advisory concluded with a list of ten “highly rated” charities performing similar types of work, including the HSUS subsidiary Humane Society International.

“It’s absolutely crazy that this donor advisory has been issued,” HSUS president Wayne Pacelle told ANIMALS 24-7, “and we are asking the folks there to take a very careful look, because it’s an error.”

A statement posted to the HSUS web site noted that HSUS “is approved by the Better Business Bureau’s Wise Giving Alliance for meeting all 20 of its standards for charitable accountability. We were named a few years ago by Worth magazine as one of the ten most fiscally responsible charities in the country. Guidestar’s Philanthropedia experts have ranked us the No. 1 high-impact animal protection organization.”

But the HSUS statement contended, “It’s unwise for any donor to rely exclusively on charity watchdog reviews,” because “They often rely on strictly numerical measures that do not capture either efficiency or effectiveness, or the degree of difficulty of the work they engage in.”

Continued the HSUS statement, “Charity Navigator’s donor advisory penalizes animal welfare organizations for advancing their mission through advocacy work and for defending themselves in court.”

CharityWatch

“Another group that gets it wrong,” HSUS said, “is CharityWatch, or the American Institute of Philanthropy,” which interprets all direct mail, telemarketing, and solicitation costs as separate fundraising expenses,” as does ANIMALS 24-7.

The Internal Revenue Service and the Council of Better Business Bureaus allow nonprofit organizations to split allocation of direct mail costs between program service and fundraising.

“While fundraising is a major component of mail or phone solicitations, there is a great deal more to these efforts than that,” the HSUS statement contended, since the HSUS marketing program “builds a constituency of supporters and educates the organization’s members and the general public about important animal protection issues. It’s because of this large constituency and its influence that we can call on our supporters to take action, communicate with lawmakers or corporations on policy issues, raise awareness in their communities, and otherwise advance our programmatic goals.”

Charity vs. advocacy

While ANIMALS 24-7 does not dispute that this is true, the HSUS statement and the Council of Better Business Bureaus’ interpretation of the IRS regulation blur the distinction between a public charity and a nonprofit advocacy group.

Historically, and by intent of the IRS rules governing a 501(c)(3) nonprofit organization, a public charity is meant to be an entity performing nonprofit work for the general benefit of society, which might otherwise be left to tax-funded agencies. Most 501(c)(3) nonprofit organizations operate schools, hospitals, museums, parks, animal shelters, conservation areas, and allied institutions that are not engaged in political or cultural advocacy. The rationale for giving such institutions a tax exemption is that they perform work that is broadly endorsed by the overwhelming majority of taxpayers. The nonprofit institutions receive the tax exemption more-or-less in lieu of receiving direct public support––although many nonprofit institutions also receive government grants and contracts.

Beth & Merritt Clifton.
(Geoff Geiger photo)

Advocacy organizations are by definition trying to change political or cultural norms in a manner not already broadly endorsed by the overwhelming majority of taxpayers. Granting a tax exemption for advocacy work in effect compels all taxpayers to subsidize the promotion of ideas with which they may strongly disagree.

The chief beneficiaries of blurring the once relatively clear distinction between charity and advocacy have been politically conservative entities, including pro-animal use groups such as the Center for Consumer Freedom and Protect the Harvest,  which conduct overt advocacy under a charitable umbrella.

(See also Humane Society of the U.S. & codefendants pay Ringling Bros. circus $15.7 million.)