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Groups' accounting practices questioned

WASHINGTON—Paralyzed Veterans of America stuffs dozens of brightly colored address labels into the fundraising envelopes it sends to homes across the country. Sometimes it sends a collection of greeting cards.

It hopes that these gifts, along with a patriotic sense of duty, will persuade recipients to make donations. In 2004, the group raised $76.6 million.

But recipients may not realize that these mailings are far more than fundraising pitches or junk mail that's never opened.

The mailings also are officially counted as an educational campaign, one that allows Paralyzed Veterans of America and some other veterans groups to boost the amount of money that they claim they spend on charitable programs.

On the back of the address stickers, for instance, Paralyzed Veterans offers these safety tips:

_ Always wear your seat belt.

_ Equip your bathtub or shower with nonskid mats, abrasive strips and grab bars.

_ Make sure that all stairs are well lit and have handrails.

These tips, plus pamphlets about the group's programs and cards that ask recipients to thank veterans for their service, allow Paralyzed Veterans of America to count large portions of the cost of its fundraising mailings as an educational-program expense. The group has even analyzed its fundraising letters, declaring that certain paragraphs and sentences within them are educational.

Such exacting accounting allows the group to report on its tax return that it spends 61 percent of its money on charitable programs. However, tax records show that if fundraising-related education is excluded, 37 percent of its spending is for more tangible good works, such as employing staff to counsel veterans about federal benefits.

Officials at Paralyzed Veterans of America said they were following a generally accepted accounting practice. But it's more than just accounting sleight of hand, they said. They're helping to protect people from spinal cord injuries.

"We do not believe they are of dubious value," said Mark Dowis, the group's associate executive director. "We think they do send a valuable safety message. If we save one person from being in a chair, we think we've done our job."

Only six of the 47 congressionally chartered veterans groups and their related entities that Knight Ridder examined count some of their fundraising costs as educational. The others are Disabled American Veterans, Veterans of Foreign Wars of the United States, Blinded Veterans Association, AMVETS National Service Foundation and the TREA Senior Citizens League.

"It's really a way to disguise your fundraising," said Daniel Borochoff, the president of the American Institute of Philanthropy.

Charities of all types frequently are trying to massage their financial reports so that they look better to donors and watchdogs, said Karl Emerson, the director of Pennsylvania's Bureau of Charitable Organizations.

Counting joint fundraising and education costs is a prime area, he said, noting that the education usually involves a sheet of paper of questionable value.

The practice is legal, he said. "But I think your average person probably wants their money to be used in a more tangible way," Emerson said.

Bennett Weiner, the chief operating officer at the Better Business Bureau's Wise Giving Alliance, said that about half the charities his group evaluated used the accounting practice. The bottom line for donors, he said, is to look at a group's educational-fundraising message and decide whether it's worth supporting.

"Not everyone agrees with every charitable mission," he said. "If you don't believe that an activity is appropriate, send your money to another charity."

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(c) 2005, Knight Ridder/Tribune Information Services.

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