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Archive for Sunday, August 7, 2011

Concerns raised about overhead costs of Tonganoxie-based nonprofit Purple Heart Veterans Foundation

August 7, 2011

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Where the money goes

If you donate a dollar to the Purple Heart Veterans Foundation, here’s where it goes:

78 cents: Paid to a for-profit fundraising business, Independent Promotions.

11 cents: Given to veterans organizations and care packages to troops.

7 cents: Spent on “other expenses,” including $6,000 spent on a vehicle and nearly $15,000 spent on travel.

4 cents: Andrew Gruber’s salary.

*Based on the foundation’s 2010 IRS tax forms.

Related document

Purple Heart Veterans Foundation tax form ( .PDF )

Fundraisers for the Tonganoxie-based Purple Heart Veterans Foundation have been spotted at booths in front of several local stores recently, collecting donations to “support the troops.”

But for every dollar you might have given them, only 11 cents would actually make it to a veteran or a member of the armed services, according to a Journal-World investigation.

Based on interviews with foundation President Andrew Gruber, as well as an examination of the foundation’s IRS nonprofit tax forms, the investigation revealed:

• Nearly $541,000 was collected by the foundation in 2010, but almost $420,000 of that was paid to Independent Promotions, an Indianapolis-based for-profit fundraising company operated by Scott Gruber, Andrew’s brother. Only $61,000 was actually paid to support organizations for veterans or on care packages for troops.

• Gruber started another nonprofit this year, registered at his home address, named the Kids Vs. Cancer Foundation. Tax forms for this organization were not yet available. The organization is run by Andrew’s other brother, Steven Gruber, in Corpus Christi, Texas.

• Andrew Gruber was paid $20,000 in 2010 as foundation president but will make $48,000 this year, a decision approved by the board of directors, which includes Gruber and two other people.

The Journal-World asked three representatives from organizations that monitor nonprofits to review the foundation’s tax forms. All three representatives expressed concern about the foundations.

“It’s not adding up,” said Lindsay Nichols, a spokeswoman from the nonprofit watchdog group GuideStar.

Is Gruber operating a well-orchestrated, multistate scheme for his and his family’s benefit? Or is his work a well-meaning — but inefficient — attempt to help others?

‘Red flags’

While nothing points to Gruber doing anything illegal, “there are some red flags,” said Laurie Styron, an analyst for the American Institute of Philanthropy. Styron reviewed the foundation’s tax forms and was particularly concerned about the involvement of his brother’s business.

“That looks really bad,” she said.

Perry Schuckman, executive director of the Kansas Nonprofit Chamber of Service, says he also sees some problems with hiring a family member’s business.

“It would be a direct conflict of interest,” Schuckman said.

According to IRS tax code for nonprofits, such organizations “must not operate for the benefit of private interests,” such as those of its founder or the founder’s family. It’s not clear whether paying a family member’s business for fundraising services would break that law. A representative from the IRS declined comment, saying the agency does not discuss particular cases with the media.

Another red flag for Styron was the creation of a second nonprofit that “tugs at the heart strings.”

Support the troops? Help kids with cancer? Who wouldn’t want to help out, she said. Styron cited previous cases across the country where individuals have created multiple nonprofits as way to funnel donation money to themselves.

Then there’s the very low percentage of money that actually supports the work of the nonprofit, which, according to the foundation’s IRS forms, is “to provide support and assistance to veterans of the U.S. armed forces.”

Only 11 percent of the more than $500,000 collected went to members of the armed services — in the form of payments to the veterans hospitals in Topeka and Leavenworth and 200 care packages sent to troops. Schuckman said the nonprofit industry standard is closer to 80 to 90 percent. If that standard were applied to Gruber’s foundation, at least $400,000 of the funds should go to support troops or veterans.

‘On the up and up’

At his home, which doubles as his office, Andrew Gruber showed photos on the walls of veterans and members of the military. Many in his family served in the military, and he started a nonprofit as his way of giving back, he said.

“Everything’s on the up and up,” Gruber said. “I started this to help out.”

Gruber previously worked construction, but as the nonprofit demanded more time, it “kind of turned into a full-time job,” he said.

Gruber rattles off the names of local veterans facilities the foundation has assisted and said the foundation donated $1,000 to the local “Extreme Makeover: Home Edition” house, being built for a wounded veteran in Ottawa.

Gruber also said he didn’t see any problem with hiring his brother’s business to raise money, nor any problems with the high overhead for the foundation.

“You’ve got to spend money to make money,” he said.

And he’s just starting out, so the organization’s efficiency shouldn’t be measured against established nonprofits, he said.

“They’ll look better next year,” said Gruber of the nonprofit’s financial statements. It’s unclear whether Gruber has any previous nonprofit experience.

Styron said it often does take a couple years for nonprofits to get going, and her organization doesn’t even rate groups that haven’t been around for at least three years.

The IRS takes a similar view, she said, and it’s unlikely Gruber’s foundation would be audited — one avenue for revoking a nonprofit’s status.

In addition to being registered with the IRS, the foundation is also registered with the state of Kansas.

The Kansas Attorney General’s Office investigates nonprofits if a complaint is made, but Jeff Wagaman, Attorney General spokesman, said no such complaints have been made against either of Gruber’s foundations.

“As a charity, we operate 100 percent within the laws governing charitable contributions,” Gruber said.

Initially, Gruber answered questions about the foundation. However, he later said he was unwilling to cooperate further for this story. The Journal-World was unable to contact Scott Gruber, owner of the fundraising business. That business is registered with the state of Indiana, but there is not a listed phone number, and the company does not appear to operate a website.

Steven Gruber, who runs the Kids Vs. Cancer Foundation, responded through email but declined a phone interview, and the website for the foundation does not list a phone number.

Little regulation

Gruber’s situation highlights a murky area of the nonprofit world, and distinguishing what’s a legitimate nonprofit and what’s a money-making scheme is difficult, said Nichols of GuideStar.

“There is not a ton of regulation for nonprofits,” she said. All that’s really required is some paperwork, reviewed by an accountant, that’s then filed with the IRS, which then decides whether to grant nonprofit status to groups.

The best thing consumers can do to prevent potential shady practices is be educated about where you donate, Styron said.

“Never give impulsively,” she said.

Comments

Bob Forer 3 years, 4 months ago

Refreshingly unusual to find the LJW running a decent investigative article. Nice job, Shaun. Sounds like a scam to me.

Jeff Barclay 3 years, 4 months ago

me too! Big bright red flags ought to be a flyin!

Gruber20 3 years, 4 months ago

Dear sir...

As a charity we operate 100% within the laws governing charitable contributions. It is a regretable fact that consistent reliable operating revenue for any new charity can only come from the help of professional fundraisers. In fact the majority of established charities continue to use professional fundraisers to cover operating costs due to the reduced staff involved.    Yes the costs associated can seem high when viewed directly but are all inline with the costs of performing the duties in house and are offset by recurring donations and other revenue streams which in turn allow a much higher yield to the bottom line. ( ie the cause)    As most people are aware advertising a new buiseness, product, or foundation and tring to gain market share can be expensive and professional fundraisers take care of all advertising and fundraising activities allowing the charity to have a stable cash flow to operate. It is the support of our local community that helps us reach our goals.    Our goal has and always will be to help each and every veteran we can as much as possible. As the foundation gains awareness and recurring donations increase the percentage to th cause increases as well.    We apreciate your concern and your continued support.                          Phvf pres. Andrew gruber

cowboy 3 years, 4 months ago

Andrew , we weren't born yesterday , this thing is waddling and quacking. You should be ashamed profiting off the backs of our injured vets.

Gruber20 3 years, 4 months ago

Also just to make the Kansas area aware, Independent promotions only operates in Indiana, and the percentages are the same that they were currently being paid by another non-profit organization. They are registered with the Indiana Attorney General and have had no complaints. The reason Purple Heart Veterans Foundation chose there company to represent us was due to a great track record and ability to be trusted with that type of cash flow and representing the Purple Heart Veterans Foundation the way it should be represented. It is pretty hard to find a supply of men and women willing to go out in the hot or cold conditions and volunteer there time to raise the type of awarness they raise. Especially in the economy we are in today. Not alot of people willing to do something for free. So again that is the cost of running in Indianapolis, and Kansas is a different situation.

tomatogrower 3 years, 4 months ago

Lawrence is a college town. There are lots of students groups who are willing to volunteer. Isn't it funny the 2 top management people of these groups are brothers? Using people's desire to support the troops so you can make a living is disgusting. Go out and get a real job. There are plenty of charity groups for troops. Give directly to them.

cowboy 3 years, 4 months ago

Since January 2010, Purple Heart Veterans Foundation has raised over $50,000.00 in order to assist our hospitalized veterans.

From your website

Why don't you tell the truth that you have raised close to a half million dollars and kept 90% of it ?

Gruber20 3 years, 4 months ago

For one we didnt keep 90% theres overhead such as building the website, merchant accounts, web hosting fees and lets not forget the shipping thats associated with all care pkgs sent out, and when website was built thats the monetary situation at the time, $50,000

Bob Forer 3 years, 4 months ago

"lets not forget the shipping thats associated with all care pkgs sent out, "

No, let's not. Don't try to BS sophisticated folks. The care packages go to APO addresses and have a low rate of around $10.00 per package. According to the article, you sent out 200 packages. That's only $2000 in expenses. Where the heck are the rest of the expenses.

Gruber20 3 years, 4 months ago

And mr cowboy do you think the $48,000 salary for this year is out of line for some one who puts in 50hrs a week with no other employee benifets such as health care social security 401k and all that. Did you know the Irs only expects at least one percent go to the mission. We did 10%. So if we were in it to make money salry might be a lil higher. However that salry will remain in effect for a long time to come.

cowboy 3 years, 4 months ago

Certainly you would be willing to post your financials as a pdf file showing all of your expenditures and to whom they were disbursed in the interest of open disclosure.

Gruber20 3 years, 4 months ago

kansas uses a large volunteer base and shawn interviewed some volunteers but declined to mention that some piece of investigative material... merely an individual with an agenda hidin behind his press badge orchestrating a smere campaign designed to cast dispersions who will make the problem worse... this story is likely to put a hault to the progress it took a year and a half to make. Way to go... take money out of the mouth of our veterans... dont represent the story at all how it is. 11% the first year in buiseness isnt bad but it isnt what we hoped for either i encourage anyone that thinks they can offer better to come forward and offer assistance id welcome it!

tomatogrower 3 years, 4 months ago

There are plenty of well run charities for veterens and troops. Give to them. Why form a new one? Why not work for one of the established charities?

If someone charged you that much money to create a website, then you were ripped off. Of course, it was your brother, so at least it was kept in the family, right? wink, wink My husband creates websites, so I know how much it costs.

Why also, should we give to uneducated people who can't even spell or use proper punctuation? Your rants here do not make us feel like giving money to your group. In fact, when we were approached by your people at the store, we were quite suspicious, and didn't give. We donate money to real veteran's groups, many run by real veterans. How many years did you and your brother serve?

SWJayhawk13 3 years, 4 months ago

Shaun has written a number of public-interest type pieces, along with more investigative stories, and I'd hardly say he is "an individual with an agenda". Far from it. Sounds to me like he's revealing a shady "organization" for exactly what it is: a scam. I volunteer for a nonprofit based out of Lawrence, and as tomatogrower points out, you are getting ripped off if your website costs you that much. Your numbers don't make sense, unless you account for the fact that you and your brother are profiting off of wounded Vets. Shame on you.

Gruber20 3 years, 4 months ago

Respectable? Meaning they have been around longer then a year. What fo you classify as respectable. Do you look at all those "respectable" organizations salaries. St. Jude for example has a retired CEO who still gets a $600,000 annual salary. Do you know why Charity Navigator dosent look at Charities until the 3rd year. Cause any first year buisness for profit or non-profit is going to have a high over head they have to get things up and going. Theres a difference between getting started and being able to coast. Going up the hill takes a lot of work and effort but after that its a lot easier.

catman27 3 years, 4 months ago

So what percentage do u forcast for this year? Why do u use a professional fundraiser in indiana? Why doesnt it operate the same there as it does here with volunteers and what impact does that make here?

workinghard 3 years, 4 months ago

LJW did a story back in 2006 about a charity operating in Lawrence that also has a 90% overhead, Planet Aid. http://www2.ljworld.com/news/2006/apr... Unfortunately it didn't inspire Lawrence bussinesses to have them remove the collection boxes, except for Cottins hardware. It's operaters have lavish mansions and life styles.

50YearResident 3 years, 4 months ago

The 90% profit makes me want to start a charity too! I'll call it "Save My Children". Send me the money........I will give 10% to my kids.

bluedog 3 years, 4 months ago

Andrew, your comments on this thread just shows you are not competent enough to be executive of a nonprofit. You're supposed to keep your mouth shut and not comment. Duh! You're making it worse for your organization by trying to defend yourself.

ps. I know start up nonprofits who's overhead is no way near yours. You obviously do not know what you're doing...or do you...SCAM.

Scott Morgan 3 years, 4 months ago

Pretty slick deal me thinks. Overhead, expenses, are a great excuse to pay for your home. While correct, the money went for expenses, the entire program could be run out of one side of a double garage. Boom the director is living free, and with a little luck could upgrade into a bigger home. Scam 101.

My wife spent a day or two putting overseas packages together with a real organization. The goal was 1000 for the weekend. She tells me it was pretty hard work. Two hundred is chicken feed.

cowboy 3 years, 4 months ago

Andrew , were still waiting for your complete financials link. Your fundraiser , err brother , ought to have that within a click for 450 grand in fees. Your website could not have cost more than 39 cents so where did the rest of the money go.

Gruber20 3 years, 4 months ago

I would like to make something clear. First of all in Kansas we only use 100% volunteers. I put in the work to obtain the use of volunteer staff and over see operations. Independent Promotions has nothing to do with Kansas they were contracted to run our Indiana campaign.

Gruber20 3 years, 4 months ago

Also Independent promotions may be ran by my nrother Scott, again in Indiana only but has nothing to do with percentage his company is paid. His company has been involved with sales, marketing and fundraising since 1994. They were getting paid the same percentage we pay out by another non-profit when I aproached him about taking Purple Heart Veterans Foundation on as a client for a 2 year campaign. The goal was to establish a list of sponsors that could be utilized by Purple Heart Veterans Foundation in a quarterly mailing campaign.

impska 3 years, 4 months ago

Is his other client also a non-profit run by a family member or friend? What is the name of that non-profit?

nativeson 3 years, 4 months ago

The first comments were the best. This is good investigative reporting that highlights the high percentage of contributions that can go toward administrative costs. All non-profits are required to file what is called a Form 990 each year of its existence. It discloses revenues, expenditures, board members as well as related-party transactions.

The Form 990 also asks if the organization has been reviewed or audited by a CPA firm. I for one would not contribute to any organization that does not provide an audit. The costs would be a small fraction of what your organization has raised.

The IRS has begun to take more interest in the non-profit sector based on recognition that agencies can use this type of organization as a tax shelter that may or may not accomplish its stated mission. My suggestion to Mr. Gruber is to put this information on the website for all to view and make an informed decision on contributions with their hard-earned dollars.

Pointing fingers at other non-profits and their alleged abuses is simply deflecting responsibility from your own organization. Agencies asking for charitable contributions need to be accountable, and there is required information that can be provided for all to see.

Joe Hyde 3 years, 4 months ago

There's a certain awful symmetry involved here.

The American public gets lied into paying for the invasion and occupation of Iraq as part of Bush's "War on Terror" (which diverts trillions in national wealth into defense industry corporations whose profits had been drying up following the end of the Cold War). Soon many soldiers return home wounded, after which sympathetic American citizens -- those who donated over a half million dollars to assist Purple Heart vets -- see a mere 11 percent of their donation spent as they wished, the remaining 89 percent being funneled into corporate pockets.

General Sherman was only half right. War isn't just hell; it's also one hell of a money-making scheme.

Gedanken 3 years, 4 months ago

Great! Now that this article was written - they will have to pay additional big $$$ to Independent Promotions to just handle the bad P.R. Some non-profits just can't catch a break ...

I just shake my head at this kind of thing. Gruber is right about one thing. There are tons of charities out there that just line pockets of the board and administrators of the non-profit. Check out the Susan G. Komen foundation some time - they are the definition of evil in my book.

EJ Mulligan 3 years, 4 months ago

Thank you, LJW, for a good article and watchdog reporting -- very valuable in this day and age.

shaunepec 3 years, 4 months ago

Spinmama, LHS56, Much appreciated. I usually get hate mail...

LHS56 3 years, 4 months ago

I also appreciate the LJW for the article. I do believe we have a "reporter" at work rather than one that accepts an organization's public relations releases. I also wondered why Gruber didn't answer the question whether he or his brother were veterans. There were a few of us that returned from overseas in the 70s that were spit on. Even ones with Purple Heart metals. It is difficult to hold back one's temper when scum such as Gruber take advantage of those that have given more than lip service to their country. Perhaps he should consider joining a church in Topeka. He sounds like he would fit right in. (yes...I'm upset..g)

tomatogrower 3 years, 4 months ago

Yeah, Gruber20, are you and your brother veterans? When or why not?

geekin_topekan 3 years, 4 months ago

"The reason Purple Heart Veterans Foundation chose there company to represent us was due to a great track record and ability to be trusted with that type of cash flow" ++++ Their, not "there".

So the fact that your brother is head of the company, Independent Promotions, has nothing to do with the decision to use their services. Services which appear to be a big secret because I can find no evidence of their existence, none. I am not saying that they don't exist, I am just asking how someone in want or need of their services may get into contact with them?

You da insider, help a mutha out.

Bob Forer 3 years, 4 months ago

He won't be back to answer this toughie. Nice job, geekin.

cowboy 3 years, 4 months ago

Gruber seems to be doing pretty well only making 20,000 per year , his address is described as a 5 bedroom home valued at over 200,000. Working a fifty hour week he has little time for other employment

Kids vs Cancer , another scam , whats next something to do with puppies or kittens

Armored_One 3 years, 4 months ago

Was reading through the comments posted, and came across Form 990. I went and looked up one of the biggest ones there are, MDA.

The freaking thing was 86 pages long.

Jerry Lewis is a volunteer, but the head honcho over at MDA makes over 300K a year, and total office expenditures for income was nearly 19 mill, if I remember right. I think that was somewhere around page 9. The telethon for the year I looked at, which was 2008, I think, brought in 45 mill.

It all comes down to operating costs, from what I was reading.

What is the overhead for this organization? How much of the start-up came directly out of his pocket?

I'm not trying to defend anyone, but I'm also not accusing, which I see a whole lot of in this article and subsequent comments. I tried finding the 1950 990-T for MDA, but it was nowhere to be found, but start up for that couldn't have been cheap, even back then.

Just think that there is a lot more involved with this than everyone is giving credit to.

Oh, and cowboy, since I can see your post while I type...

Did you happen to find out how long he has lived in that house? If he bought it very recently, yeah, you might have a point there, but if he's had it for 5 or 10 years, you just shot yourself in the foot.

Full information, or don't bother opening your mouth.

catman27 3 years, 4 months ago

I think that is a good point armored one... since when did our society become so judgemental? What happened to innocent until proven guilty. It was stated that volunteers were interviewed but nothing about that in the article and gruber mentioned that the brothers company is only operating in indiana... i dont know exact advertising costs but it seems t me that an office full of employees and an advertising budget for any company would be costly. It was also stated by the article that the watchdog groups even comented that first few years expenses are high for most. Perhaps we could all agree that it seems the brother being the one fundraising is the big reason to jump to that conclusion but the math seems simple enough... would u trust just anyone with 10k a week in cash? Lets think about enron and mci worldcom... i would like to see the next report before i decide what i think. Maybe it was just a well intentioned bad decision. Just a thought.

kernal 3 years, 4 months ago

Kind of reminds me of a national sheriff's organization that used to call for donations for children, or other recipients, when huge chunk of the money was going to the ceo and not to benefit the alleged recipents. Forget what it was called, but after I told the alleged deputies calling for money how much the ceo had been taking out for his salary and why I wouldn't contribute, they quit calling me after two years.

808Drive 3 years, 4 months ago

Charity starts at home. They are all scams!

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