Vetmade Industries has a vaunted mission: To return disabled warriors to the workforce. It boasts that “93 percent of funds go directly to the cause of helping our heroes.”
Well-meaning folks donated cars worth more than $2 million to Tampa-based Vetmade in 2015 – but only $91,348 made it to the charity, according to data from the California Attorney General. That’s 4.5 percent.
What happened to the overwhelming bulk of that money? About $1.9 million – 95.5 percent of revenues – was spent by a company called Just Donated Inc. in Orange, which specializes in “promoting your cause and generating a steady flow of vehicle donations,” according to its online pitch.
Vehicle donations are one of the most costly ways to give in all of philanthropy, those in the industry say. They’re complicated and time-intensive, often requiring extensive advertising, expensive towing, mechanical repairs, storage, paperwork and eventual sales of what are often clunkers. The charities usually don’t have to do anything at all, leaving all the work to the (usually) for-profit middlemen.
All that costs a lot of money. But, as we’ll show you, some charities get a lot more out of it than others.
Just Donated, the Orange business that processes vehicles for charities, did not return calls and emails seeking detail on the numbers. But Vetmade’s executive director in Tampa, John Campbell, said that there are many costs incurred by tow truck drivers, auction houses and the companies that run the donations themselves.
Campbell has been happy with Just Donated, he said; after all is said and done, some companies don’t return anything to the charities at all.
• Another Southern California company specializing in charity car donations is Fund Raising Partners, long of Los Alamitos and recently relocated to Redondo Beach. Fund Raising Partners processed vehicle donations totaling $1.6 million for the nonprofit Durable Medical Equipment Aid Society in Tarzana in 2015, of which the charity got just 1.7 percent (or $27,235), according to the Attorney General’s data.
The charity’s executive director said the numbers reflect initial start-up costs of running a new car donation program, and that numbers for 2016 will be better.
Fund Raising Partners also handled car donations totaling $593,889 for Faith’s Hope Foundation in Fullerton. The return to that charity was even lower – just $3,213, or 0.5 percent.
• Automotive Recovery Services of Westchester, IL, processed donations worth $6.5 million for the National Veterans Service Fund in Darien, CT. The charity got $1.2 million, or 18.5 percent.
“The amount a charity receives for a vehicle donation is driven by two main factors, 1) the market value of the vehicle donated, and 2) the cost to solicit the donation,” said Phil Kraft, executive director of the National Veterans Service Fund Vehicle, via email. “In the current market we are seeing softer prices for donated vehicles.”
When market prices are soft, the charity focuses on generating “donation volume” to hit its financial goals, Kraft said.
“National Veterans Services Fund has a very limited staff and does not have the human resources to do hands-on marketing. Therefore we choose to utilize broader methods of marketing to solicit donations including SEO and PPC (pay per click). These broader marketing methods can be more costly, but help us drive higher volumes of vehicle donations.”
• Michael Reese Enterprises in Costa Mesa specializes in processing a very large volume of low-value vehicles. It handled donations worth $6 million for a nonprofit called Growing in Voices in Irvine. The charity got $571,165, or 9.5 percent.
• The biggest players on the scene were the Car Donation Foundation, aka Wheels for Wishes, in St. Louis Park, MN., and its vehicle processor, National Fundraising Management in Hopkins, MN. Total revenue was $31 million, of which $14.1 million went to the charity, or 45 percent.
That’s better than average.
Total revenue generated by vehicle donations in California was $64.2 million in 2015, with charities getting about $25.5 million, or 39.8 percent of the total, according to the data.
“Vehicle donation programs have become more popular over the past several years,” the AG said in her annual report on commercial fundraisers. “These programs are administered either directly by charities, or by commercial fundraisers that solicit donations and manage the program on a charity’s behalf, in exchange for compensation.”
How does it work?
The process usually begins when a donor contacts a charity or commercial fundraiser in response to an ad or solicitation campaign, the AG explains. In the initial phone conversation, the donor will be asked questions about the vehicle. Generally, the vehicle will be accepted unless the cost of towing it exceeds its value.
The donated vehicle is then sold and the proceeds are divided between the commercial fundraiser and the charity. “Because all costs associated with advertising, towing, storing, and selling the vehicle are deducted from the proceeds before any distribution to charity, charities usually only receive a marginal amount from the car’s sales proceeds,” the AG warns.
The attorney general filed suit against Ventura-based Cars 4 Causes in 2015, charging it with breach of fiduciary duty and deceptive and misleading solicitations. C4C, as it is known, kept and spent millions of dollars in donations that should have gone to other charities, the AG charged in the suit.