Greg Mortensons inspiring commitment to build schools in Afghanistan and Pakistan has sold millions of books and inspired thousands of people including President Obama to donate to his charity, the Central Asia Institute. Now, though, Mortenson is facing allegations that he fabricated parts of his best-selling book, Three Cups of Tea. Even more troubling, questions have been raised about whether the Central Asia Institute misused donors contributions.
Greg Mortenson
Author Greg Mortenson in 2006 with school children in Hushe Valley in Pakistan.
Greg Mortenson
Author Greg Mortenson in 2006 with school children in Hushe Valley in Pakistan.
Donors can be forgiven for feeling confused, since the charity received top marks from Charity Navigator, an online charitable watchdog. But other groups that monitor charities raised concerns about Central Asia Institutes finances long before it was featured on 60 Minutes.
Daniel Borochoff, founder of the American Institute of Philanthropy, says he requested financial information from the Central Asia Institute in 2009 in response to requests from donors. Borochoff was disturbed to discover that the charity didnt have audited financial statements, even though thats a requirement in many states.
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In mid-2010, Central Asia Institute published audited financial statements for fiscal 2009, but they failed to assuage Borochoffs concerns. The audited statements showed that contributions to the Central Asia Institute were far more likely to be spent educating Americans about problems in Central Asia than on educating young people in Afghanistan and Pakistan, Borochoff says.
The Better Business Bureaus Wise Giving Alliance has also had issues with the Central Asia Institute. The charity failed to meet the BBBs accountability standards because, among other things, it has only three board members, including Mortenson. BBB-accredited charities must have at least five members, says Bennett Weiner, chief operating officer for the Wise Giving Alliance.
Otherwise, a charitys board risks becoming a kitchen Cabinet where you have just a few individuals who may be friendly with the CEO, Weiner says.
The BBB has been unable to evaluate the charity since 2009 because the CAI has declined to provide information necessary to complete a review, Weiner says.
The Central Asia Institute has pledged to cooperate with an investigation of its finances by Montanas attorney general. The charity and Mortenson have also said 60 Minutes portrayed a distorted view of the organizations work.
Still, the fallout from this story provides important lessons for donors, including:
•Be wary of ratios. On its website, the CAI says it spends at least 85% of contributions on programs and only 15% on administrative and fundraising costs. This ratio is one reason Charity Navigator gave the charity four stars.
But in an online expos of the charity published by Byliner.com, writer Jon Krakauer noted that the CAI categorizes the money it spends promoting Mortensons books and his travel costs as program expenses. If those costs were categorized as fundraising and administration expenses, he says, they would exceed 50% of the charitys annual budget.
Ken Berger, president of Charity Navigator, says his organization is in the process of revamping its standards to include transparency and accountability. Charity Navigator subjected CAI to a prototype of the new formula and found that they didnt score well at all, he says.
•Look for results. When selecting a charity, donors should seek out solid evidence that it has had an impact, says Elie Hassenfeld, co-founder of GiveWell.org, a non-profit charity evaluator. In the case of the CAI, he says, A lot of money the organization raised seemed to be coming from donors who liked the story that Greg Mortenson was telling, as opposed to donors who saw the effects of the program.
•Separate the cause from the charity. One reason the CAI has been so successful is that many people desperately want to help educate young girls in Afghanistan and Pakistan. But if you feel strongly about this cause, the CAI is just one of several charities that have similar goals. Weve provided a list of charities with programs in the region that have earned top ratings from the American Institute of Philanthropy. You can find more information at charitywatch.org.
Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays. E-mail her at: sblock@usatoday.com. Follow on Twitter: www.twitter.com/sandyblock
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