If you are thinking about donating your car for a tax credit before April 15, think carefully before you donate to a heavily-advertised group which may not be what it seems.
Kars4Kids gets low ratings from charity watchdogs for its costly advertising and for “disguising the purpose” of donations, and has been investigated by the Attorneys-General of several states
The catchy jingle is on radio and TV almost non-stop.
You’ve heard it so often over the years that you know it by heart.
Disguising the Purpose of Donations
Kars4Kids does not mention in its ads or on its website that donations are to send Orthodox Jewish from NY and NJ to summer camp in in the Catskills, or that “mentorship” is excluively for Orthodox Jewish children.
The Kars4Kids website says only that donations help provide “the foundation kids need for successful, happy and meaningful lives”.
Kars4Kids also does not mention in its ads or on its website that it funnels most donations to a group it shares office space with, which invests in real estate, but has lost millions of dollars in Kars4Kids donations on failed real estate investments.
Kars4Kids has been slammed by multiple charity and consumer watchdog groups both for it costly non-stop advertising and for “disguising the purpose” of donations.
That’s legalese for misleading advertising.
Sharing the Wealth with Relatives
Also not mentioned on the Kars4Kids website or in their advertising, is that the largest recipient of Kars4Kids donation funds is another tax-exempt non-profit, Oorah, which has absolutely nothing to do with the US Marines.
Oorah shares an office and shares office staff with Kars4Kids in New Jersey.
Some Oorah executives are relatives of some Kars4Kids executives.
Oorah has lost millions of dollars of Kars4Kids donations in failed real estate investments.
If you want to donate your car to a charity that funds summer camp for Orthodox Jewish children, or to relatives of of a charity you have donated to for real estate purchases, that is your choice.
The issue here – and why we are publishing this as a scam alert – is that Kars4Kids hides that information, and its purpose, and has been slammed repeatedly by such charity watchdogs as Charity Watch, and investigated by several states for fraudulent and misleading advertising.
Kars4Kids Security Breach
Kars4Kids also has been accused of leaking information on 21,000 donors
My article on pros and cons of donating your car to charity
Summer camps and failed real estate investments
The Minnesota Attorney-General is one of a list of watchdogs accusing New Jersey-based Kars4Kids of playing fast and loose with donations.
Her “Compliance Report” is being shared with the IRS, which grants tax-exempt status of a charitable organization – and can revoke it – and also with Attorneys-General of other states.
Why Minnesota? Because Kars4Kids raised more than $3 Million from Minnesota donors between 2012 and 2014, but spent only $11,600 on only three kids from Minnesota.
Where did the other $2,988,400 go?
Once again –
Donations to Kars4Kids support programs for Orthodox Jewish children in New York and New Jersey, but only indirectly.
The largest recipient of Kars4Kids donation funds is the tax-exempt non-profit, Oorah.
Multi-millions in donations to Kars4Kids are funneled to Oorah, which shares both an office and some staff with Kars4Kids, including a cousin of the head of Kars4Kids who is a top decision-maker in Oorah.
Like Kars4Kids, Oorah has a poor track record of using the funds it raises – from Kars4Kids or directly – for the programs its IRS tax-free status outlines.
Oorah lost nearly $10 Million on bad real estate investments made – presumably – with funds from Kars4Kids, between 2012 and 2014, the years the Minnesota Attorney-General’s Compliance Report covered.
And Oorah’s record since then hasn’t been much better.
According to watchdog agency ProPublica, Oorah took in just over $19 Million in 2015 (the most recent year such records are available), but spent just $891,000 on program services.
Where did the other $18 million go? We don’t know.
Perhaps the Minnesota Attorney-General should look into that, too.
Ditto the New Jersey Attorney-General, where these two tax-exempt charities share office space, and the New York Attorney-General, home to many of the advertising agencies which create and schedule commercials, and the radio and TV networks which air them.
It’s certainly okay for you to donate to a program for Orthodox Jewish children in New York and New Jersey, and/or for real estate investments by relatives of the charity you are donating to.
The issue here is no more and no less than you should know how your money will be used when you donate your money, your car, motorcycle, RV, boat or the real estate Kars4Kids now also solicits in those expensive, non-stop advertising campaigns from Manhattan to Minnesota, and beyond.
“Donors need accurate and straightforward information to make informed choices. We hope this report sheds greater transparency on Kars4Kids, one of the nation’s largest vehicle donation programs, “ said Minnesota Attorney General Swanson in her Compliance Report.
Lack of transparency and “disguising the purpose” of donations is legalese for what most of us would call misleading advertising, or bait and switch.
Kars4Kids also gets low-to-failing ratings from charity watchdog and rating groups like Charity Navigator and Charity Watch for the same reasons.
Earlier in 2017, Charity Watch sharply criticized Kars4Kids for not disclosing its cozy relationship with Oorah or the limitations of its charitable programming. Oorah’s primary programs are summer camps and tuition assistance, and two-thirds of participants and recipients are Orthodox Jewish children from New York and New Jersey.
Kars4Kids passed more than $40 million – more than 90 percent of its actual expenditures on charitable programming – across the office to Oorah from 2012 to 2014, the two years the Minnesota Attorney-General reviewed, which cited that $10 million in failed real estate investments.
Again, it’s perfectly fine to donate to such programs – as long as you know that’s how your donation will be used.
Again, the issue is that Kars4Kids “disguises the purpose” of donations and also its cozy relationship with Oorah.
Details from the Attorney-General’s Compliance Report –
- Kars4Kids spent less than half the proceeds of vehicle donations on its charitable mission between 2012 and 2014, well below standard.
- Kars4Kids engaged in questionable financial reporting tactics to make it appear to donors and charity watchdogs that more of its money was spent on charitable programs as opposed to fundraising and overhead.
- Kars4Kids claimed that $12 million spent on fundraising ads (about one-third of its $38 million advertising budget) served a charitable purpose because they mention it on their website.
- Instead of reporting gross proceeds from vehicle sales and report the fundraising costs associated with the processing of these vehicles, it reported the net proceeds from vehicle sales, thereby failing to disclose another $9.7 million it spent on fundraising costs associated with the processing of donated vehicles.
- By failing to report this $22 million as fundraising and overhead expenses, Kars4Kids publicly claimed to have spent 63 percent of the proceeds of vehicle donations on its charitable mission, vs. the actual 44 percent, which is well below standard.
- Kars4Kids does not adequately monitor Oorah, with which it shares both offices and family members.
- Kars4Kids and Oorah lost about $9.7 million in real estate investments since 2007, most of which were managed by a cousin of the Kars4Kids president. Real estate losses include an outlet mall, strip mall, a hotel in Staten Island, and a condo development in New Jersey.
Where to donate your vehicle
If you want to donate your car, such top-rated charities as Salvation Army, Habitat for Humanity, Goodwill, Volunteers of America, Special Olympics will give it to a worthy low-income person who needs transportation to get to work, or as transportation by charity staff or volunteers doing charity work.
If you want to donate to a poorly-rated charity that spends $38 million on advertising to raise money for real estate investments by relatives and summer camps and school tuition for Orthodox Jewish children in New York and New Jersey, then – by all means – follow the jingle and call 1-800-Kars4Kids to donate your car today.
Is Kars4Kids a fraud?
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This article was published originally in 2017, and is updated annually for tax season, including in 2020.
Evelyn Kanter also is the author of several NYC and Hudson Valley guidebooks, including my latest, 100 Things to Do in NYC Before You Die.
Purchase autographed copies by emailing [email protected]