Minnesota AG: Kars4Kids Overstates Charitable Work, Misleads Minnesota Donors

May 04, 2017 07:15 PM

Vehicles that Minnesotans give to a well-known car charity are not translating into enough charitable donations benefiting state residents, the state attorney general's office said Thursday. 

New Jersey-based Kars4Kids raised $3 million from more than 5,800 Minnesota donors between 2012 and 2014, but spent just $11,600 on programs that benefited Minnesotans during that time, according to a compliance report issued by Attorney General Lori Swanson.

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The report shows Kars4Kids, which does little charitable work itself, funneled the majority of its donations during that time through a charity arm called Oorah, Inc., whose claimed mission is to promote Orthodox Judaism primarily to kids in New York and New Jersey. The two share a New Jersey headquarters.   

Oorah's two largest programs are summer camps and tuition assistance, the report says, from which just three Minnesota children benefited during that three-year span. Two-thirds of those who benefit from the programs are in New York and New Jersey.

Further, Swanson's report found Kars4Kids used financial reporting tactics to make it appear publicly that 63 percent of its proceeds went to charity, when the figure was actually 44 percent.

Wendy Kirwin, Kars4Kids director of public relations, said donors can get a clear picture of how the charity spends its money by visiting its website. The charity stands behind and is proud of its work, she said.

"As the Attorney General's report makes clear, there has never been any question of diversion of funds from the charity," Kirwin said Thursday. "We believe Minnesota residents understand that charity needs cross state borders and appreciate that their generous donations to Kars4Kids help children both in and out of state."

Kirwin said the financial reporting techniques the charity uses, though complex, are due in part to the fact Kars4Kids processes all donations in-house rather than through a third party. She said the process is scrutinized by accountants, accepted by the IRS and has never been questioned before. 

However, "We welcome their suggestions and are reviewing them," Kirwin said. "The donation of a vehicle incurs considerable expenses that are typically not present in a cash donation and we hope our donors are cognizant of that."

Kars4Kids received $87.8 million in proceeds from the sale and scrapping of about 160,000 vehicles donated nationwide between 2012 and 2014, Swanson’s release states. The group donated more than 90 percent of its expenditures on charity programming to Oorah during that span.

A charity watchdog group in March criticized Kars4Kids for not disclosing its relationship with Oorah or the limitations of the programming to which the money is directed, according to the attorney general's release. Oorah is mentioned twice on Kars4Kids homepage, though no link to the charity is provided. 

Kirwin said Kars4Kids has frequent conversations about more clearly defining its mission statement online, but that the nature of the group's advertising – the well-known and minimalist jingle – leaves no room for specifics.

Minnesota's is not the first attorney general to take issue with Kars4Kids' operations. The Oregon Attorney's General Office took issue with what it called "misleading statements" in the charity's advertising, including offering a free vacation with every car donation in Oregon, according to an article in the Jewish news and politics Tablet Magazine. A notice at the bottom of the "terms and conditions" page in the vacation voucher section now reads, "KARS4KIDS DOES NOT OFFER THE VACATION VOUCHER IN THE STATE OF OREGON," the story said.

That compliance report has been sent to the IRS, which has the power to revoke the tax-exempt status of a charity, the release announcing the findings said.

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Michael Oakes

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