MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Americans donate nearly $350 billion every year to more than one million charities. But most donors have no idea if the money they give is having a measureable effect.

MS. DIANE REHMJoining me in the studio to talk about the growth of charitable organizations and how donors can choose the most effective ones, Ken Stern of Palisades Media Ventures. He's author of a new book titled "With Charity for All." And Lisa Meriwether of United Way of Central Virginia. Joining us by phone from Alexandria, Va. is Major Ron Busroe of The Salvation Army.

MS. DIANE REHMAnd you are welcome to join us. Give us your thoughts. Give us a call, 800-433-8850. Send us your email to drshow@wamu.org. Follow us on Facebook or send us a tweet. Good morning to all of you.

MS. LISA MERIWETHERGood morning.

MR. KEN STERNGood morning.

REHMKen Stern, I'll start with you. What is a charity? How is it defined?

STERNWell, a charity is typically defined by the Internal Revenue Service. The codes 501C3 and various other Cs of the IRS code, that's how charities are typically defined. Educational organizations, scientific research organizations, health organizations, social services organizations, lots of amateur sports all fall under the broad definitions of charity in the IRS code.

REHMSo the question becomes is there a requirement that a so-called charity must use a portion of its income to make sure that a huge portion of its income goes to the particular charity? Does the IRS outline that?

STERNNo, the IRS supervision -- one of the things I write about in my book is the IRS supervision of the charitable sector is very light. The IRS approves about 99.8 percent of all applications to form a charity. If we had to stamp a form right now, we could start a charity in a matter of weeks.

REHMWithout oversight?

STERNWell. it's a very quick process and I think one of the challenges is once a charity starts, there's 1.1 million charities in this country and less than 100 full-time regulators of the sector across 50 states. So there's very little regulation, supervision in the sector, which is why you have wonderful charities and then you have a lot of charities that are ineffective or, in some cases, downright fraudulent.

REHMThere was a story in today's Wall Street Journal about the problem at a Florida veteran's charity, talk about that.

STERNYeah, veteran's charities, actually a particularly challenging area for the public, there are 50 -- I think there are 59,000 charities in the country with the word veterans in the title. And because there's very little information about who is good, who is bad and who is in the middle, it is easy for those who want to take advantage of people who want to help veterans and do so fraudulently.

STERNAnd there have been a number, I mean, sort of an extraordinary number of fraudulent charities in the veteran's space out there, including one that broke out last week around something called The Allied Veterans of the World. The Lieutenant Governor of Florida, who had done some PR work for the charity, had to resign over it.

STERNIt was a charity that, in theory, helps veterans. It was largely a front for gaming operations and for self-enrichment.

REHMAnd charges that less than 2 percent of the funds that the group brought in between 2008 and 2012 actually went to benefit veterans?

STERNYeah, but that's not even clearly illegal, Diane. There's actually no specific guidelines about how much has to go to the actual beneficiaries. And there are some operating charities out there that operate in sort of full disclosure. They file public forms that annually rake off somewhere between 90 and 95 and 97 percent of the revenues that goes to their for-profit fundraisers, that goes to salaries, that goes to enrichment of the organizer of the charity and that's actually not definitionally illegal.

STERNIt only becomes illegal if you file false statements with the government or do something -- because there are really no set rules about what a charity has to do or not to do. One of the things I wrote in my book is, I discovered along the way, the way to get rich is not to write a book about charities, but it's to set up a charity.

STERNIf you want to you can set up a charity, veterans, cancer, firefighters, things that you can phone-bank around and then set up your for-profit boiler room and rake off the money most of it that way. And that's a very sad thing, especially for areas as important as American veterans.

REHMBut there are examples of programs that work well. Lisa Meriwether, talk about your own.

MERIWETHERAbsolutely, we're located in Central Virginia and we are an affiliate of the United Way Worldwide, which is located actually here in Alexandria, Va. It is a 4 -- almost $5 billion business. It operates about 1800 United Ways in about 41 countries. It's huge.

MERIWETHERThe United Way has been around -- well, they just celebrated their 125th year. The United Way of Central Virginia has been around for 91 years. And we operate -- we provide services. We partner with agencies that provide impact services into our community.

MERIWETHERAnd gosh, some examples would be The Salvation Army and I know that Major Busroe is going to be here today, we'll be hearing from him, as well as Meals on Wheels and housing services and services for the aging population as well as programs for youth development, so.

REHMAnd some of the questions regarding charities have been directly involved with how much money executive directors take from that charity.

MERIWETHERSpeaking directly to the United Way of Central Virginia executive directors, sure you could go on our website at www.unitedway.cv.org and see that none of us are making a lot of money. But I do know that there has been some question regarding the compensation for Brian Gallagher, who is the president, CEO of United Way Worldwide and I'll tell you I'll speak to that.

MERIWETHERHe is the director of the largest non-profit organization, privately-funded, non-profit organization in the United States and because of his leadership through those 1800 United Ways worldwide. It's huge, you know. I'd like to -- again, I'll just reiterate it's a $4 billion business, you know, and if you take a look at the salaries, and I know Ken addressed that in his book as well, and correlate that to some of the larger corporate businesses, it's pretty commensurate.

MERIWETHERBut I will tell you their compensation board and board of trustees work to identify what that salary is and he provides some wonderful leadership so.

REHMAll right. What about those high salaries at the top, Ken?

STERNWell, so I think the issue is around the top because as Lisa suggested, I actually looked pretty broadly and I don't think, in general, there are major issues around compensation for non-profit employees generally. I think there are actually two areas which I raised questions about in my book.

STERNOne is the charities that look, act and feel like for-profit businesses and the best examples of those are charitable hospitals, which are more profitable than for-profit hospitals and pay their executives routinely into the millions. There are, I think, eight hospital executives in Baltimore alone who make annual salaries of more than a million, charitable hospital executives, and provide no more charitable care than for-profit hospitals.

STERNSo these are essentially for-profit organizations that are operating under charitable charters and that I think has a broader -- that has a conversation issue to it and a broader issue to it.

REHMYou have some harsh words about the Red Cross.

STERNI actually don't have harsh words -- well, I have some harsh words. Let's be candid. I have some harsh words about the Red Cross. I have harsher words about the situation that they find themselves in, the funding situation which I think is the root of some of the failures they've had.

STERNThey've had major failures around Katrina and 9/11 and Haiti. I think the challenges, how they're able to raise money and how people see themselves as donors for them. Think of the Red -- I think of the Red Cross essentially as a supply line company. Think of other supply line companies, Wal-Mart, FedEx, the U.S. military. They have to put billions of dollars into their infrastructure, their tracking technology.

STERNCompare that to the Red Cross, which really raises only larger sums of money when a disaster happens and people put hundreds of millions in, half a billion during Katrina, I think. But by then, it's too late because they've not been able to invest in the infrastructure, the technology, the training that is necessary to be effective in those types of things.

STERNAnd if people want the Red Cross to be effective, they have to worry not about the victims that they hear about, but the next victims down the road because they can't do their job unless people are willing to let them build infrastructure necessary to be the best they can.

REHMBut isn't that precisely what the Red Cross said when it was criticized regarding Katrina, that it didn't use all the money it received, but in fact put it away for future disasters?

STERNSo the story I tell in my book is about Bernadine Healy, who was the CEO -- she's now deceased, but was then the CEO of the Red Cross during 9/11. 9/11 was sort of her great failure after the crash, after the Pentagon crash, the Pentagon attack, which is only a couple of miles from the Red Cross, 24-hour emergency bunker.

STERNShe wasn't able to get her teams to the Pentagon in time to be helpful at the time. And she said this is a failure of infrastructure. This is a failure of systems, never again. And $500 million poured into the Liberty Fund to help the victims, which was the American Red Cross Victims Support Fund during 9/11. And frankly for what the Red Cross does, they had no need to spend that much money on what is, you know, on a terrible tragedy, but had a finite group of victims.

STERNSo she said, look, I'm going to take the leftover money, which was more than $300 million, and I'm not going to invest it. I'm going to invest it for the next victims. I'm going to build the infrastructure so we can be successful next time. And, you know, there are issues around transparency, but the fundamental strategy she laid out there was the right one.

STERNBut when the public found out about the fact that she was not going to use the money for the 9/11 victims, there was a huge outcry. She lost her job and, not surprising, the same problem happened in Katrina four years later.

REHMAnd indeed we did invite the Red Cross to be present on the program this morning. They did supply us with a statement, but declined our invitation. We'll be right back.

REHMAnd our guests this morning. Ken Stern. He's chief executive officer of Palisades Media Venture and author of a new book. It's titled "With Charity for All: Why Charities are Failing and a Better Way to Give." Lisa Meriwether is director of development at the United Way of Central Virginia. And joining us by phone from Alexandria, Va., Major Ron Busroe. He's community relations and development secretary at the Salvation Army.

REHMMajor Busroe, I wonder how you respond to what you've heard from Ken Stern. Do you believe that charities like the Salvation Army are failing in being transparent, making sure that donors understand exactly where our money is going and how executives are paid?

MAJOR RON BUSROEI do not believe that his criticism applies to the Salvation Army. With 1.1 million not for profits out there, there are certainly way too many not for profits whose means and methods and outcomes are just not what any of us would find acceptable. But I think -- the Salvation Army's been around since 1880. We have services in every zip code in the United States. Our footprint is very broad when it comes to meeting human need without discrimination in this country. So I think the Salvation Army is effective.

MAJOR RON BUSROEWe're trying as best we can, particularly on the local level, to measure the effectiveness because it's at the local level -- particularly where we do our funding at a local level...

REHMOf course.

BUSROE...and when -- we get money from the United Way and we get money from United Way. We partner with United Way throughout the country and they fund specific programs. And we work with them in measuring, not just outputs -- we're great at measuring outputs, as most organizations are. But it's more important I think with funders today to measure outcomes. And we work off that local level to devise the kind of tools to measure the outcomes that the donors are expecting.

REHMAll right. Ken Stern, you were critical in the book of the Salvation Army's acceptance of a major gift from the estate of Joan Kroc. Why?

STERNWell, I wouldn't say I was -- I'm never going to be critical of any charity that decided to take a donation of $1.8 billion from the estate of Joan Kroc. It would've been an extraordinary thing to turn anything down like that. My -- the Kroc story there is really about donor psychology, why people give and how they give. My overall critique of the charitable sector is -- actually more than anything else is a critique of how donors give and why they give.

STERNBecause they do not reward, in my view -- and, by the way, including that list of donors, not just individuals, but the federal government which gives $500 billion a year to charities of a $1.5 trillion charitable economy -- that they do not do in a way that rewards the best most effective charities. And ones -- and I'll take Major Busroe at his word -- that measures the effectiveness of their programs.

STERNAnd one of the things I say in the book, if you look -- if you compare -- there was a study at Harvard Business School a few years ago that looked at sort of the dynamism of the for-profit marketplace. If you look at the Fortune 50 companies from 40 years ago, that list has all changed. You know, American Can and Bethlehem Steel and LTD are all gone replaced by Microsoft and Google and Facebook and, you know, the other companies that sort of reinvented the economy.

STERNLook at the list. The top charities of 40 years ago is exactly the same as it is today. And that's because the charities awarded are awarded not because they're the best and most inventive. It's because they have familiar brands, they're comfortable to donors and they have the relationships that allows them to sort of continue to do what they're doing. And that doesn't create the type of marketplace that allows the best and most creative charities to win.

STERNAnd that's not a criticism of United Way or Salvation Army. it's actually a criticism of the market economy of the charitable sector at a time when we need the most effective charities possible.

BUSROEWell, let me just say that I think there's also -- I think I can speak for the United Way. I've been involved with the United Way now for 35 years as a partner and certainly with Salvation Army. And I think there's the desire to adapt. And so when you have some large corporations, for-profit corporations, as the economy changed they couldn't adapt. And there were new modes of doing things. There were new issues that came about.

BUSROEThe Salvation Army and the United Way over these past 25 years, we have adapted. There are different needs in the local community and the Salvation Army adapts to the changing needs in the community and seeks to meet the needs. I think that's one of the reasons that people continue to support the Salvation Army. Yes, we have a very recognizable brand and there's a trust level that the American public has had with Salvation Army for well over a century. But the fact is, we continue to meet human need at the point of need. And that's what the people respond to and that's why they put money in the kettle.

REHMAnd turning to you Lisa Meriwether, how is United Way responding to calls for more transparency?

MERIWETHERAbsolutely and I'm glad that Major Busroe brought that up because we are adapting to the changing climate of what it is that we do at United Way. You know, we've always been referred to as a fundraising organization. And now instead of saying fundraising, we are a community impact organization. We get to the root of what the needs are in each individual community and kind of flush that out.

MERIWETHERFunding the needs of agencies and programs such as the United Way and with Salvation Army's partnership, now we're investing in strategies for community change. It's all about trying to make people understand that it's not just about the dollar. Certainly we fundraise. Certainly we're out there doing that every day but it's about creating lasting change. And I think that's...

REHMAll right. And let me ask you specifically about early childhood education, which is one of the focal points of United Way. How do you know you're making a difference? How do you measure the impact you are making?

MERIWETHERWell, that's a good question. You know, we have just started -- I say just -- in the last three or four years identifying programs that we can partner with that do address the early childhood development. We understand that these children, if they are not ready for kindergarten -- truthfully one in five children are just not ready for kindergarten. And by the time they get to that third grade, their reading scores suffer, everything suffers.

MERIWETHERAnd then there just can be a tremendous breakdown in the educational system at that point. They're not ready for school. They're not ready for higher education. We want them to be workforce ready. We are working with the school systems, the directors of the school systems and certainly with a lot of organizations to put children into preschool-quality-rated preschool programs that provide the basis for these children to go on and be successful. And we're tracking that now. And so this is important information...

REHMHow are you tracking it?

MERIWETHERWe're tracking it through test scores. We're tracking it through -- and of course I'm not an educator so a lot of these scores are testing names I'm not familiar with. But that's one of the many ways that we do that. And right now our women's leadership group has just put a series of children through the money that they're raising as an infinity group with United Way. And they are putting children through these preschool programs. And so we're going to be watching closely over the next, you know, ten to fifteen years as these children go on through middle school and into high school. So...

REHMAnd joining us now from Newbury Port, Mass. is Katie Clapp. She's president and co-founder of FRAXA Research Foundation, which supports scientific research aimed at finding a treatment and a cure for Fragile X disease. Good morning, Katie. Welcome.

MS. KATIE CLAPPGood morning and thank you, Diane.

REHMOf course. Talk about Fragile -- FRAXA's mission.

CLAPPWell, FRAXA's goal is to deliver specific and effective treatments to people with Fragile X syndrome. And Fragile X syndrome is the most common known cause of autism and intellectual disabilities. And I founded FRAXA with another mother and with my husband almost 20 years ago now when our son was diagnosed with Fragile X. And all of our board members are parents. All of our volunteers are families. And we directly fund research at universities that is aimed at finding treatments for Fragile X.

REHMTalk about how many donors you have.

CLAPPIt's a grassroots organization of about 4,000 donors annually, so we are small. Almost all of those donors either have a personal connection of some sort or they've heard of us through a personal connection.

REHMAnd after you get donations how do you show donors where the money is going and what you are accomplishing?

CLAPPWell, I don't think we could do what we do without the internet. We report everything on FLAXA.org, our website. And that includes the detailed listing of the grants that we fund each year, the university, the team, the amount of money and what their plan is. And so people can see over the years -- you know, when we started in '94 we funded one grant. The next year there were three or so and one of those made a discovery. And the next year it was nine or ten and so on.

CLAPPAnd we've gone from the first discovery of what causes Fragile X to actual treatments, drug trials and a drug that's scheduled for market in 2014.

REHMSo it sounds as though, Katie, you are taking in money, using it for exactly the purpose intended. And I gather there's very little overhead from the two people who are organizing.

CLAPPWell, that's right. I am the one and only fulltime employee and there are three part timers and then thousands of volunteers. And there is just no way we could've done this if it weren't for the families, the volunteers, you know, who have very clearly in mind what our goal is, which is truth.

REHMKatie Clapp. She's president and founder of FRAXA Research Organization, which supports scientific research aimed at finding a treatment and a cure for Fragile X disease. And you're listening to "The Diane Rehm Show." Ken Stern, it would seem that a small organization like FRAXA would escape criticism from the kind of investigation you've been doing because as Katie said, you have a small number of parents, friends, interested participants who are giving directly to an organization that they can track.

STERNI think that's right, although let me actually touch on an issue raised in your conversation with Katie which is this question of overhead. So one of the things -- one of -- which I call and others call the overhead myth is the way that most charities are evaluated is on how much of the money goes to services and how little goes to overhead. And that's sort of the coin of the realm right now about determining what is good and what is bad.

STERNI think that is actually a destructive analysis because that has very little to do with what organizations are effective on the impact side. It tells you where they spend the money. It doesn't tell you whether that money is spent to good effect. And in fact, a lot of the things -- think about what goes into overhead, strategy, research, technology, people, training, all things that anyone should know is necessary to build a great organization, a skilled organization, which is what in fact a lot of these problems really need.

STERNSo I'm very critical in my book of the organizations like Charity Navigator and Charity Watch. That is...

REHMWhy?

STERNBecause they are telling you how they spend -- how organizations -- where organizations spend the money but not whether it's to good effect. In fact, I would say that organizations that tend to invest in themselves into building great organizations to research really critical in my book. Evaluations are often, in the long run, going to be the most effective in terms of outcomes.

STERNAnd I'll say, I was very hard on one organization specifically, Charity Navigator, because it's the most widely followed of these evaluation organizations. And to their credit, after the book -- my book went to print, they came out and sort of agreed with me essentially. They said, next year we're going to launch Charity Navigator 3.0. It's not going to over that overhead, it's not going to about compensation. It's going to be about results these charities can show.

STERNAnd if you can't show good results, actual impact against real metrics that they set out, you're not going to get good ratings from Charity Navigator. And that's exactly where the system needs to go.

REHMAnd how do you feel about that, Mr. Busroe?

BUSROEWell, we certainly believe that we need to start measuring effectiveness. I mean, you know, Ken's right. We love to talk about the fact that, you know, 82 cents of every dollar goes to a program. But the fact is, if we're only providing meals with that money and are not really figuring out a way to effectively deal with those who are coming to eat and helping them break the cycle of poverty and get off the street, then that's not money that's effective. And...

REHMBut at least in the interim you are helping people. You are achieving at least a short term outcome.

BUSROEWell, you're achieving a short term output. You're providing a meal. And you are keeping them from starving to death.

REHMExactly.

BUSROEBut -- and it's -- and for meals particularly it's an entry point.

REHMI see.

BUSROEWhen I've run homeless shelters, as I have in the past, one of the things that we always did is when we had like a soup kitchen, we always made sure that there were trained professions there to spot people who might be exhibiting issues related to mental illness, but also talk to newcomers to try to find those newcomers and get them into a transitional...

REHMAll right. And short break here. More of your calls when we come back. Stay with us.

REHMAnd here's our first tweet on charities from Ray who says, "Disaster experience with Red Cross and Salvation Army. Red Cross meant red tape. Salvation Army, no red tape and immediate help. Ken, do you want to respond?

STERNWell, I think I'm not the person to respond to sort of specific critiques of individual organizations, other than the ones I looked at in my book. I mean, that's the 1.1 million charities. I'm not holding myself out as an expert on each of the 1.1 million charities, but I think the red tape or no red tape goes to, ultimately I hope, which is whether the services that those organizations provided were ultimately effective for the end users. And I can't speak to the Red Cross versus Salvation Army. I know the challenges the Red Cross has faced, but I think it is a question as to did you get the goods to the place people need it? How do you measure that and how do you report out to your stakeholders and funders that you did a good job?

REHMAll right. Let's go to St. Augustine, Fla. Good morning, Conrad.

CONRADGood morning, Diane.

REHMHi. Go right ahead, sir.

CONRADWell, I just have a question for Ken. I used Charity Navigator and Charity Watch, basically to kind of vet the charity that I gave to and the one that I was involved with was Homes For Our Troops and our local American Legion. We raised a couple thousand dollars for them to build a couple houses here. And that I see is immediately measurable. You can see the effect. You can see the results. And I, again, I use that, you know, Charity Navigator, you know, four-star rated, but I'm wondering if there's any way to maybe legislate, you know, if you're going to raise money for the veterans or you're going to use veterans in your fundraising words or military, whatever it is, that you have to be able to use like 90 percent, you know, effective?

REHMAll right. Ken?

STERNThey're actually were Congressional hearings in 2007 around the very issue of veteran's charities. And for whatever reason no legislation came out of it. I think, ultimately, until either the federal government or the states are going to put a lot more resources into regulating the supervision section, which I think seems unlikely in this environment, it's going to be self-help for donors to figure out either on your own or through market mechanisms the best charities to give. And there are groups, like Give Well, which I write about in my book, that actually tell you a lot in detail about some charities. The problem with Give Well is it is very deep, but not terribly wide.

STERNAnd there are other organizations that are popping up now. I know of an organization called Bright Funds in California, that are essentially becoming mutual funds, essentially, for donors to help sort of give the same type of support for donors that they get as investors. And I actually think that's where the marketplace is going to go because it's going to very hard.

REHMReally?

STERNIt's going to be very hard for any individual to tell, you know, any casual observer, who's not going to make a career of it, to tell the difference between the best veterans' organizations, 59,000 of them. But given the scale of--you talked about $300 billion that Americans give--there should be more professional help to get donors, to help them get their money to the best charities.

REHMAll right.

STERNAnd that's where I think we've got to go.

REHMTo Salt Lake City, Utah. Allison, good morning.

ALLISONGood morning, Diane. I love your show.

REHMThank you.

ALLISONGreat. I work for a non-profit called InterVarsity Christian Fellowship. And we're a national college ministry. And so I work at the University of Utah as a field staff for them. And I love the group I work with and I work for. And one of the things that I really love about my organization is that we're a charter member of the ECFA, which is the Evangelical Council for Financial Accountability. And so what the means is that to be a member of them and to be accredited you have to meet seven standards of financial accountability.

ALLISONAnd some of those standards are like transparency, you have to have a doctrinal basis, so you have to be able to communicate what your organization is about, what you believe in, what your vision and mission is. And you have to have a board of directors that's independent from your organization, which we have. And you have to be able to prove that you are stewarding well the charitable gifts that are coming. And so that's something that I just really appreciate about the organization that I work for because I think some people are really leery of religious groups and afraid of being scammed.

ALLISONAnd so when I talk with donors I can point them to this fact, that we're a charter member of the ECFA.

REHMAllison, thanks for your call. Major Busroe?

BUSROEYes. The Salvation Army also is very much involved with ECFA. And we report regularly on how money is spent. We produce national reports. We produce local reports to the local communities. Because we're a religious group we're not required by law, say for instance to submit a 990, but when a donor or an entity requests it, we do file them voluntarily. Right now we're working with the State of New York on Hurricane Sandy funds. And we're reporting to them and giving them the information that they require, so…

REHMAll right. To Pensacola, Fla. Hi, David.

DAVIDHow are you?

REHMFine.

DAVIDI have a crow to pick with the United Way.

REHMOkay.

DAVIDI worked for a major government contractor right after I left college. And I won't name who they are because it would be egg on their face. The United Way came along, it was very important to management that we be 100 percent. One guy in our section was adamantly opposed to A., the United Way and B., direct deductions from his paycheck. The office manager called him in and had two pieces of paper lying on the table. One was a resignation and the other was a donation form.

REHMWhat do you make of that, Lisa?

MERIWETHERWow, well, I will tell you that we do not fundraise in that manner. And what an interesting story. I believe it's the first...

REHMYes.

MERIWETHER...of that kind I'm hearing this.

REHMIt sounds more like a criticism of the company or the corporation.

MERIWETHERI wasn't going to say that, Diane, but thank you very much for voicing that. And I will say what a shame. We do work very closely with a lot of large corporations in our region and so many of these investors, if you will, in our community impact areas do champion the United Way and our mission within their workplaces. And by doing that they make available opportunities for me to come into their workplace and talk to them about what it is that we do and why we do and why it's important and how we're making a difference in the community on a variety of levels.

MERIWETHERWe bring in partner agencies, such as similar I'm sure, Major Busroe has probably stepped in with the United Way representative at some point in his career and talked to...

BUSROEMany times.

MERIWETHERThere you go. And so...

REHMBut surely it's probably illegal to...

MERIWETHERKen, would you like to respond to that?

STERNI'll pass on that.

REHMYeah, I have that feeling. All right. Let's go to Sal, in Grand Rapids, Mich. Hi there.

SALHi, Diane. Good morning. Thanks for taking my call.

REHMSure.

SALIt seems to me that there are two fundamental issues we need to get past to move Ken's point about program effectiveness forward. First of all, the funding world, which would be government agencies, United Way's foundations and I would argue the non-profit providers themselves, still incorrectly characterize evaluation expenses as administrative. They should be program expenses. Secondly, we need to get past the issue of evaluation capacity building. There are thousands of non-profits across the country that want to be accountable, want to evaluate their programs, but they don't have the skills, the talents, the knowledge, the time, the culture, leadership or money to do so.

SALAnd I think these two issues are related. And I want to hear from you folks as to what we can do to move forward.

REHMAll right. Ken?

STERNHeck, he should have written this book. The caller obviously knows what he's talking about. I think that's exactly right, which is the system discourages investments in the resources necessary to build the best organization. That's actually research, benchmarking, training, things that organizations need and donors should demand in order to prove effectiveness or not. I mean, one of the things that we should talk about is everyone assumes charities are effective. But the issues that charities are tackling are some of the most intractable issues, education, poverty, scientific research. We all know it's really hard to move the needle.

STERNAnd we should be investing in and evaluating on who is moving that needle and making sure that those organizations get the great investments and the others, whether they're well-meaning or now, don't.

REHMBut you know it's really hard for us as individuals to be able to pressure people into doing, as you say, with those charitable organizations.

STERNExactly. So what do we as small dollar donors do? And that's why I'm actually really interested in sort of the middle layer, which is missing here. So one of the things I write about in the book is if you look at the for-profit world and how people invest, most people invest through mutual funds. There are 150,000 people who work in the mutual fund whose jobs it is to find the best companies. And you better believe companies know where those mutual funds are investing and follow those and are driven by it. There's nothing comparable to help direct donors to be charitable investors, which is what I'm really talking about.

STERNWe need that middle layer to help aggregate and invest. And then charities will be impacted.

REHMAll right. Major Busroe, we've had several emails like this one from Renada who says, "I've heard that the Salvation Army will not hire gay people. Is that correct?"

BUSROENo, that's not correct. You know, unfortunately there are a number of people and because of the ability of the internet to publish false information, there are people out there who believe that the Salvation Army discriminates against the LGBT community. Our mission statement is that we do not discriminate. And we do not discriminate in hiring, we do not discriminate in the delivery of services to people who present themselves in our programs. And so, you know, we say it and we live it and we do it. And that's just the facts of the matter.

REHMAll right.

BUSROEAnd we'd be glad for anybody who's listening to contact us and we'll share with them the information to clear this up.

REHMSo you are saying that there are LGBT individuals on your staff?

BUSROEWe have LGBT individuals who are on our staff. Of course, first of all, we don't ask if a person is in the LGBT community before we hire them.

REHMHow do you suppose that rumor got started?

BUSROEA few years ago there were a few people who blogged about discrimination in the delivery of service. Then were some issues back about 10 years ago when the Salvation Army unwisely got involved in encouraging the government to exempt the Salvation Army from certain laws related to who we could hire. And we're past that now. We don't discriminate when we hire. We didn't discriminate then. I can remember back in the '80s working in Florida and doing funerals for people who died of AIDS who were working for us from the LGBT community. We never asked them.

REHMAll right.

BUSROEThey were our employees.

REHMAnd you're listening to "The Diane Rehm Show." And speaking of Florida, we've gotten a piece from FloridaWatchDog.org. about top executives for three Florida-based Goodwill charities who are taking home six-figure salaries while simultaneously paying some employees as little as 22 cents an hour. Now, the question is why some employers can be exempted from minimum wage payments where charities are concerned and all of these employees are with disabilities. And the argument comes back from these high-ranking executives who are paying 7300 of its 105,000 employees beneath minimum wage. How can they get away with this, Ken?

STERNI have no idea, Diane. So I don't know anything about that specific situation. I could speculate that they might be viewing some of them as volunteers rather than employees. I don't know much about the facts, but it sounds like a terrible exploitation of people. I will say to try to move away from a situation I don't know anything about, that it's not a common occurrence.

REHMBut what about Goodwill industries, generally?

STERNWell, I think the only thing I wrote about Goodwill in my book is a story in a chapter where I talked about sort of fraud on the charitable sector, actually because of the inability of charities to invest in themselves. One of the things they don't invest is sort of financial in-kinds. It actually turns out to be extraordinarily easy to steal from charities. And I told a story of actually how in California one of the Goodwill presidents actually stole over 20 years an extraordinary amount of dollars. I think it came out to about $20 million over the course of 20 years.

STERNHe had an entire ring of henchmen that helped him steal that much money. I don't know if that's an issue widespread at Goodwill, although it is issue, I think, widespread in lots of parts of the charitable sector. And there have actually been studies of the problems within the Catholic Church and other places that have similar theft problems.

REHMAll right. So finally, having done the research you've done, what is your best advice to people who want to give and know that their dollars are going to be used and used effectively?

STERNYeah, I think the best advice I have, and it sounds a little schoolmarmish, I admit because it's actually very hard to be good donors these days, is to actually do the work because there are great charities out there. And I mentioned some great charities in my book, like the Nurse Family Partnership out of Colorado, which spent 20 years testing its premise in field testing before it went to market. And Youth Villages out of Memphis, which invest extraordinary amounts of money into research and proving its services in making a difference in people's lives.

STERNThose organizations out there, they can be found. There are places like Give Well and others that help direct you, but there's no substitute for doing what you want to do around a good investment, which is researching the organization, going to their website. If they don't have goals, standards, accountabilities and results up there, they're probably not worth investing in. And most don't, but great ones do.

REHMKen Stern, his new book is titled, "With Charity For All: Why Charities are Failing and a Better Way to Give." Lisa Meriwether, director of development at United Way of Central Virginia. And Major Ron Busroe, community relations and development secretary at Salvation Army. Thank you all so much.

MERIWETHERThank you for having me.

BUSROEThank you.

STERNThank you, Diane.

REHMAnd thanks for listening all. I'm Diane Rehm.