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From the Fall 1997 Watchdog Report

A Crafty Project

Is It An Employment Program or Just Clever Marketing?

As you go through your daily routine of looking through the mail, you may find sandwiched between your bills and solicitations a catalog of stunning Indian jewelry and crafts from the Southwest Indian Foundation.

The Southwest Indian Foundation (SWIF) reports that for over 25 years it “has been working to relieve the tremendous poverty and despair of these forgotten Americans [Indians].” SWIF says that it supports mission schools and homes for battered women and children, sponsors alcohol counseling centers, delivers food baskets every Christmas and clothing and shoes throughout the year and repairs homes and installs wood stoves.

The above description paints a glowing picture of the charity. However, that glow fades rapidly when one tries to review how SWIF is actually spending its money. This is not an easy proposition since the group has not complied with AIP's repeated requests, starting in early 1995, to disclose voluntarily its complete financial statements. According to Nina Smith, Chairwoman of the Fair Trade Federation (FTF), marketers of products that purport to help low-income artisans should have “total transparency.” SWIF is not a member of FTF. The FTF and some of its high ethical standards for membership are described in “Do Craft Purchases Help the Poor?” (see below). “I never heard of it” was William B. McCarthy’s (Executive Director of SWIF) reply when asked by AIP if his organization was a member of FTF.

Unlike most other charities SWIF is not required to file public information. Why? Because the Internal Revenue Service classifies SWIF as a church or church-related organization. SWIF does not appear to have a congregation that regularly meets for prayer services but has obtained church type status with the IRS under a group ruling of the U.S. Catholic Conference. This status allows SWIF to be exempt from state and federal laws that require charities to regularly file financial information with the government. Churches involved in trade or business activities unrelated to their exempt or charitable purpose do file annual information with the IRS on the for-profit portion of the organization but these filings are not open to public inspection.

Fortunately, AIP was able to obtain SWIF’s documents from two reliable sources. What we found is that SWIF’s primary activity, other than fundraising, is buying and selling jewelry and craft items. SWIF’s support of mission schools and other human and social service programs only accounted for about a quarter of its total expenses in 1996.

A letter on the back of SWIF’s Winter 1996 gift catalog from Deacon Daniel Nez Martin, who is not a staff or board member of SWIF, states that “it is a catalog of uniquely crafted gifts from some of the poorest people in the United States-the Indian peoples of the American Southwest.” It also says that “this catalog helps provide jobs because it serves as an outlet for my people to sell their precious crafted goods.” AIP asked SWIF's Executive Director how “some of the poorest people in the United States” can afford silver, gold, turquoise and other expensive materials to make the fine crafts displayed in its catalog. He said that there are commercial suppliers that will loan materials to artists with the expectation of receiving a percentage of the future sales revenue. McCarthy said SWIF does not provide this service. 

When asked by AIP if SWIF teaches or trains poor or unemployed Native Americans to make crafts, McCarthy said that this was not feasible “on site” because the Indians are spread out over vast areas. He did say that one or two dozen participants in SWIF’s alcohol counseling program were trained to make ceramics. “Many hundreds [of Native Americans] make products for our catalog” and “lots of them would not [otherwise] have jobs,” according to McCarthy. McCarthy likes to refer to the “ripple effect” of SWIF’s craft purchases. He cites an improved local economy, more jobs at the post office, positive effects on an artist's family and preserving the Indian culture for future generations as indirect benefits of SWIF’s catalog operation.

After reviewing the Winter 1996 Southwest Indian Foundation catalog, Ms. “Cat” McClannan, who manages a store in Bethesda, Maryland that specializes in Native American art, said that most of SWIF’s products are not unique but are mass market items that can be purchased through wholesale distributors. SWIF’s Executive Director said that a “good portion” of its catalog sales are unique crafts and a majority of its sales revenue comes from products made by poor Native Americans. McCarthy was not clear about how he defined “poor.” He did not define it in terms of income but said the artisans were “poor by degree” in comparison with most Americans.

McCarthy did not tell AIP what portion of the retail sales price of a crafted item was received by the Indian artist but did say that about one-third to one-half of SWIF’s catalog costs went to them. 

In SWIF’s financial statements the cost of buying, selling and promoting the jewelry or crafts in its catalog is labeled as a program service called “Employment project – jewelry.” Yet SWIF has reported to the IRS in its 990-T, (Exempt Organization Business Income Tax Return) for fiscal 1994, that the costs of its so called employment program are unrelated trade or business expenses. Unlike SWIF’s financial statements, its IRS report indicates that its jewelry sales do not substantially fulfill an exempt or charitable purpose.

AIP would consider the cost of training or teaching Native Americans to make jewelry and the identifiable expense of locating and reaching isolated Indian artists to be a bona-fide charitable program but does not consider the total cost of goods sold by SWIF to be one. Being that there are numerous for-profit outlets for the sale of Native American crafts, it appears that SWIF’s craft sales serve primarily to generate sales revenue and donations for the charity.

Donors to American Indian charities may also want to consider the charity’s board composition. When AIP asked McCarthy how many Native American were on SWIF's Board, he said that “it didn't matter if there were any Indians on the Board” but that 5 out of 12 are Native Americans, including 2 Navajo Judges. First Nations Development Institute and the Campaign for Human Development (CHD), which make grants to Native American charities, feel strongly that Indian leaders should control the money that is donated to help their tribe. Both of these groups only make grants to those Native American charities with a majority of Indian board members.

DO CRAFT PURCHASES HELP THE POOR?
The Fair Trade Federation (FTF) is an association of over 130 producers, wholesalers and retailers “committed to providing fair wages and employment opportunities to low-income artisans and farmers worldwide.” Before buying crafts for the purpose of helping poor artisans, one might want to consider if the marketer is a member of FTF (508-355-0284) or meets its membership criteria.

Some of the criteria: paying a fair wage in the local context; engaging in environmentally sustainable practices; being open to public accountability; providing healthy and safe working conditions within the local context; providing financial and technical assistance to producers whenever possible.

Even with these criteria it can be difficult to determine whether poor people are receiving substantial benefits from the sale of their crafted items.

Another approach is to buy crafts directly from a business owned and operated by members of a group that you want to help. To receive a free listing and description of a wide variety of American Indian and Alaska Native owned and operated arts and crafts businesses, write to:

Indian Arts and Crafts Board
US Department of the Interior
MS-4004-MIB
Washington, DC 20240


 
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