CharityWatch recently published our updated rating of Kars4Kids, a popular car donation charity with a catchy jingle and ubiquitous marketing. CharityWatch had been critical of the organization in the past for its advertising, which in many cases failed to inform potential donors that its mission centers on helping Jewish children and promotes an Orthodox Jewish lifestyle, which may not align with the values of most potential donors.
CharityWatch CEO, Laurie Styron, was recently interviewed about the charity for Noovo Info (Bell Media) in Quebec:
“Many people when they hear this charity’s advertisements, they don’t understand the underlying nature of its programs…You typically want to donate to an organization that has programs that align with your values.”
Class Action Lawsuit
Earlier this year Kars4Kids and its related organization, Oorah, were named as defendants in a class action lawsuit in which the charities were accused of operating a “scheme to deceive unwitting donors to donate their vehicles to Kars4Kids for undisclosed and misrepresented purposes,” according to a Complaint (the Complaint), filed in the United States District Court For The Northern District of California in April 2024.
As also asserted by the Plaintiffs, according to the Complaint: “While promoting strict tenets of Judaism in a particular geographic area [New York] may be a worthy endeavor for donors intending to do so, Defendants designed their ads to conceal this true purpose from potential donors. By failing to inform potential donors that their car donations would be used almost exclusively to: (i) fund Oorah and its orthodox ‘outreach’ activities; (ii) benefit families of only one religion in one geographic area; and…fund Kars4Kids’ and Oorah’s significant expenses and investments, Defendants’ ads misled and deceived thousands of donors, who, like Plaintiff, would not have donated had they known the truth about the Defendants scheme.”
Organizational Structure & Flow of Cash
CharityWatch reported on the legal structure of Kars4Kids and its related organizations in our March 2017 article, Costly and Continuous Kars4Kids Ads Disguise Charity’s Real Purpose. Upon analyzing its 2023 consolidated audited financial statements and the tax filings of Kars4Kids and Oorah earlier this month, we confirmed that it continues to operate in the same way. While both organizations are registered 501(c)(3) public charities, Kars4Kids essentially functions as the fundraising arm of Oorah.
According to the Kars4Kids consolidated audit of December 31, 2023 (Note 9, Related Party Transactions):
“The Organization distributed most of its grants to an affiliated nonprofit organization under common management. Total grants to related organizations during 2023 amounted to $36,120,405. Total grants from the related organizations during 2023 amounted to $1,253,187. In addition, the organizations share premises, and certain overhead costs are allocated between them based on usage.”
According to the Kars4Kids 2023 IRS Tax Form 990, in 2023 Kars4Kids made a cash grant in the amount of $34,123,050, and a noncash grant of $1,365,855, to its related public charity, Oorah (tax ID #22-3746051). According to Oorah’s IRS tax Form 990 of the same year, Oorah’s mission is stated as follows:
“Oorah was established as a Jewish outreach organization for the purpose of imparting education, values, and traditions, as well as guidance and support, to children who lack access to these fundamentals. Oorah takes a holistic approach to its mission, utilizing Jewish tradition to enhance every aspect of children’s lives, the majority of whom are at risk due to divorce, loss pf parent, serious illness in the family, unemployment or poverty. With Oorah’s intervention, these children are able to avoid the pitfalls of anti-social and destructive behavior that often beset vulnerable children.”
According to Oorah’s 2023 IRS tax Form 990, Schedule I, the organization made cash grants to the “Middle East and North Africa” totaling $16,500,000 that year. The purpose of the grant is reported as “to promote religious education.”
CharityWatch Rating
Even donors whose values align with the missions of Kars4Kids and Oorah may want to consider if these particular organizations are the ones most worthy of their donations. Since our initial rating of Kars4Kids based on its financial year 2015, the charity has never received a CharityWatch rating higher than a C-minus on our A+ to F rating scale: 2015 (D rating); 2016 (D rating); 2018 (D rating); 2021 (C- rating); 2023 (D rating).
Most recently CharityWatch analyzed Kars4Kids’ IRS tax Form 990 and consolidated audited financial statements and determined that in 2023 the charity spent $48 dollars to raise each $100. We also determined that it spent 41% of its expenses on programs and 59% on overhead that year.
Contained within that computed 41% is the $34.1 million cash grant from Kars4Kids to Oorah—Oorah then incurs its own, additional overhead costs that cut into the resources available to be spent on programs for kids. When analyzing the finances of related charitable organizations, CharityWatch generally relies on the figures from consolidated audited financial statements that include the financial activities of all related organizations and that eliminate any transactions among them so they are not double counted. In this case, however, the financial activities of Oorah were not included in Kars4Kids’ consolidated audit even though the two are listed as related organizations in the charities’ tax filings. CharityWatch’s rating of Kars4Kids does include the financial activities of the legal entities consolidated in its audited financial statements for the organization’s fiscal year ended December 31, 2023.
According to Note 1 of the consolidated audit, these include:
“…the accounts of Kars 4 Kids, Inc. and its wholly owned subsidiaries Carsandmore2001 LLC, K4K LTD, Kars Resources LTD, K4K LLC, and K4K Medial LLC. Carsandmore2001 LLC sells donated vehicles outside of the organization’s usual distribution channels. K4K LTD and Kars Resources LTD provide back-office services to the Organization in Israel. K4K LLC holds investments in real estate and real estate donations. K4K Media LLC is an in-house advertising agency for the Organization. All material intercompany balances and transactions have been eliminated in consolidation.”
State Attorney General Actions Against Defendants
In January of 2009, Kars4Kids (which then operated under the name JOY) and Oorah settled an action with the Pennsylvania Office of the Attorney General related to its solicitation “for contributions in Pennsylvania through a vehicle donation program in order to benefit disadvantaged children…” while failing “to properly inform donors that their donations would only benefit services for children of certain religious affiliations,” according to the Complaint.
Later that year, Kars4Kids (still operating at the time as JOY) settled another action with the Oregon Office of the Attorney General that accused the charity of “deceiving Oregon donors about the use of their donations by failing “to disclose that the organization did not benefit needy children generally, but instead directed its efforts to a narrow religious purpose,” according to the Complaint. The Oregon Department of Justice also alleged that Kars4Kids misled Oregon donors by making unsubstantiated claims of being a “top rated” charity and failing to disclose that its “free vacation” voucher offer was designed to recruit people to attend timeshare presentations.
In 2017 Kars4Kids and Oorah were investigated by the Minnesota Office of the Attorney General (AG). According to the Complaint, the Minnesota AG concluded that “Kars4Kids had engaged in financial reporting shenanigans to make it appear to donors that more of its money was spent on charitable programs, as opposed to fundraising and overhead, than was really the case,” and that “Kars4Kids and Oorah had lost around $9.7 million in donation-funded real estate investments since 2007, most of which were managed by their CEO’s cousin.”
| Charity | |
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| Kars4Kids |