98.8 Percent Overhead
The North Seattle Community College Foundation is one of the nation's biggest credit-counseling agencies, but hardly any of the millions of dollars in revenue goes to helping students. Most of it goes to for-profit corporations.

by Bruce Rushton

Desperate debtors were supposed to be the key to riches for the North Seattle Community College Foundation, created to independently raise money for North Seattle Community College, a public school. Finding money for scholarships can be tough for a two-year school that alumni are prone to forget after they transfer to a four-year college. So seven years ago, the nonprofit foundation, which had relied on dinners and other traditional fund-raising events, settled on an unusual way to fill its coffers: credit counseling.

As the foundation began to morph into a credit-counseling agency in the ensuing years, organization officials predicted great things. Credit counseling would bring in as much as $1 million a year for scholarships, they said.

The foundation's credit-counseling business today is one of the biggest in the nation, generating yearly revenue in the tens of millions of dollars. But federal records show just a small fraction of that money—far less than $1 million in any given year—has gone to college scholarships or programs. Most of the money raised has gone to for-profit concerns contracted to do the foundation's credit-counseling work, not needy students.

In the fiscal year ending June 30, 2004, the North Seattle Community College Foundation took in $65.7 million and gave just $895,725 in scholarships and grants to college departments. Since setting up its credit-counseling business in late 1998, the foundation has taken in $233.6 million and contributed only 1.2 percent of that in scholarships and grants, according to tax returns. That would put overhead costs at 98.8 percent.

In April, the foundation found it was a poster child in a U.S. Senate report titled Profiteering in a Non-Profit Industry. Among many other negative findings, Senate investigators concluded that the foundation provided debtors with scant help to avoid financial trouble. With that notoriety and scrutiny by the Internal Revenue Service and other federal investigators, the foundation has changed its practices and says more changes might come. But former and current foundation officials insist that Senate investigators didn't find anything substantive.

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