Before donors give money to a charity, they can check to see how much money that charity spends on itself. They wouldn't want to give a gift and find that most of the money was spent to pay a charity's expenses instead of helping people in need.

But in the case of a group of charities drawing millions of dollars in donations from federal workers, that is exactly what's happening.

An Arizona Republic investigation has found that charities can legally inflate their finances by taking credit for donated goods that they never actually handle. This makes donors think the groups are large and makes the groups' expenses appear lower.

The investigation of 22 charities with ties to a Phoenix televangelism ministry revealed:

��The charities have collected millions of dollars from donors, who give through the U.S. government's Combined Federal Campaign for charities.

��Of the groups' cash, most is spent on their own salaries and expenses.

��Of what's left over, the groups donate much of it to other charities and affiliates run by relatives, co-workers or associates.

��Of those charities, the named group that gets the most money is the one owned by the Don Stewart Association, a ministry.

No one claims the law prohibits these practices. But charity watchdogs say setting aside those donated goods and looking at how a charity spends its cash gives a good picture of what a charity is really doing.

Today, The Republic looks at what donors may not realize is happening with the money they give.

Donations are the lifeblood of any charity, usually arriving in two forms.

There is cash donated by prime benefactors, such as rich donors or companies, or by the public as part of marketing or workplace campaigns.

And there are goods or services, known as gifts in kind. Those can include canned food, medical supplies, property or a business' donated services.

Most charities receive the bulk of their income in cash. A smaller number deal mainly in gifts in kind.

An Arizona Republic investigation found that charities can use a kind of title transfer of gifts in kind that inflate their finances, making their operations appear larger than they are.

That improves the financial profile they present to donors in the federal charity drive and may attract more cash donations. The charities then spend most of the cash on salaries and expenses and pass the cash to other charities operated by relatives, co-workers or associates.

The findings spring from The Republic's examination of a network of 22 charities with ties to a Phoenix televangelism ministry, the Don Stewart Association. Tax records and interviews show that many of the 22 charities made large donations of gifts in kind that involved transfers of ownership of goods without the charities' physically handling the items. The transactions made the charities' budgets appear larger and cash expenses appear smaller as a percentage of total revenue.

Because of such transfers, which are legal, it is hard for a donor to tell how a charity uses its real, tangible resources.

The 22 charities reported $154 million in total revenue over three years. About four-fifths of that was in the form of gifts in kind.

At least $80 million involved goods the charities never handled.

Richard Wong, the former president of Gifts-in-Kind International, one of the largest charities in the United States, said he believes it's OK for a charity to occasionally outsource its shipping and handling of in-kind gifts, but not as a matter of course. Gifts-in-Kind International's tax returns show that each year its biggest or second-biggest cash expense was shipping and warehousing - unlike 21 of the 22 charities, which did not claim any expenses related to warehousing on their taxes.

All but four of the charities operated out of private residences.

Charity watchdog groups say the best way to see how a charity uses its money is to strip away the gifts in kind and look only at cash.

In the case of the 22 charities tied to the Don Stewart Association, more than half of their total cash revenue of $29 million from tax years 2003 to 2005 was used for expenses. The largest expenses were for salaries and other compensation, program development, education supplies, travel, vehicles and occupancy or rent.

Seventeen percent was donated to other charities in the same 22-charity network, and 10 percent went to unidentified recipients.

Just 5 percent of the cash, or $1.5 million, went to organizations outside the network of 22 charities and their affiliates.

The Don Stewart Association owns one of the 22 charities.

Among the items some of the 22 charities expensed as part of their operation:

� $68,000 for a Hummer H2, $47,107 for an Acura MDX and $35,000 for a Dodge Ram truck, all for a hunger charity.

� $51,000 for a BMW and $2,490 for new wheels, for a children's cancer charity.

� $81,956 in "occupancy" costs related to a hunger charity that operated out of a private residence that was deeded to the charity.

� $80,000 for a tract of farmland in Montana, purchased from the family of a hunger charity's president.

� $5,239 for a couch, end tables, conference table, chairs, TV, VCR and stereo for a cancer charity run out of a private residence.

� $1,831 for drums and a piano for a hunger charity that also operates as a church.

� $4,890 total for a digital camera, a juice machine, a video camera, a video projector, a slide projector and cellphones for four cancer or hunger charities.

Spokesmen for most of the 22 charities say the groups spend cash responsibly, pay modest salaries and assist other charities to ensure donations get to the needy.

Errol Copilevitz, a Missouri lawyer representing charities run by Don Stewart Association executive director Larry MacKay and his families, said the interaction between charities is important to get work done.

"The reality is that sometimes the strategy is to involve more than one organization so that the cost can be shared," he said in a memo. "At the end of the day, people in need receive critical supplies."

James Raftery of Mesa, an accountant for 16 of the 22 charities, said it is "unequivocally unfair and bordering on being uninformed" to omit the value of gifts in kind.

"You can't pull the gifts in kind and say, 'Well, what do you have now?' " he said. "Well, we don't have anything, because you just pulled our whole operation."

The Republic described the finances of the 22 charities to officials at three of the nation's leading charity watchdog groups; they said the share of cash spent on expenses appeared steep in light of the title transfers of goods.

"You can make an argument that they are agents and (shouldn't) have any expenses," said Daniel Borochoff, president of the American Institute of Philanthropy in Chicago. "It's just a shell game, and they are using it to pay salaries."

Today, The Republic sets aside the gifts in kind and looks at the money.

Contact the reporter at robert.anglen@arizonarepublic.com.