Locks of Love
$6 Million of Hair Donations Unaccounted for by Locks of Love Each Year
Nonprofit Investor Rates Locks of Love a "SELL" for Disclosure Inadequacies. Locks of Love is the first "SELL"-rated Organization Amongst 62 Nonprofits Evaluated
NPI analysis indicates that approximately $6.0 million of hair donations are not accounted for by the charity Locks of Love ("LoL") annually. Each year, Locks of Love makes approximately 300 wigs with the 100,000 hair donations it receives.
Of the 62 nonprofits independently reviewed by NPI to date, 35 have received a "BUY" rating, demonstrating clear impact with a high degree of transparency. 26 nonprofits have been rated "NEUTRAL", receiving suggestions on how to improve operations or transparency. NPI's first "SELL" rating raises serious questions about Locks of Love's operations and finances.
Children, celebrities, relatives of those in need, and countless others have been selflessly donating their hair to Locks of Love for over 15 years. Nonprofit Investor's analysis raises significant questions regarding how how the hair donations are used.
Locks of Love receives an estimated 104,000 hair donations per year (1). LoL indicates that up to 80% of this hair is unusable (2) and that 6-10 hair donations are necessary to make one hairpiece (3). Based on these numbers sourced from Locks of Love, the charity should produce a minimum of 2,080 hairpieces per year (104,000 hair donations * 20% usable hair donations / 10 hair donations per hairpiece). However, NPI has confirmed with they charity's staff that the organization produced only 317 natural hairpieces in 2011 (IRS Form 990 figure of "430 wigs" includes synthetic wigs) (4).
The 1,763 hairpieces that are unaccounted for are worth $6.6 million (LoL states that the retail value of a natural hair wig is between $3,500 to $6,000 and costs $1,000 to manufacture) (5)(6). While Locks of Love discloses that it sold $572,997 of hair in 2011, this leaves $6.0 million of hair unaccounted for by the organization.
Comparisons to other organizations illustrate the significant difference in utilization of hair donations:
- Locks of Love. 104,000 hair donations per year divided by 317 hairpieces produced in 2011 = 328 hair donations accepted to produce 1 wig.
- Pantene Beautiful Lengths. 65,000 hair donations per year divided by 3,500 hairpieces produced per year = 19 hair donations accepted to produce 1 wig (8).
In other words, it takes Locks of Love 17x as many hair donations to make each hairpiece. Additional organizations that accept donated hair include Ohio-based Wigs for Kids, Children with Hair Loss, and Michigan-based Wigs 4 Kids.
Response from Locks of Love:
NPI provided Locks of Love with this specific analysis in February, 2013 in order to ensure accuracy.
- Locks of Love indicated that "LOL does not count, catalogue nor maintain lists of hair donations" (7).
- NPI asked LoL how many hair donations are sold each year ($573,997 in 2011 reported on IRS Form 990). LoL responded: "As we do not catalogue hair donations, you might imagine that we also do not count unusable hair that is sold..." (7). It is unclear to NPI how it is possible for Locks of Love to sell more than half a million dollars worth of hair without knowing the quantity of hair sold.
- In regards to the figure of 2,000 donations per week cited by USA Today and the New York Times, LoL responded: "We are unaware of this "publicly available data" nor do we endorse it" (7). As a result of LoL's inability to provide updated information, NPI relied upon the statements of LoL's executive director as cited in USA Today to estimate the amount of hair donated each year only after reasonable and diligent efforts to obtain updated data.
Additional Concerns Raised by Nonprofit Investor:
- Declining Capital Efficiency. Locks of Love continues to build its balance sheet through fundraising and disclosed sales of $500K-$1MM of hair each year while $3.8MM in cash and investments remain idle on the balance sheet. With disclosed personnel and office expenses of less than $1MM per year and net assets of $6MM, NPI views six years of reserves to be an inefficient use of capital.
- Application Process for Receiving a Wig More Complex Than Peer Organizations. Locks of Love requires applicants to provide two letters of recommendation explaining why the child would benefit from a hairpiece. This requirement is not typical of peer organizations.
- Additional Potential Beneficiaries. While LoL states that the primary beneficiaries of its wigs are children with alopecia, many donors believe that the primary recipients are cancer patients. With extremely high levels of donations and available assets, LoL should be able to provide more wigs to children with alopecia or expand its scope to others in need, such as cancer patients.
Recommendation to Locks of Love:
NPI recommends that Locks of Love publicly disclose the amount of hair donations it receives each year, how many are used to produce wigs, how many are discarded and how many are sold. NPI views number of hair donations accepted and number of wigs produced to be the two most critical business metrics for Locks of Love to track and disclose in order to provide accountability.
Recommendation for Prospective Hair Donors and Financial Donors:
NPI recommends that prospective donors to any nonprofit require clarity on how their donation will be utilized. By selecting the nonprofit that most closely aligns with the individual's objectives, the same amount of resources can go a lot further.
View and download the full ten-page report on SlideShare:
(1) "According to Susan Stone, executive director of Locks of Love, the organization gets 2,000-3,000 donations a week" - USA Today, 12/14/04. Because program service expenses (not including research donations) have increased 79% from 2004 to 2011, it is conservatively estimated that Locks of Love currently receives as many donations as it received in 2004 (104,000 per year)
(2) "As much as 80 percent of the hair donated to Locks of Love ... is unusable for its wigs, the group says" - New York Times, 9/6/07
(3) "6-10 ponytails go into one hairpiece" - Locks of Love Website FAQ, accessed 5/10/13
(4) Provided to NPI by Locks of Love via email on February 8, 2011. This number is not publicly disclosed in LOL annual reports or IRS filings
(5) Retail cost of hairpiece is "between $3,500 to $6,000" - Locks of Love Website FAQ, accessed 5/10/13
(6) "Mr. Taylor sells the wigs wholesale to Locks of Love for less than $1,000" - New York Times, 9/6/07
(7) Email from Locks of Love to NPI, 2/8/13
(8) Procter and Gamble, 10/4/12