I have been knitting for charities in Russia and Afghanistan, where they need wool items, and I have found some good online sources for wool yarns on sale.
1. Little Knits--fast service, good quality, clearance prices can be really low.
2. Webs--again fast service, good quality. Make sure you check closeouts and garage sale.
3. Smiley's--sometimes really good prices. Downside is they require a $50 minimum total purchase. But maybe several people can go in together.
Several other thoughts--
Contact a church or service organization and see if they might be willing to provide yarn for this charity. By doing this, you might get people who are also interested in knitting!
Build a relationship with your local craft store--take a copy of the Internet site that explains about this project. Tell them you knit for charity and ask if they have any special discounts or closeout wool yarns. I did this one time and got Patons that was going to be thrown out for 25 cents a skein.
Ask your local library or school if they would like to adopt this charity or allow you to place a collection box for 100% wool yarn.
Our local credit union (bank) has boxes in the lobby to send items to soldiers in Afghanistan. You might find a bank that would put a box out for wool and maybe open an account for donations.
I hope this helps someone.
Pam