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Blogs by Andy Parker
Should the Government make charities more transparent? 5/25/2009 7:01:01 AM
The U.S and U.K give away more money than any other country but an unpleasant question lingers: how much of that money is well-spent, and how much of it is squandered? The uncomfortable truth: no one knows for sure, and even worse, few are checking. Whether it’s wrongdoing, wasteful spending on administrative overhead, rent or celebrity balls, or questionable proportions of benefit to causes and corporations in symbiotic cause marketing relationships, who can tell?
The Internal Revenue Service lacks enough investigators to glimpse more than a minute sample of nonprofit behavior. Publicly disclosed forms often provide only a vague and incomplete picture of what’s going on. Some states are even unable to identify legitimate charities; they lack requirements for nonprofits to register. Other states lack even a single full-time attorney to investigate complaints.
Despite some tough talk by the feds in recent years — and initiatives in which tax authorities are said to be cracking down on nonprofit executive compensation and other abuses — the chances of an IRS audit are so remote that even shaky nonprofits can go for years without much risk of being caught. Even litigation is difficult: the Supreme Court has ruled there’s nothing inherently illegal about a charity that spends just 1 percent of donations on good deeds.
The result? Just about anything goes — an unregulated, unpoliced free-for-all in which anything might be happening to donor dollars, with anything short of blatant allegations of legal wrongdoing unlikely to be exposed, except occasionally by enterprising reporters or bloggers well after the fact. “These are times that try nonprofit souls,” says New York University Professor Paul Light. “It used to be that the nonprofit sector had the benefit of the doubt from donors. But not anymore. Donor confidence is shaky. Americans have come to believe that there is some sort of leaky bucket that no matter who they give to, some of the money will be lost through waste, inefficiency and high executive salaries.
So should we be asking Government to demand Charities how the books are balanced and where our donation has gone?
