A Call for Oversight of Charities

A recent opinion piece in the New York Times called for oversight of charitable organizations in the United States. Not more oversight, but any. The piece, written by David Callahan, founder and editor of Inside Philanthropy, came after the federal government alleged that four cancer charities had defrauded donors of millions of dollars.

The piece contains some rather startling information about the non-profit sector. Like the fact that there is pretty much no government oversight of charities. This creates a sort of “Wild West” atmosphere where charities and non-profits do whatever they want and nobody stops them. That’s how fraudulent charities spring up and survive.

One problem, which seems pretty serious, is that donations provide a tax break based on the idea that giving money to charity has an immediate benefit to society, so as a reward, you pay a little bit less in taxes. That’s fine, but the problem is that not all non-profits are created equal. Yes, your money might go to a group with noted success that helps people immediately with your money. Or it might go to a think tank who’s whole purpose is to “end poverty” by waging ideological warfare against food stamps.

And then there’s the amount of money that charities spend, and how quickly they spend it. At current, non-profits only have to spend 5% of their money each year, meaning that the vast majority of it might just sit in an account generating interest, and not being used. Since you got a tax benefit from donating to that charity, neither the government nor the people who were supposed to benefit from that donation actually got the money.

There are other problems, and Callahan makes some good suggestions for how they can be fixed, which you can read here. The point though, is that transparency and third-party oversight is necessary to ensure that charities and non-profits are doing the things the claim to be doing. Not that every charity does this, of course, but there are those that would hide behind their more generous peers.