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.

Organizations Profiles

Inside Philanthropy Challenges Big Donors for Big Results

Inside Philanthropy
IMG: Inside Philanthropy

In the world of not-for-profit fundraising, smaller startups and nonprofit organizations often minimize the pool of donors that they reach out to, simply because donations from more prominent donors seem unattainable. As Forbes contributor Tom Watson explains, “At the top end, philanthropy is a disproportionate business. The largest funders, the big foundations, the massive fortunes and their grant officers enjoy a position of power over nonprofits and social entrepreneurs that’s similar – if not more dominant – to the venture capital and startup equation,” of the disparate nature of philanthropy.

However, one startup is breaking all the rules as it challenges the big funders to ante up for causes of all kinds. It’s called Inside Philanthropy, and was founded by social entrepreneur David Callahan, the man behind Demos and author of “The Cheating Culture,” a book that explores why humans cheat to get ahead in finance and economics. Inside Philanthropy is a website that provides news on philanthropic trends, information about major donors, and uses a ratings system to evaluate philanthropic foundation program officers. Inside Philanthropy promotes transparency in the charitable sector, and is bridging the gap between big and small donors, in hopes of leveling the philanthropic playing field.

In a recent interview, Callahan commented on the ways in which major philanthropists hold back so much. He says, “I’m continually blown away by the sheer amount of money waiting in the wings and how even major philanthropists like George Soros and Pierre Omidyar have barely scratched the surface in giving away their fortunes.” Callahan notes that not all philanthropists are like this, however. “Bill Gates is a great example,” he says. “He’s given away more money than anyone, but he keeps getting richer [and] is now sitting on $79 billion. The philanthropy we’ve seen in recent years is nothing compared to what’s coming.”

Inside Philanthropy is a small company that is focused on the big money that exists within the philanthropic sector. By sharing information about huge donors and remaining transparent, Callahan hopes to inspire even more giving around the world, but keeping major philanthropists honest about their generosity.

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