A Charity Scandal with a Surprising Twist

Yet another charity scandal has made headlines. What makes this ongoing situation startling is that the charities involved are the victims while government is the offender.

“Nearly $10 million in charitable donations by California taxpayers sat unspent in government accounts at the end of last year, The Associated Press has found, and the Senate Governance and Finance Committee chairman said Thursday that he wants a review of state accounts and will hold a hearing to find out why the money hasn’t been spent.”

Since 2005, California has collected $35 million for 29 funds. The state’s taxpayers donated the money when filing their tax returns. The money was supposed to go to a variety of charitable organizations ranging from cancer research to wildlife protection.

“’This is just embarrassing. It’s unacceptable. People expect their money to be spent for these important purposes and these delays, you know, they’re not explainable to me,’ said Sen. Bob Hertzberg, D-Van Nuys. ‘So I just learned about it, but I’m going to jump on it,’” according to the AP report.

Sadly, California is not alone in mishandling taxpayer donations to charity. For example, “New York’s top financial officer found donations languishing in its tax checkoff funds,” according to the AP.

While well intentioned, the government’s efforts to help charities have not always been efficiently or properly managed. I’m reminded of a famous quote from a former California Governor, President Ronald Reagan:

In 1986, Reagan famously said, “The nine most terrifying words in the English language are: ‘I’m from the government, and I’m here to help.’”

While Democratic administrations in both California and New York have mishandled money meant for charities, Democrats do not have a monopoly on making life difficult for nonprofit organizations.

While it initially looked like the Republican controlled US Congress might quickly enact certain charitable giving incentives including the IRA Charitable Rollover, the body failed to act before the summer recess. With a full legislative calendar awaiting the return of lawmakers, it’s unclear if or when the matter of charitable giving incentives will be addressed. This means that even if Congress passes measures that would benefit charities, nonprofit organizations will once again have very little time to promote those opportunities to donors prior to the end of the year.

While government can and should take steps to help the nonprofit sector, charities should not wait expectantly for assistance. Furthermore, even when assistance is promised, charities should not expect such assistance to be delivered in a timely or efficient manner.

As Doug White, Director for the Master of Science in Fundraising Management program at Columbia University, told the AP, “They are not in the business of charity. The government has its own issues.”

Another way in which government hurts the nonprofit sector is through burdensome, costly regulation that does little or nothing to protect the public interest. Such regulations divert donor funds away from the fulfillment of charitable missions.

While government action and in-action has a direct cost for nonprofits, the problem could be much greater. For example, in California, donors may now distrust the government to such a degree that they will no longer bother to designate funds for charities. Time will tell.

So, what can you do?:

1. Be Vigilant. If you are expecting to receive funds from the government, you should vigorously pursue payment. For example, the California YMCA contacted state officials on a weekly basis for seven months before the organization finally received its first payment.

2. Maintain a Government Relations Program. The best time to cultivate government officials is before you need them. This does not need to involve hiring a high-paid lobbyist. Even small organizations can engage in government relations activities. For example, the tiny theatre company Tribe of Fools is presenting Zombies … With Guns as part of the 2015 Fringe Festival in Philadelphia. On Sept. 9, State Rep. Brian Sims will serve as a guest zombie while Philadelphia’s mayoral frontrunner, Jim Kenney, will serve as a guest zombie on Sept. 12.

3. Unite with Others. Many chapters of the Association of Fundraising Professionals, in addition to headquarters, have a Government Relations Committee. Other professional associations do as well. Get involved.

4. Contact Government Officials. When issues arise, contact government officials. Relatively few calls on an issue can have an enormous impact on legislators. Encourage your donors to take action, also. Donors to charities are often donors to political campaigns. While legislators listen to voters, they listen especially to their donors.

5. Donate. The AFP Political Action Committee is the nation’s first philanthropy-focused PAC. If you are a US citizen and a member of AFP, I encourage you to support the AFP PAC. The organization makes political contributions to members of Congress who have been or who are in a position to be helpful to the nonprofit sector.

Together, we need to hold our government accountable.

That’s what Michael Rosen says… What do you say?

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3 Responses to “A Charity Scandal with a Surprising Twist”

  1. Michael,

    Sadly, this is not a new phenomenon and problem. I recall this very thing happening in Illinois a few years ago, and if I recall correctly, in my former home of Oregon. When dealing with the bureaucracy of any government, there will be a waiting period, but waiting months and even years, is ridiculous. The larger the government, the more inefficient it is.

    • Richard, thank you for sharing your insights. Whether through inefficiency, general incompetence, or nefariousness, help from the government can be problematic. In my state of Pennsylvania, the government has yet to adopt a budget. Soon, this will likely hurt nonprofits dependent on government funding. While some charities have a substantial cash reserve that will see them through, others will have no choice other than cutting much needed services.

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