Charity on Trial: What You Need to Know before You Give

Americans — individuals, corporations, and foundations — give and give generously — to the tune of more than $250 billion a year. Did you ever wonder where all that money goes? Or stop to think to whom you are entrusting your hard-earned dollars? Would it surprise you to learn, as you sit down to write another check, that the leaders of your favorite charity might be gaming the system for their friends and families?

Certainly, the majority of America's charities (all 1.5 million of them) are on the up and up. But some are not — and they're the subject of Doug White's Charity on Trial: What You Need to Know Before You Give, an engrossing and at times stupefying account of some of the more reprehensible recent acts of nonprofit malfeasance and incompetence.

In what White, author of the award-winning The Art of Planned Giving, describes as an "anxious alliance," charities (and the people who run them) walk a fuzzy line separating the best and worst in the American character. While giving is part of our national genome, says White, we want our charities to be lean and mean and are frequently miffed when a nonprofit executive earns a six- or seven-figure salary (no matter how large the organization or how well-qualified the individual). Our displeasure often turns to anger whenever we hear that an already "overpaid" executive has feathered his nest with questionable perks and/or gone out of her way to bamboozle donors. Get over it, says White. Sure, we're a giving and trusting nation; but charity is big business, and whenever money is involved, greed waits in the wings.

In Charity on Trial, we meet a rogues' gallery of the infamous and the merely disappointing: men, women, and organizations at the forefront of the charity business who have been exposed as swindlers or incompetent trustees of the public trust. Men like William Aramony, the United Way executive who spent hundreds of thousands of dollars in the 1980s and 1990s on extravagant trips and gifts for himself and his loved ones, or William Crotts, the Baptist Foundation of America executive who made millions of dollars in loans to companies controlled by members of the BFA board. White also singles out organizations like the Nature Conservancy, some of whose trustees engaged in insider real-estate deals with friends, families, and donors in the 1990s, or the American Red Cross, which, according to White, betrayed the public's trust in the wake of the September 11 terrorist attacks and again after Hurricane Katrina. And let's not forget the countless charities that accept used cars as donations and look the other way as the donor claims a tax deduction based on the vehicle's alleged market value — a scam, says White, that costs American taxpayers hundreds of millions of dollars a year. Alas, the list of culprits is long and the shenanigans detailed in the book astounding all the more so because they give charity a really bad name.

And that makes White mad. Sure, we're a gullible lot; we think the idea of charity necessarily translates into ethical, legal behavior. And most of the time that's the case. But when billions of dollars are at stake, shouldn't we expect that to be the case all the time? The scandals at WorldCom, Enron, and Tyco rocked corporate America and forced Congress to act (for better or worse); today, as a result, Big Business lives with the disclosure requirements of the Sarbanes-Oxley Act. But the nonprofit sector, says White, keeps getting a pass. Form 990, the document all nonprofits must file with the IRS, is out of date and doesn't require organizations to detail how they spend the money they raise. What's more, accounting practices vary widely from one charity to the next, making the job of figuring out how the money is being used that much more difficult. Similarly, nonprofit (mostly volunteer) boards rarely take their oversight role seriously, while Congressional hearings invariably produce an abundance of platitudes (someone is always shocked, shocked to find that someone has been gambling on the public's dime) but little or no action.

Given all that, says White, the only way to really reform the world of charity is for individual donors to stand up and demand information from the charities that come knocking. It was the public uproar over the redirection of 9/11 donations that led to more openness (and honest marketing) on the part of the Red Cross, just as the public outing of the free-spending ways of the president and trustees of Adelphi University ended the lavish excesses at that school.

In White's view, no charity should ever refuse to explain how it serves its community, how the funds it raises are spent, and, perhaps most importantly, what would happen to the community should the charity itself disappear tomorrow. And while the overwhelming majority of charities play by the rules and work hard to live up to their donors' expectations, if a charity can't or won't answer those questions, it doesn't deserve your money. As White cautions us, Let the donor beware.

Daniel Matz
Web Services Associate
Foundation Center
New York, New York