Working in the nonprofit sector is usually viewed as a noble pursuit. The hours are usually long, the tasks you juggle are complicated, and the pay and benefits are usually lower than for-profit equivalents, but the rewards are often about making the world a better place. It’s become a punchline in Silicon Valley that all of these startup businesses are “making the world a better place,” but many nonprofits can legitimately claim that. Working for an organization whose values line up with your own can be incredibly rewarding. However, just knowing an organization has a 501(c)(3) tax status does not guarantee that an organization is truly a benefit to the public. Just like any sector, there are nonprofit organizations where fraud, mismanagement and illegal activity can be found.
The Tampa Bay Times and Center for Investigative Reporting have done extensive investigations into the worst charities in America. Their findings highlight organizations that spend only small fractions of donations they take in on charitable causes. The millions that they take in are wasted on bloated overhead costs, lavish fundraising, and dubious expenditures.
These organizations are able to operate out in the open despite these glaring issues for a variety of reasons. For one, they use similar naming to confuse donors. For example, the Make-a-Wish Foundation grants the wishes of children with life threatening illnesses, while the Kids Wish Network “squanders almost every penny.” Second, these problems continue “due to a lack of regulation and meager penalties.” Barring any meaningful reforms, exposure is the best way to keep these organizations from abusing their charity status.
Many of the organizations listed by the Tampa Bay Times are a national problem, and most of us would like to believe the nonprofits of Minnesota wouldn’t traffic in such egregious behavior. Think again. Just in the past couple of months, federal authorities indicted executives at Community Action of Minneapolis for “diverting at least $250,000 for personal use, and the use of friends and families.” The trial is forthcoming, but low-income Minneapolis residents have been forced to request assistance from (and in some cases travel to) agencies in the suburbs ever since the Minneapolis organization was shut down in 2014. Even grant makers aren’t immune to these problems. The Bremer Foundation ran afoul last year when it came to light that they were paying themselves over a million dollars after firing the foundation’s executive director “without leaving any accountability mechanisms in place.”
There are currently systems and resources in place to help you know whether a nonprofit does what it says it does. Next time you’re thinking of donating money or volunteering with an organization, look them up in the Charity Review Council’s Accountability Standards. It’s a great way to know whether the nonprofit can back up what it says and provides all of the evidence to prove it. There are also many tools online if you would like to do your own vetting. For example, you can use ProPublica’s search tool to lookup 990 tax filings, or you can go straight to the source and look an organization up with the IRS. The Tampa Bay also has a long list of resources for checking nonprofits.
The important for all of us to know is that an organization doesn’t do good work just because of its tax status; organization’s must earn that label, and it’s up to us to help keep them honest.