Wednesday, July 30, 2008

The Church and the IRS - Part 2

I am very pleased to see that my blog entry last week has sparked replies both on the blog site and via email. I very much appreciate the feedback and encourage other users of our site to feel free to join in the discussion as well. I list below some of the points I have made in the email and blog exchange regarding this issue:

[In my last blog entry] I was indicating what I consider to be basic common sense. We believe that donors to all public charities should be well informed before they give, so it seems wrong (to my common sense at least) when the lion’s share of private contributions goes to entities that have no obligation to inform their donors. I see no down side to this or infringement on the freedom to worship as one chooses. I believe that there is a veil of secrecy here, under the guise of separation of church and state, that needs to be removed for the good of all.

Anyway, in answer to the question of why “churches” (i.e. houses of worship) are not required to file (BTW, religiously affiliated organizations in most cases ARE required to file which is why we have a section on our web site for religious organizations), I am currently reading up on the history of this myself. However, I suspect it gets back to the separation of church and state. There are various interpretations as to the meaning of this and my opinion is, the “church” should be free from any state encumbrance in regards to how it chooses to worship (as long as it does not violate laws of public safety), but as a tax exempt public charity, they should have an obligation as all other such charities do, to provide an informational report as to their finances [if their annual revenues exceed $25,000].

Regardless of historical rationales for the right of privacy to extend to church finances and the legal interpretation (Lord knows we have changed our legal interpretations over time) by some of the possible violation of the First Amendment, it doesn’t make sense. I believe it just makes plain sense that an entity with tax exempt status should disclose its financial information to the IRS. I think one of the hallmarks of our country has been that, at the end of the day, common sense often wins out over a certain philosophy or specific political viewpoint.

Furthermore, back when this was all first set up, the money involved was miniscule by comparison to today’s record breaking amounts over $100 billion. Circumstances change and our policies should change accordingly. Continuous improvement of our policies as a nation!

The fact that SOME churches do provide SOME financial information to their congregants (or some leadership body) does not eliminate the need for the standardized reporting I suggest. This is an added layer of information and transparency that can be more broadly scrutinized and reviewed.

Friday, July 25, 2008

Charity News Roundup

In case you missed it, here are some of the charity headlines making news this week:

Thursday, July 24, 2008

God and Money - The Church and the IRS

A recent report heralded the fact that US donors gave more in private contributions this past year than ever before - over $300 billion. The people of the US are considered the most generous on the planet in their voluntary charitable giving (as opposed to what could be called involuntary giving, i.e. taxation!). We give more than double the amount of money (as measured by Gross Domestic Product)the people of the next most generous country give. Furthermore, the largest portion of that $300 billion goes to our houses of worship (referred to as churches by the IRS).

There are an estimated 350,000 churches in the US today and about half (the largest and most well established I suspect) opt to register themselves with the IRS. However, here is the first distinction from most other public charities - registering with the IRS is optional, not required - regardless of the church's size. For other public charities you must have less than $5,000 in gross receipts to be tax exempt without registering.

Then we get to the second and more troubling distinction. Every other type of public charity over $25,000 or more in annual gross receipts must file a report to the IRS (called a 990) every year. The churches are under no obligation to do so and the vast majority do not. In other words, over $100 billion dollars (that is an estimated amount, since we can not know for sure) was donated to churches last year and most do not report any information to the IRS on how much was taken in and what they did with the money. Doesn't that seem wrong?

We at Charity Navigator are able to rate charities based on the information provided on the IRS 990 forms. Since almost all churches do not file the form, it is impossible for us to evaluate over a third of the private contributions that go to charities. How can you as a donor be confident that your money is being spent for the purposes for which you gave it? We believe that, as with the public charities we rate, the vast majority of churches do the right thing. However, how are we as a society going to be able to hold to account those who are not doing right with the money we give? Given human nature, when this amount of money is involved, you better believe we have got some bad apples in the bunch.

Anyway, until such time as the laws change on this (some are predicting it will coincide with when pigs fly) we strongly encourage you who attend church to urge your religious leaders to opt in and file those 990s every year. We implore the church community as a whole to provide the transparency and accountability that is the hallmark of management best practices.

Transparency is Key

A recent Washington Post article reports that Senator Charles Grassley is proposing a bill that would increase the Smithsonian Institution’s accountability to the public. The Senator’s proposal comes after expense reports for Lawrence Small, the Smithsonian’s Former Secretary, were publicly questioned. Although the Smithsonian’s Board of Regents ultimately determined the questioned expenses were reasonable, we wonder if the Smithsonian had been more transparent from the beginning, might it have avoided all this negative attention? If so, perhaps then the American people would not have doubted what we at Charity Navigator already know - that that Smithsonian is in good financial health. It’s just further evidence that transparency and accountability is important to donors, and without it, even financially healthy charities can be called into question.

Monday, July 21, 2008

Tell A Friend

If you have a blog, or website, and you would like to promote charitable giving, then consider linking to Charity Navigator or adding our daily list of featured charities.

Friday, July 18, 2008

Charity News Roundup

In case you missed it, here are some of the charity headlines making news this week:

  • The Clinton Foundation, created by former President Bill Clinton, has worked with several pharmaceutical companies to make malaria medicine available at a reasonable price for people in poor countries.
  • Here are some tips for small business owners that want to establish relationships with charitable organizations, in order to donate a percentage of their proceeds.
  • The United States Olympic Committee has announced the creation of the Team for Tomorrow Fund, which will provide Olympians and Paralympians an opportunity to give back to their communities.
  • And lastly, donors are looking for more ways to get involved with the charities they support, as evidenced by this article about creative ways to give to charitable groups, as well the increase of recent college graduates working for social causes.

Tuesday, July 15, 2008

The Media Calls - A Week in the Life

This past week, because a couple of people were out of the office, I was called upon to respond to all of the media inquiries that came in. The calls came from all over the country - from Charlotte to Los Angeles to Colorado Springs, and then some. The nature of the calls is instructive as a sampling of the issues that are on the minds of the public:

1. 30% of the calls involved some type of questionable behavior or worse (Board self-dealing, extravagant events that lost many tens of thousands, relatives on the payroll, etc.).
2. 40% involved excessive compensation either for a CEO or private fundraiser.

I know that controversy attracts an audience, however it also gives a false sense to the general public of the nature and integrity of most non-profits. Of the roughly 5,300 charities that are rated by Charity Navigator, 65% are rated Good to Excellent. If we include those that meet or nearly meet industry standards, the percentage reaches about 88%.

The good news is that, in addition to the calls we got, an equal or greater number of media reports were published quoting letters we sent to charities that were recently given a four star rating by us. However, I suspect that the more prominently displayed, "headline grabber" articles, describe the controversies mentioned above. That is what most people remember. As usual, the few bad apples are giving the entire non-profit sector a black eye.

Monday, July 14, 2008

Increased Demand on Food Banks

With uneasiness in the economy as of late there has been an increased demand for the services of food banks. According to America’s Second Harvest, a national hunger-relief organization, food banks are seeing a 15 to 20 percent increase in the number of people they serve compared to last year. In addition, food banks normally realize an increase in need for their services over the summer months when children are not in school receiving their daily school lunch. And so this is an important time of year to find and support an efficient food bank. Please review our list of 4 star rated food banks listed here. And if you want to keep your donation local use our Advanced Search to find a food bank in your local area to support.

Change the World in 60 seconds

Check out this video, created by Ryan Mulvany, a film student at California State University. Ryan uses an array of statistics to demonstrate the diversity of charitable causes and to motivate the viewer to take action to improve the world. At the end of the PSA, Ryan recommends Charity Navigator as a source for finding a charity.

Friday, July 11, 2008

Charity News Roundup

Here are some charity news stories from the past week:

  • Festivals across U.S. downsize or cancel because of economy.
  • Call it a sign of just how bad the economy has gotten: A food bank in one of the Chicago area's wealthiest townships is pleading for donations.
  • An L.A. Times investigation found hundreds of examples of charities that pocketed just a sliver of what commercial fundraisers collected in their names.
  • An investment manager has pledged $100-million to Princeton University, in large part to stimulate research and education on efforts to prevent global warming.

Wednesday, July 9, 2008

Transparency - A Tale of Two Nonprofits

I read in today's New York Times that two nationally known nonprofits are in the news spotlight because of reports of misappropriation of agency funds. The responses of the two organizations are instructive.

ACORN (not rated by us), a community organizing group, is reported to have had approximately $1 million "embezzled" about 8 years ago. The leadership of the organization chose to tell no one, not even their Board of Directors. In fact, it is reported that they even had the person involved in the embezzlement on payroll up until June of this year! After 8 years of cover-up, in May of this year, a whistle blower "forced ACORN to disclose the embezzlement".

The Points of Light Institute (which we give a four star rating), that promotes volunteerism and citizen activism, is reported to have had bogus travel packages auctioned off on eBay by an independent contractor. The organization found out about the problem in May of this year when they got complaints from people who had not received vouchers for their travel packages. The Points of Light Institute immediately jumped into action:
  1. They stopped the travel auctions immediately.
  2. They contacted everyone who had bought the travel packages.
  3. They have begun to repay people who bought the packages and hope to pay off all of them.
  4. They posted information on their Web site about the problem.
  5. They contacted the US Attorney's Office.

Here at Charity Navigator, one of our core beliefs is the importance of charity's transparency - that they maintain open communication about their operations, both good and bad, with the public. This transparency is critical for donors to maintain their trust in an organization. Without that trust, an organization can not survive for the long haul.

ACORN has explained its withholding of information as a concern that their critics would use the information against them if it was found out. How much worse will it be for them now, than if they had owned up to it at the time??

Monday, July 7, 2008

Giving to Patriotic Causes

After the grilled hot dogs and before the fireworks on Friday, you probably took a moment to reflect on all the men and women who have given their lives defending our country. Perhaps you even considered ways in which you could honor their sacrifice. And with America at war in Iraq today, you probably even thought about how you could provide assistance to injured soldiers and their families. Sadly, there are many "charities" that will use your compassion for veterans to coax you into supporting their inefficient, if not fraudulent, operations.

To help you give with confidence to military and veteran-related charities, our site includes a hot topic and an article which highlight the highest and lowest-rated of these charities.

Wednesday, July 2, 2008

Hello

Dear Reader,

This is my first entry to the Charity Navigator blog. I hope it will be one of many going forward. I guess there is not much need to introduce myself since this blog site has already announced my appointment and general background information. I just want to start out by saying that I consider it a great honor to be here. Over the past couple of weeks I have developed a deepening appreciation for the wonderful work this agency does. The staff are very thoughtful people who do a fantastic job with the resources available to them. As our Board Co-Chair Pat Dugan would say, I look forward to our "doing great things" together.

Ken

Tuesday, July 1, 2008

July Update

Today we published 350 updated ratings, more new top 10 lists and a Roundtable Discussion, in which charity leaders speak about issues of critical importance in the nonprofit sector.