The Lifestyle Charity Fraud
For decades I have observed an abuse of charities that I am not sure has a name. I call it the "lifestyle" charity or non-profit. These are charities more known for the glittering fundraisers than their actual charitable works, and are often typified by having only a tiny percentage of their total budget flowing to projects that actually help anyone except their administrators. These charities seem to be run primarily for the financial maintenance and public image enhancement of their leaders and administrators. Most of their funds flow to the salaries, first-class travel, and lifestyle maintenance of their principals.
I know people first hand who live quite nicely as leaders of such charities -- having gone to two different Ivy League schools, it is almost impossible not to encounter such folks among our alumni. They live quite well, and appear from time to time in media puff pieces that help polish their egos and reinforce their self-righteous virtue-signaling. I have frequently attended my university alumni events where these folks are held out as exemplars for folks working on a higher plane than grubby business people like myself. They drive me crazy. They are an insult to the millions of Americans who do volunteer work every day, and wealthy donors who work hard to make sure their money is really making a difference. My dad, who used his substantial business success to do meaningful things in the world virtually anonymously (like helping save a historically black college from financial oblivion), had great disdain for these people running lifestyle charities.
So I suppose the one good thing about the Clinton Foundation is it is raising some awareness about this kind of fraud. This article portrays the RFK Human Rights charity as yet another example of this lifestyle charity fraud.
DirtyJobsGuy:
I have a friend, a successful insurance broker, who got involved in arts groups as a volunteer and later served on boards of directors for several. He finally quit after he found out that a group that sponsored a 3 day jazz festival had a president making $100K+ each year. It was their only event and several people got pretty fat deals while volunteers did all the grunt work. But this is true for almost all artsy or politically oriented charities, NGO's etc. It's a well worn career path for suitably progressive students from Northeastern liberal arts colleges.
August 4, 2016, 11:07 amHenryBowman419:
The Tampa Bay Times published a list of America's worst charities in Dec. 2014. There are lots of these so-called charities that are simply scams — I don't know why the IRS puts up with them.
August 4, 2016, 11:57 amSamWah:
They are friends of and/or donors to Democrats, is my guess.
August 4, 2016, 12:14 pmmorganovich:
you have to realize: these are not charities. they are sellers of a veblen good.
the goal is not to help the needy, it's to sell attendance at posh parties as a form of virtue signaling.
everyone goes, dresses up, swills expensive booze, and feels awesome about themselves. they brag about what "socially responsible" folks they are. the more expensive the event, the more you get to slap yourself on the back for going to a lavish party.
August 4, 2016, 1:03 pmJoe:
The Girl Scouts are also very much a benefit the manager/executive type organization, As noted below, most of the valuable work is done by the volunteers while the executive board is concerned almost exclusively on building and maintaining the income stream.
August 4, 2016, 1:05 pmJoe:
A former client who donated art to a museum took great pride in the value of her donations of art with the sincere belief that the expensive art somehow would make such an impression on an inner city kid that would somehow steer the child to the good. (as if any kid would give a rat's behind as opposed to being impressed about the art). But it made her feel good.
August 4, 2016, 1:09 pmMaddog:
The IRS should only be allowed to extend 501(c) status to charities to which 85% of money's received are passed through to the specific charitable goal. If for profit insurance companies can run their business with an 80% pass through rate, non-profit charities can do so at 85%.
https://www.cms.gov/CCIIO/Resources/Files/Downloads/mlr-report-02-15-2013.pdf
I post on my blog: Maddog's Lair
http://www.maddogslair.com/blog/the-lifestyle-charitable-foundation-fraud
Feel free to visit.
Mark Sherman
August 4, 2016, 3:34 pmsteamboatlion:
It isn't just charities. After spending several years working in third world countries, I came to the conclusion that the primary achievement of most foreign aid organisations, whether NGOs, government funded (e.g. USAID), or intergovernmental (e.g. various UN bodies) is to provide highly educated westerners with a morally self-righteous path to making lots of (tax free) money and living like kings. Not because they're bad people (most of them truly believe they're doing good) but they have a self-interested blind spot that stops them seeing that development cannot be imposed or even facilitated from outside a society (It took me a few years to work it out too).
August 4, 2016, 4:54 pmGil G:
"Those limousines out back aren't cheap."
August 4, 2016, 5:39 pmJaedoDrax:
Here's a better question, how many of these charities are largely money laundering organizations who take money it, take a cut of it to pay for all of their administrators, and then just pass the rest along to another organization who does exactly the same thing.
August 4, 2016, 7:49 pmCapnRusty:
I would propose the complete elimination of charitable deductions. The opposition would of course be furious, but it would be enlightening to see where it came from. The problem with charitable deductions is that the government (i.e., people like Lois Lerner) decides which organizations qualify, and what the standards might be. We wind up with the kind of "charities" Warren talked about, because the deduction only benefits wealthy donors, and they aren't really "giving," so much as purchasing a very large virtue signal.
August 4, 2016, 10:07 pmJ K Brown:
I've been catching up with The British History Podcast. One thing that has struck me is the monasteries and nunneries which were often barely religious at least in the 7-9th centuries Britain. However, they were where the "spares" of the nobility could set up house and be out of the dynastic struggles, but still accumulate great wealth. Even the odd contender for the crown could be forced into religious life and therefore be ineligible for the crown, beats a late night assassination. The Vikings saw the monasteries as very rich, unguarded vaults. Look up the attack on Lindisfarne.
These charities you speak of, I never had a name for them either, but lifestyle certainly seems appropriate, are just the modern equivalent of these monasteries. On occasion one will do some good, but mostly they collect wealth from their family and social connections and give cover to the "secular" business of their "houses".
August 5, 2016, 10:55 amConqueror of All Foes Cheese:
They also give people a chance to get together and look down on others with a "not our sort, dear" attitude. That's gotta be worth something.
August 6, 2016, 10:21 amsteve:
I disagree that these charities should be removed from tax exempt status. Oh, I agree with the criticism that their purpose is virtue signaling and to provide an opulent lifestyle for management. And, I agree that they do little charitable work. Nevertheless, it doesn't bother me whether people spend their own money on virtue signaling, status goods like yachts or cars, or even real charities. It is their money let them do with it what they want. Tax free should be extended not contracted.
August 7, 2016, 6:23 amsteve:
it is my belief that if the Libertarians ever get into power in a major way somewhere and actually create a Libertopia the term "fraud" will eventually be its undoing. The legal definition of fraud will be expanded by subsequent generations of politicians to encompass all manner of interactions much the way the interstate commerce clause is interpreted today.
August 7, 2016, 6:35 amano333:
That's an odd statement about the Clinton Foundation, Warren, considering their A rating at Charity Watch:
https://www.charitywatch.org/ratings-and-metrics/bill-hillary-chelsea-clinton-foundation/478
August 8, 2016, 9:50 amelambend:
Charities have been money laundering vehicles for politicians for a while (Clintons took it to new heights, though). The IRS has nibbled at the edges of some, but not many. In a large mid-western city the price for doing business with the city often involved donating to the Mayor's favorite charity, run by his wife.
August 8, 2016, 9:53 amelambend:
I remember being baffled by all the people I knew in college and grad school wanting to work for charities and NGOs, particularly because most of them didn't strike me as particularly hard working. Experience has taught me the same lesson as you have learned. Value signalling and a relatively easy lifestyle become the real end.
August 8, 2016, 9:55 amelambend:
yeah, I've seen a lot of college mates go down that path...cushy life
August 8, 2016, 9:56 amelambend:
I love this example. I also think it applies to many publicly traded corporations, the managers have taken the real power from the shareholders and will sell the assets to prop themselves up before ever returning anything to the equity holders.
August 8, 2016, 9:58 amDavid Zetland:
You'll love this: https://nonprofitchronicles.com/2016/08/09/davos-woman-why-running-1049-miles-through-seven-deserts-to-alleviate-global-water-scarcity-is-pretty-much-pointless/
August 20, 2016, 6:12 am