Something is rotten in Charity Land. Consider a few recent stories out of Washington, D.C., New York and New Jersey.
Washington's former mayor Marion Barry now serves on the city council, where he has been most adept among his fellow members at securing large sums of tax dollars in the form of legislative earmarks to six of his pet charities. That alone is not illegal, although the practice has gotten criticism in recent years at all levels of government. In Barry's case he managed to earmark funds for the charities even before they legally existed, according to a July 10 report by Mike DeBonis in Washington City Paper. Not only that, the charities were under the effective control of his personal staff.
All of the charities focused on activities in Barry's ward and employed people close to him. City Paper also reported facts intimating that Barry was deeply involved in how the non-profits spent the funds--clearly an improper action, if true. In all, the Barry-related charities received $950,000 of public funds last year.
Miguel Martinez, a Manhattan city councilman, resigned his office in July and pleaded guilty to federal charges involving misuse of public funds. He admitted to funneling funds into a long-favored charity called U-CAN, which received earmarks of $786,000 over two years and on whose board his sister served. Another Martinez-favored charity received $53,000 this year while employing his sister as a program aide, according to the New York Daily News.
Also according to the Daily News, the city is investigating whether several other council members sent tax money to other non-profits, some with relatives or staff members on the payroll. The paper identified the suspect council members and the non-profits, but did not offer a dollar amount that might have been involved.
Non-profit charities were again embroiled in scandal and received national attention in July when FBI agents swept up several suspects, including elected officials, in a one-day raid to shut down an international money laundering and corruption operation focused in New Jersey. Among those taken into custody were five rabbis who allegedly laundered millions of dollars through charities they controlled. The charges included claims the charities trafficked in kidneys.
It appears that unscrupulous public officials and others have deemed the non-profit charity form of organization a convenient cover for all sorts of nefarious deeds. Not only do the charities seem to be the perfect foil, they also enjoy an instant credibility by virtue of their do-gooder status. Indeed, with names such as the Upper Manhattan Council Assisting Neighbors or the Ward 8 Youth Leadership Council, the organizations do not automatically attract the FBI's or anybody else's attention.
Maybe it is just too easy to form a charity and then immediately operate as one. The law, both state and federal, is certainly complicit in such ease of operation, but that arguably is a good thing--it encourages good works without excessive red tape. But it is no secret, especially to those lacking true charitable intent, that in most states the attorney general's office is woefully inattentive to policing the charitable sector. Even New York, home to a large number of non-profits, has in recent years seen a decrease in oversight. Smaller states had none to begin with.
At the federal level, the IRS also is in straitened circumstances when it comes to doing anything more than even just keeping track of how many charities have a tax exemption and making sure their annual tax forms are filed. In other words, no one seems to be minding the store. Given the size of the charitable sector and the faith donors still have in it, the state and national governments ought to hire a few security guards.