June 23, 2009
Congressman Urges Charities to Stomp Out Waste and Fraud
By Brennen Jensen
Washington
Rep. Xavier Becerra, the California Democrat who has long questioned whether enough philanthropic dollars flow to charities that help minorities and the poor, told nonprofit leaders in a speech today that there was a pressing need “to look at the issues of waste, abuse, and corruption in the nonprofit world.”
“I’m more than willing to leave the issue to you but what I’m not willing to do is leave the issue altogether,” he told a conference in Washington sponsored by Independent Sector and the Internal Revenue Service.
The congressman did not outline any concrete steps he planned to take on the issues of nonprofit malfeasance or giving priorities, either legislatively or as a senior member of the Ways and Means Committee, but stressed that the challenges presented by the recession make it an even more important time to “find out who the bad apples are in the nonprofit world.”
Mr. Becerra praised philanthropic activity as “indispensable to American society.”
He acknowledged that he has been accused of “trying to run the nonprofit sector into the ground” for questioning how it spends the “tens of billions of dollars” diverted from the national treasury through charity tax exemptions.
But he says that his reputation is unfair — and that his motivation for examining philanthropic activity comes from the needs and concerns of his congressional district, a largely working-class section of Los Angeles that is home to many immigrant families.
“When I see a nonprofit organization paying its executives more money than the president of the United States, I don’t know if the folks in my district who are paying taxes on the $30,000 they make a year appreciate that,” he said. “When I find that most of the money in the nonprofit world doesn’t even end up helping the Latino, the African-American, the Asian-American families in my district who are trying to make their way up, but ends up mostly in the backyard of the folks who gave the money — and very few folks in my district can give a lot of money — then I wonder if we are getting the most out of those dollars by allowing tax-preferred treatment in the nonprofit world.”
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This is a serious indictment of the sector. I would like to see the data upon which the congressman bases his claims. If his statements are valid, we have lots of work to do. If they are not valid we are simply not getting the story out about the value the NP sector provides to this country.
— Art Taylor Jun 24, 01:57 PM #
I agree, Art. I am ALL FOR frugality and more effective use of resources, but if he is openly admitting his knowledge and motivation is based only on LA nonprofits that he is familiar with, I hope he gathers more information on a national scale before condemning the nonprofit sector as a whole. And perhaps he could try direct communication with groups first before grandstanding with such provocative language.
— Stephanie Tholand Jun 24, 02:33 PM #
Kudos to Rep. Xavier Becerra. Finally someone may look into bogus nonprofits, such as the “nonprofit” lobbying groups in Washington. Or, how about the Bernard Madoff Foundation? Or Jack Abramoff’s Alexander
Strategy Group?
— Olivia Brown Jun 24, 02:37 PM #
Perhaps he should do his job and vote for funding government programs and organizations that support the people he wants to help instead of attacking independent nonprofits that don’t receive their funding or directives from the government. Does he criticize corporations for their waste or inflated executive salaries?
If he wants to stamp out waste, start with the $2.9 trillion dollar budget. It really quite arrogant and irresponsible for him to attack the nonprofit sector randomly like this, but not help solve the actual problem he is claiming exists.
— Howard Levy, blog.redroostergroup.com Jun 24, 02:56 PM #
I just noticed this article which provides a solution:
A British association of local charities is recommending that major donors be charged less in taxes if they give to organizations based in disadvantaged regions, reports Third Sector Online.
In a manifesto on local philanthropy, the Community Foundation Network proposes creating “special giving zones” to encourage investment in poorer communities by offering givers favorable tax treatment. Also among the 29 recommendations is a $49-million fund to help smaller charities set up online donation systems.
Read the article here:
http://www.thirdsector.co.uk/News/DailyBulletin/915301/Call-give-philanthropists-tax-breaks-when-donate-poor-areas/9671FB8B16C354971B8F619C63F4787F/?DCMP=EMC-DailyBulletin
— Howard Levy, blog.redroostergroup.com Jun 24, 03:00 PM #
He might have been thinking about the report from the Center on Philanthropy in 2007 that is summarized on the Center’s website thus: “The Center on Philanthropy at Indiana University and Google partnered in early 2007 to estimate how much of the charitable giving by households in the U.S. focuses on the needs of the poor. This analysis finds that less than one-third of the money individuals gave to nonprofits in 2005 was focused on the needs of the economically disadvantaged. Of the $250 billion in donations, less than $78 billion explicitly targeted those in need.
Only 8 percent of households’ donated dollars were reported as contributions to help meet basic needs—providing food, shelter or other necessities. An additional estimated 23 percent of total giving from all sources went to programs specifically intended to help people of low income—either providing other direct benefits (such as medical treatment and scholarships) or through initiatives creating opportunity and empowerment (such as literacy and job training programs).” There is a working paper that can be downloaded at: http://www.philanthropy.iupui.edu/Research/giving_fundraising_research.aspx#Google
— Richard Brewster Jun 24, 03:48 PM #
The figures on giving to the needy are unreliable as – for example – they don’t count a gift to a hospital for cancer research, or a gift to a “cause” such as the environment, or for arts in after-school programs in schools and libraries in East L.A. All of these gifts meet societal needs, including those of economically disadvantaged and minority communities. But they are not caught in statistics…also they may be supplied by institutions that are not physically located in poor districts.
— Andrew Finch Jun 24, 04:14 PM #
As an aside, if you want to compare the President’s compensation to that of non-profit executive, it’s only fair to include both the money Presidents inevitably make after holding the position (and because they held it) and the non-monetary benefits of stature, prestige, etc. I would argue it’s just not a useful comparison and distorts the conversation about fair compensation in the sector.
— Chris H Jun 24, 05:52 PM #
When Rep. Becerra conflates “bad apples” with high CEO compensation, without any data on the value the CEO is producing, as he did here, he is either a) out of touch or b) deliberately dumbing the issue down in the interest of his own popularity with voters. Either way, the sector deserves and should expect much more from a member of the United States Congress.
— Dan Pallotta Jun 24, 06:01 PM #
This congressman should look in the mirror and figure out how to address “waste, abuse, and corruption” in the FEDERAL world.
— AM Jun 24, 06:32 PM #
Rep. Xavier Becerra comments are not new. Nor is the sentiment he expresses. Over the past five to seven years members of Congress have expressed their individual and at time collective displeasures with the non-profit sector.
Over the last eight years we have seen an increasing number of laws at the federal level, not to mention those at the state level, that are designed to address the perception that Rep. Becerra is addressing. This perception is made worse by a belief that sizable amounts of tax dollars or tax benefits are flowing to organizations that do not return value to society.
While the Congressman has not suggested specific action there are items in the works that are designed to hold the sector’s collective feet to the fire. The new 990 will require organization to publically address issues of governance, risk and compliance. There is the potential for the reintroduction of SB 2831 – the reauthorization of the Federal Trade Commission that contained a provision that would give it oversight of all 501©(3)s.
The real question ought to be how to be position or sector so that those who make the regulations realize that we are policing it ourselves, working within the rules we have been provided and return significantly m ore value to the community than we consume? If we cannot provide that perspective then be prepared for m ore comments like those of Rep. Becerra and specific actions by those who can regulate the sector to create the perspective they want.
John C. McGee
Woodstock, GA
— John C. McGee Jun 24, 09:54 PM #
Wake up my fellow non-profit advocates: We need increased transparency and accountability, not less. We just had a front page story in the Los Angeles Times a few weeks ago regarding a MAJOR non-profit that – among other things – is alleged to have paid its executive director $428K, its COO $332K for a 32 hour week in salary plus $238K in additional compensation, plus $2.27 million in rent to the same officials and two board members. If administrators are to be believed, they accomplished this completely within the law, adhering to all disclosure and recusal requirements required by law. One need not dig too deeply on Google or in our individual memories to recall compensation scandals in our industry in recent years – from bonuses to townhouses to Jaguars. Becerra is on to something here: Taxpayers want accountability from us, and they have every right to expect it and to get it. Those of us who care about the health of our industry would be wise to embrace openess and transparency and strong regulation against conflict-of-interest and self-dealing: These are the best mechanisms for preventing fraud and waste in government, in the for-profit world, and yes in ours too.
— Cesar Portillo Jun 25, 02:00 PM #
The issue is really not whether the Representative is right or wrong—it’s that the nonprofit sector is ill equipped to foil legislation (at the city, state or federal level) that is developed with faulty assumptions or flawed logic. Looming state deficits will only produce more such accusations and short-sighted attempts to regulate and tax. Until we develop a nation-wide movement to unite nonprofits, based heavily our combined and substantial economic contributions, we will remain at the mercy of a process in which our voices are barely audible.
— robert egger Jun 25, 02:20 PM #
This congressman is most likely basing his headline grabbing, muckraking campaign speech on a case of one. There have been some local scandals in the LA area. But yes, there is salary abuse in the NP sector. But there have also been much more sophisticated efforts to address them, and I encourage the congressman to educate himself instead of using simplistic yardsticks such as the President’s salary to make comparisons. As for the ridiculous accusations leveled at the NP sector about the number that serve disadvantaged, last time I looked at the tax code, “nonprofit” did not equal “charitable” and “charitable” did not equal “serving the disadvantaged”. I didn’t write the tax code, members of Congress did, so stop blaming the NP sector for past Congressional actions.
— Nonprofit Professor Jun 25, 04:43 PM #
You need better watchdogs. Charity Navigator is woefully inadequate. They DON’T have the power to properly audit accurately. They DON’T evaluate a charity’s efficacy. They are extremely understaffed and lack legitimate authority to get into the books of charities. Yet the donors are duped in thinking their rating system has meaning.
— Joseph Jun 28, 12:00 PM #
If the “nonprofit professor” meant 501-c-3 status in reference to “nonprofit,” he should go back to school. Here is some relevant verbiage from irs.gov :
“Exempt Purposes – Internal Revenue Code Section 501-c-3
The exempt purposes set forth in section 501-c-3 are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.”
Apparently the IRS doesn’t completely agree with the “nonprofit professor.” (And 501-c-3 appears to be the only way to type this designation to prevent it from appearing as 501 © (3) when posting a comment on this site.)
— Benton Carson Jun 30, 05:56 PM #
The congressman should ask those he represents if they get a pension health care for life after only 10 years service as a congressman. As our health care debate looms which health plan will Congress put itself in public or private?
The non-profit sector by in large has fewer problems than most industries. We could also point out much fraud and waste we see in working with government sources.
— Bob Glowacki Jul 1, 08:53 AM #
One way to protect donors is to eliminate the need to investigate how or where their charitable donations are spent by allowing them to donate directly to the governmant. Rep. Becerra might argue that the government would INSURE EQUITY and FAIRNESS in charitable spending, using the same reasoning, care, diligence and judgement in the allocation of charitable contributions as it does when spending our taxes. This would make charitable giving quick, easy, fair, equitable and would relieve the donor of the responsibility of determining how to make a positive impact with the greatest personal meaning. A comfort and convenience to those who aren’t sure what matters most to themselves and a situation in which Rep. Becerra could guarantee fairness, equity, efficiency and effectiveness with regard to charitable spending. THE LEAP OF FAITH!
The most effective, efficient means of policing charities while preserving the donors right-to-choose is the donors checkbook! LOOK BEFORE YOU LEAP! Let those donors who investigate, evaluate and responsibly choose where their donations go, continue to do so without GOVERNMENT INTERFERENCE. If any donor disagrees with how much a charity pays its CEO or how it allocates its donations, they have the FREEDOM OF CHOICE, based on information which is already available to them BY LAW, to communicate with the charity seeking justifications, adjust their donation or contribute elswhere. The donors and charities will find better solutions than the government.
My greatest fear, based on Rep. Becerra’s comments, is that he believes his and other constituancies would be best served if, in return for granting 501c3 status, legislators be given congressional power to PRIORITIZE ALLOCATION OF CHARITABLE FUNDS as they do tax revenues or, worse yet, my first suggestion.
— Rick Sherman Jul 1, 08:04 PM #