The complicated world of charitable donations

A nonprofit organization, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in contrast with an entity that operates as a business aiming to generate a profit for its owners.

A charitable organization or charity is an organization whose primary objectives are philanthropy and social well-being. The legal definition of a charitable organization varies between countries and in some instances regions of the country, but the general principle of philanthropic activity remains the same.

In summation, a nonprofit is an organization aims to spend exactly as much as they receive (or as close to exact). Their expenses are whatever is required for them to keep their doors open. That could be phone bills, that could be food, that could be clothing, whatever they need. A charitable organization is one that gives out the dollars they collect. They’re supposed to keep their expenses to an absolutely minimum as their dollars are supposed to go to those that need them.

Whether donating dollars to a non-profit organization, or a charity, there will always be some sort of expense. At the very basic level, there’s banking fees. Beyond that, there’s compensation for the employees. There’s resource fees. There’s a lot that needs to get covered. Some charities and non-profits work excellent. They keep their expenses to an absolute minimum as a means to ensure that the people who need what they give, get it. A lot of charities and non-profits suck. They will take in as much money as they possibly can under the guise of their charitable or non-profit status, and they will use it.

Hypothetically speaking, there are charities and non-profits in this country in which if you don’t $100, $5 will be used as expenses. Then, there are those in which if you donate $100, $50 of that will be used as expenses. Some charities, if you donate $100, as much as $80 can be used for expenses.

But why?

Why are some non-profit and charitable organizations expenses so vastly different from others? Well some of it has to do with the area of society in which they operate. But largely, if an organization is spending 50% of a donation is being spent on expenses, that should be a giant red flag. If an organization has too many expenses that operate too much of their budget, that should be a red flag. It should be a red flag because charities and non-profits are operating with the goal of providing help, noooot lining their own pockets.

Here’s some ways how charities and non-profits hide money and juice their numbers:

They know when they’re being audited.

It sounds silly, but it’s true. Non-profit organizations and charities, at least those in the country that I live, are required to go through an audit every year in order to maintain their status with the government.

Said audit to maintain status with the government will happen at the same time, every year. For example, one organization or charity will know that every year during the last two weeks of September, they will get audited.

It’s a lot easier to make all of the books align when you know exactly when someone is going to be looking at all of the books ahead of time.

They know who’s auditing them.

This comes from a place of privilege, please understand that first and foremost. A lot of non-profits and charitable organizations will get to know their auditors. They’ll have the same company and same people come to audit them every year so that they can get to know their auditors.

Why would you want to know your auditors? Because when someone who knows their auditors can paint themselves as whatever character they need to be. People who are scammers, who hide money and who take part in illegal activity under the guise of it being for charity or social service are a specific type. Have you ever noticed that? Because I have. No one would’ve ever suspected it from them… and then they’re caught.

The people behind the charity and non-profit, they can paint themselves as ‘the family man’ and ‘the innocent angel’ and ‘the one with the biggest heart’ and completely hide their narcissistic behaviours because they know the auditors. This is not an attack on those who work as auditors, this is just a suggestion that auditors aren’t cops or detectives, they’re not trained to look for a wolf in sheep’s clothing, they’re trained to look at the numbers. If the wolf in sheep’s clothing fudges the numbers, it’s easier for said wolf to do so knowing exactly who’s going to be looking at the numbers each year.

They borrow money from ‘friends’ to cover the for other ‘friends’.

Sounds an awful lot like a ponzi scheme, doesn’t it? That’s because the basic principles transfer through a lot of different worlds and industries.

Charities and non-profits will often (if not always) have big donors. Those donors are those which charities and non-profits can rely on every year, year after year. If a charity or non-profit is operating properly, the only time they’ll talk to their big donor every year is to provide them with a tax receipt. If a charity or non-profit is not acting on the up-and-up, those donors are friends. They’ll take them for meals, wining and dining them. They’ll give them concert tickets and gifts for their children. They’ll pay for their hotel stay at events… buy them gifts for themselves.

A charity could *allegedly* host a golf tournament fundraiser every year in which the big donors are invited, have their travel to and from said tournament paid for, their hotel room covered and the charity might even go so far as to buy the big donor a new set of golf clubs.

Why do they do this? Why does the big donor need this if they’re wealthy enough that they can donate $20,000 to charity every year without blinking an eye? The donor doesn’t need this. But, when the charity needs something… such as to make their expenses align for an upcoming audit, said big donor is more willing to do favours for the charity to help.

They donate to other charities.

Have you ever been to a fundraiser or seen a silent auction of some sort in which there are are prizes that aren’t donated buy “International Pop Star John Doe”, but rather by “The John Doe Foundation”? That’s for a reason.

See, it serves International Pop Star John Doe better if the donation comes from his foundation. If he donates a private concert, from his foundation, that private concert needs to have an associated value. He can say the value of that concert is valued at $2,000 or $20,000 or $200,000. He’s then spending that ‘as an expense’ of the charity, allowing himself to pay himself, for said private concert. He’s not giving that concert for free. His foundation is paying him to give that concert.

This is different if he donates the concert on behalf of his person. If he donates it himself, and not through his foundation, then the donation is the concert. He gets no pay day.

Translate this to… any donation… from any charity. This happens A LOT. And, if you pay really close attention, Charity A will donate to Charity B and then Charity B will turnaround and donate to Charity A. This is done to allow them to pay themselves. Otherwise, why would it happen? Why wouldn’t they just keep said donation as a resource? Because if Charity A doesn’t donate to Charity B, that expense isn’t created.

They juice their expenses.

This one is not difficult. Contrary to popular belief, it’s really easy to make a phone bill look as though it’s twice as much as it actually is. At least in the country which I live.

Charitable and non-profit organizations in this country are required to keep paper-trails of expenses for several years. (It varies but typically it’s around 7-8 years) Paper trails, paper bills, there’s no way in this world to see if said expenses were photoshopped or edited before printed off. NOOOO WAY. Anyone who’s half decent at photoshop can make a phone bill go from $60 to $120 in seconds. Literally.

Said employee of charity/non-profit pays their phone bill at $60, submits their expense at $120 (a photoshopped phone bills) and next cheque run when they’re paying out expenses, the charity/non-profit reimburses $120 for a $60 phone bill. Come the last two weeks of September when they’re being audited, because it’s a paper trail, no auditor would be able to be any the wiser of what happened.

This is one small example of what could happen. Truth is, charities and non-profits that engage this activity do so using thousands or tens of thousands of dollars a month doubling out actual expenses.

Where this gets really hairy is with respect to signing authority. Every charitable and non-profit organization is required to two people who have signing authority to pay out bills, expenses or give money. Often times, the people with the signing authority are signing their own expenses. So there’s no one checking what happens.

And again, this isn’t always. But, it does happen.

Phrasing isn’t deceiving.

[Insert charity name here] RAISES $100,000 FOR [Insert cause here]!

It sounds great, doesn’t it? In a press release, a newspaper headline, even in dang tweet, reading that makes on-lookers think ‘Gosh, they must be doing a lot of good’.

With people who have extra cash laying around and the ability and kindness in their heart to donate it, they often consider donating to places in which they see often. Someone seeing [insert charity name here] raising money for a worthy cause several times a year, they might want to jump on board with said charity more then they would a charity that lays low and under the radar.

The problem with ” [Insert charity name here] RAISES $100,000 FOR [Insert cause here]! ” is that, said total is not a reflection of what will go to philanthropic places or social services. If said charity raised $100,000 but spent $90,000 to run said event, then only $10,000 will actually go towards philanthropic places or social services.

It’s common practice for charities to not say how much was spent, with respect to expenses for said event, because the public hearing that event cost $90,000 could serve as a poor reflection on the charity/non-profit. After all, they spent $90,000 hypothetical dollars to put on said event, so anyone who donated to them before said event likely donated to their hosting of said event, not to any philanthropic place.

TO CONCLUDE

While I could go on about this subject for what might seem like forever, I will leave this advice: pay attention to where you’re donating your dollars. Whether you’re donating $5 or $50,000, pay attention.

Charities and non-profits are required to produce annual reports to the public following their annual audits. If you donate, read the reports. If you’re making donations, those reports will tell you a lot about where money is being spent. You might not be able to track your exact donation, but allocation of dollars can provide you some insights as to the inner-workings of the charity.

Expenses any higher than 30 percent could/should possibly be seen as a red flag. So keep your eyes open. Perhaps your donation dollars can be spent in a place that deserves it more, and would make better use of it then where you’re currently donating.

Ask for that report.

If you’re donating a large sum of money to a charity, first off, thank you. If you have said dollars and you’re donating it to someone/some people who deserve it, you have a good heart. At least, I hope you’re donating it for the right reasons. Anyways, if you’re donating a large sum of money you have an ability to specify where you want said money to go. You have an ability to say ‘I don’t want any more than 10% to go to expenses’ or ‘I want you to do good in [Insert Community Name Here]’. Good charities, they’ll work with you to ensure that happens. Good charities want you to know that they appreciate your donation so they’ll try and oblige with your wishes as best they can.

Overall, be mindful. There are a lot of charities in this world who do a lot of good. There are also a lot of charities in this world who don’t. Pay attention. Don’t just throw your money blindly at a charity/non-profit and expect that it’s going to the right place.

Research said charity or non-profit before you donate. Just seeing how they operate can tell you a lot about where your money is going. Are they hosting golf tournaments and galas that cost $100,000 to host? Or are they hosting a pancake breakfast that costs $5,000?

I truly believe in the power of donations and that those of us who are privileged, and able to donate, should. I just think that when donations are made, they should be going to the right places. And a lot charities skirt the system to fill their own pockets and not provide it to those who actually need it.