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Woods is Director of the Center
for Effective Compassion at the Acton Institute in Grand
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Government Control of Charities Looms
Overkill on the way...
[Karen Woods] 7/20/05
concerns about financial abuses at charities, lawmakers are
looking at significantly stepping up regulation of tax-exempt
organizations, including faith-based groups. Last month, a
much-anticipated report from the Panel on the Nonprofit Sector,
a U.S. Senate advisory group, advocated some 120 measures to
increase accountability and financial transparency.
is the key issue,” said Diane Aviv, president of Independent
Sector, a coalition of nonprofits, and executive director of
the Senate panel. She’s right, of course. But achieving full
transparency with massive amounts of red tape and oversight
from Washington would be like going after a housefly with a
sledgehammer. And what about the laws and regulations already
on the books?
Gammon & Grange
P.C., a Virginia law firm specializing in nonprofit issues,
analyzed testimony at Senate Finance Committee hearings in
June, along with written submissions. In all, some 94 alleged
abuses were cited about a number of charities. Gammon & Grange
found that current laws, regulations and reporting requirements
already address all but two of the abuses.
measure that was under discussion would limit tax-breaks for
noncash donations to charities to $500. That would cripple
many organizations, including faith-based and church groups
that depend on gifts of food, medicine, clothing and other
goods to serve the needy. The subsequent outcry from food banks,
rescue missions, homeless shelters and other neighborhood programs
apparently convinced the Panel on the Nonprofit Sector that
no limits should be placed on these donations.
for faith groups, the prospect of ceding more control and oversight
of charity work to centralizing, federal authority would be
against the grain of our American tradition. Remarking on the
influence of faith in America, de Tocqueville noted in the
early 19th century that religion “restricts itself to its own
resources, but of these none can deprive it; its circle is
limited, but it pervades it and holds it under undisputed control.” Now,
it looks as those this circle of faith will have to be shared
with IRS investigators.
on the Nonprofit Sector held hearings in fifteen cities across
the country earlier this year in an effort to formulate recommendations
to the Senate Finance Committee, chaired by Sen. Charles Grassley
(R-Iowa). The evolution of comments made before the committee
underscore that charity abuse isn’t the only big ticket item
on their agenda. Testimony from various officials indicated
more than a passing interest in the income potential of increased
regulation. These new nonprofit regulations would, of course,
require hundreds of million of dollars required to help enforce
the proposed legal changes.
a concrete plan has yet to be fleshed out, the committee’s
proposals mainly deal with issues of loans and compensation,
noncash donations, and distribution of assets. The panel’s
meeting in Detroit drew a wide variety of professional nonprofit
workers along with the neighborhood faith-based and community
groups that have no association with—and therefore never abuse—some
of the more sophisticated financial tools available to nonprofits
such as donor advised funds. The probability for excessive
executive or board compensation for almost three quarters of
501c3 organizations, which are so small that they don’t even
file 990s, is beyond imagination. For example, a review of
Acton Institute’s 2004 Samaritan Award twenty semi-finalists
revealed that the average executive director receives $35,000
per year and the bulk of program manpower is provided by volunteers.
about non-governmental tools for transparency? The Acton Institute’s
newly launched Samaritan
Guide is a unique new information tool, providing both
program and financial transparency for privately funded charities.
The Guide puts into action Marvin Olasky’s principles of effective
compassion, based on the recognition of the dignity of human
persons created in God’s image. Such comprehensive perspectives
are proven methods of long-term poverty solution. Twenty categories,
detailed information about volunteers, and board activity all
provide ample transparency and also indicate the applicant
charity’s intent to tell the truth and to improve their ability
to help their neighbors. And isn’t civil society about going
beyond just the letter of the law?
changes must be made to strengthen the public’s trust in charitable
organizations. But rather than encouraging increased charitable
giving, as Senator Grassley originally claimed, his committee
and its advisors have come to focus on a narrow legislative
agenda that ignores the significant value of nonprofit organizations
to both givers, receivers, and to the communities where they
operate. The more common sense approach would look to transparency
and accountability measures that are already on the books,
rather than fashioning yet more regulation and mandated enforcement
from public agencies.tOR
earlier version of this article identified The Nature Conservancy
as the subject of the Gammon & Grange study. In fact, the
study examined a number of charities and nonprofits, including
The Nature Conservancy.
2005 Acton Institute