This is quite a downer: according to Stern, charities are failing, in multiple ways:
Their programs are ineffective. For instance,
- multiple charities promise to deliver water to Africa by drilling wells. But they don’t spend any time ensuring those wells are maintained over time, or that the well is constructed in such a way that local villagers can repair it. Hence the gains are short-lived and illusory.
- The D.A.R.E. program of anti-drug education, so ubiquitous in schools, was finally, after it became dominant, proven to be ineffective (or even harmful — inadvertently teaching kids how to be drug users), but continues on in many schools due to the power and influence of its supporters.
- After-school programs of all kinds, meant to keep kids out of trouble, have generally failed at their mission, because, unintentionally, the programs resulted in grouping together high-risk kids to reinforce their bad behavior.
- Charities in general are mismanaged and disorganized, in part because money spent on organizational effectiveness is a black mark in the metric of spending on program services. And they rarely evaluate their programs to test whether a program that intuitively feels like it will make a difference, actually does.
There are countless “charities” that aren’t even charitable.
- Hospitals are the biggest culprits, in which “non-profit” hospitals are actually worse at providing charitable care than their for-profit counterparts. They’re raking in enormous profits, and going on a building boom in response.
- But bowl games? They’re nonprofits, too, with the tax-exemption funding lavish spending all around.
- And the USGA!
- And the Metropolitan Opera and other entities whose core constituency is the ultra-wealthy, with little to no public outreach.
In the case of hospitals, and likely other institutions, maybe even universities, too, they ought to by all rights be paying Unrelated Business Income Tax (UBIT) in the same way as any profit-making venture of a charitable enterprise, but lobbyists have been too effective for this to happen.
Plus, of course, there are large numbers of charities that are outright frauds, with no other purpose than to enrich their founders.
People donate based on personal connections, for instance, a single starving child tugging at their heartstrings, rather than donating to causes/organizations that are actually effective at what they do.
CEOs of charities’ pay is escalating rapidly. In some cases they deserve it for their management skill. Usually they don’t.
The bright points:
Stern highlights some charities which are actively attempting to truly be well-managed, and to choose their programs and services based on authentic research of what’s actually effective. And he points to key organizations which are attempting to research effectiveness rather than give based on sentiment: GiveWell and New Profit and the Gates and Robin Hood Foundations receive particular mention. Stern’s hope is that these and similar “charitable mutual funds” will grow and more people will turn to research for their charitable “investments” in the same way as they do for their personal investing, and his “interim recommendation” is that one look to the causes these organizations donate to in order to get ideas of vetted charities.
He also recommends (though without a clear line of sight on how to get there) that the IRS be more tight-fisted with its charitable exemption approval, and that a renewal process be implemented, to require charities to prove that they continue to be charitable.
So what do you do? And how, if at all, would you change the laws around charities and tax-exemption in the United States?
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