Charity is a growth industry. More than 1.5 million tax-exempt organizations are registered in the United States. According to the National Center for Charitable Statistics, more than 180,000 public charities were established before 1969, and more than 350,000 were founded during the past decade. But giving is down since reaching record highs in 2008. In 2009, households with more than $200,000 in income, or $1 million in net worth, reduced their giving by 35 percent since 2007, according to a report from Bank of America and the Center on Philanthropy. Charities’ budgets are strained, as the recession and a widening wage gap reduce giving but also increase demand for charitable services.
Tiger Woods’ divorce scandal last year exposed the excesses and waste of the entertainment charity industry. Sports stars, celebrities, and politicians create foundations and then arrange lavish fundraisers for wealthy friends. The catch is that celebrities can shift entertainment expenses for alcohol or party hosts to these foundations, which cuts into the foundations’ program budgets. Check out Charity Navigator to see its rating for charities on fundraising efficiency.
Wealthy sports figures aren’t the only ones who raise questions about charitable funding. Politicians have used foundations to funnel corporate donations into constituent handouts or even campaign contributions. The midterm elections last fall shed plenty of light on the loopholes exploited by political action committees and corporate giving.