It seems like every year we hear about some type of scam concerning charities. Web sites are set up to accept donations and the money is used to support the owners lavish lifestyle, little or none of the money actually gets to the intended recipients. We are constantly told to only give to registered 501c charities to avoid scams. If you look at the results of the big charity organizations though are they really any better than the scams ? The latest figures I have been able to find say that UNICEF actually gives less than ten percent of what they collect to the intended recipients.
Consider the following facts
· UNICEF CEO Caryl M. Stern $1,200,000 annual salary (100k per month) all expenses and a ROLLS ROYCE
· The American Red Cross President and CEO Marsha J. Evans
annual salary is $651,957 plus expenses
6 weeks - fully paid holidays including all related expenses during the holiday trip for her and her husband and kids. and 100% paid health & dental plan for her and her family, for life.
annual salary is $651,957 plus expenses
6 weeks - fully paid holidays including all related expenses during the holiday trip for her and her husband and kids. and 100% paid health & dental plan for her and her family, for life.
· The United Way President Brian Gallagher’s annual salary is $375,000 base plus expenses
These are all legitimate and legal 501c3 NON-PROFIT organizations and yet the people who manage them are literally getting rich. I don’t think they should work for free but the compensation seems a bit extreme in my opinion.
Even many of the religious organizations have pretty poor track records with charitable contributions. They spend a lot of the donations on facility upkeep and staff salaries.
So why do I see so many charities recently claiming to give 100% to the recipients. The only answer I can see is creative book keeping. If their office space is donated it still has a value and cannot be considered as being given to the recipient. Telephones, computers, websites, salaries and of course the fees paid for incorporation all add to the overhead of any charity.
I recently researched opening a charity as I was considering creating one to benefit starving orphans. Not only do you need to be incorporated as a non-profit but you also must pay a fee ($400 to $800) to the IRS and then wait up to six months for approval. Then you must follow the IRS guidelines to keep from losing the non-profit status and stay out of prison.
Fortunately there is a way around getting the IRS non-profit designation. You can apply to an IRS registered charity and work under them. They collect the funds that you raise and disburse them to your organization. The IRS still maintains control over how you utilize the funds though.
The only way that I can see to open a charity and be able to help your chosen group, is to set up as a for profit company and spend enough on the recipients each year to effectively not show a profit. Any money that you have not spent will be considered income and taxed accordingy.
I have setup a company to accept donations and support small orphanages in third world countries. The web site is here
Disclaimer: Being neither an attorney or CPA nothing in this article should be considered legal or financial advice . You should always check everything with an attorney and a CPA.
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