With the holiday season comes greater focus on charities and giving. Most charities are legitimate and work hard to provide services and assistance to those in need in our society. Unfortunately, there are some “charities” set up to take advantage of tax laws and act more as a tax free investment vehicle for the wealthy than a true charity. Last week’s stories about Bernie Madoff’s little scheme brought to light this side of the charity world.
It is hard for me to believe, as some charities struggle to raise funds there were other “charities” with millions of dollars invested in hedge funds and worse, with Bernie Madoff, the ponzi scheme operator. Of course, short term investments into treasuries or CDs to enhance a return while waiting to dispense help to the needy is part of proper functioning of a charity. However, a “charity” with millions of dollars invested in hedge funds and risky investments does not seem to be acting as a true charity and should not be considered a charity. Are we to believe that these charities could not find any worthy recipients? I can think of quite a few off the top of my mind.
A charity should give away a minimum of 90% of its proceeds to the people who are in need of assistance, with a maximum 10% used for administration of the charity. After all, charities are set up to help people with direct assistance or funds for research and should not pay out large executive compensation. Charities and endowments were not originally designed to be tax free investment vehicles for its wealthy patrons, although in some cases that is exactly what they’ve become.
Charities provide a much needed service for our communities and improve and enrich many lives. In these difficult economic times, many charities are struggling to raise funds to continue their good works. The lack of funds have lead to the closing of food assistance centers, loss of temporary shelters and cut back in grants for research. It is appalling to hear there are “charities” out there hoarding money and making risky investments instead of distributing help to the ones who need it most.
In the true spirit of the season, try to give help to someone and brighten the world in which we live.