The charitable sector is a bit like the Wild West — by design. Foundations have long been granted expansive freedom, on the view that the diversity of America’s civil society is one of the country’s signature strengths, as Alexis de Tocqueville famously said, and that government shouldn’t mess with this magic. Both political parties have been content to impose a minimum of rules on philanthropy.
For example, foundations don’t have to prove that they’re making good use of billions of dollars of tax-subsidized funds, and nonprofits don’t have to identify their donors, as we’ve learned from the Clinton Foundation saga. The law even permits donors to get an immediate tax break for charitable gifts that may sit in investment accounts for decades, never helping anyone. And in many states, the rules that do govern philanthropy are barely enforced, which is why the fraud perpetrated by those four cancer charities was undetected for years.
David Callahan, “Who Will Watch the Charities?”, The New York Times (31 May 2015), SR4.