How charitable are charities?

When officials at nonprofits make many more times than the average American worker, are they really charities?

The 2020 NBA All-Star Game featured a new format in which players largely competed to give to charity. Some liked it. I didn’t. Bring back the old-school Eastern Conference-Western Conference rivalry.

Two Chicago nonprofit organizations, Chicago Scholars and After School Matters, really liked it. As beneficiaries of the NBA arrangement, they made an extra $400,000 and $200,000, respectively, not to mention additional donations that come with the heightened publicity.

The charities help students succeed in school. That sounds good, but when you dig into their IRS financial statements, you learn some details that make them seem more like many booming for-profit businesses than altruistic societal difference makers.

Chicago Scholars listed assets of $10.3 million and revenue of $5.5 million on its latest federal tax form 990. Its president earned $254,000 in fiscal 2018, and at least three other vice presidents took in more than $140,000.

After School Matters had even more assets and revenue at $39.8 million and $38.9 million, respectively. Its CEO pulled down more than $240,000 in fiscal 2018. A “senior strategic advisor” made $179,000. At least six other top officials earned more than $110,000.

The median salary for full-time U.S. workers — many of whom give their money to such charities, thinking they are contributing to kids or cancer research or the environment or whatever — is about $47,000.

When I am making a lot closer to that median salary than many “charity’s” directors, I question how charitable those charities really are. In most cases, some funds help the cause, but when someone at a so-called charity is making many times more than me, that’s a business in my book.

Been going on a long time

This situation with charities has been an ongoing controversy, though most people are still surprised to find out how much directors of them earn.

After suffering a heart attack in 1987, talk show icon Larry King, as many high-dollar celebrities do, started a foundation to help needy people pay for life-saving medical procedures. The Larry King Cardiac Foundation was headed by his son, Larry King Jr. When some found out the son made as much as $216,127 annually as president, donations dwindled. The foundation eventually died.

In 1992, William Aramony resigned as president of the United Way in the midst of a financial scandal that saw him using charity funds to pay for trips with a teen-aged mistress. He was making $463,000 then, and donations to the United Way plummeted in ensuing years before recovering after Aramony was convicted of fraud in 1995. High-dollar payouts to top executives didn’t stop, as the organization’s president pulled in $1.66 million in 2017. Numerous others in that office and regional United Way groups made more than $300,000.

In 1993–94, the foundation of former Dallas Cowboys quarterback Troy Aikman paid his mother, Charlyn Aikman, about $42,000 for her work. In 2016, the NFL Hall of Fame quarterback dissolved his foundation and transferred its $1 million in assets to a donor-advised fund of the United Way. Such DAFs are a growing trend since they face less IRS scrutiny and restrictions, as well as lower costs for founders.

Celebrity couple Khloe Kardashian and Lamar Odom made a splash with Cathy’s Kids, which Odom formed to honor his mother who died of cancer when he was 12. The problem was that little of the funds went to cancer research, with an old high school coach of Odom’s and some youth basketball teams the primary beneficiaries.

Jerry DeGregorio, a former coach of Odom, was paid an average of $72,000 a year through the charity from 2004 through 2011, according to tax records. DeGregorio did not respond to requests for comment, and Odom only told ESPN, “It’s my money.” Which it isn’t, once it goes into a charity and donations from the public are solicited. In its 2016 tax return, Cathy’s Kids listed only $1,000 in net assets and no revenue.

Charitable foundations set up by wealthy people like King, Aikman, Odom and the Kardashians have long been used to avoid paying taxes and put money into a cause the founders support, while that foundation is often run by family members or friends who financially benefit. Some are set up as charities, while others as corporations in Delaware, Nevada, and other tax-haven states where money is funneled to pay less — or even zero — taxes. The list of those with Nevada holding companies includes Oprah Winfrey, Madonna, Mel Gibson, Nicolas Cage, Paul Simon, Bono, Steve Jobs, and Bill Gates.

Oprah Winfrey is among those who set up charitable foundations, which some view more as businesses and a way of avoiding higher tax bills while raising funds for causes. [Shay photo]

The Oprah Winfrey Charitable Foundation listed funds from the Cayman Islands and other offshore accounts worth more than $26 million under assets in its 2012 tax return. By 2017, those offshore assets were significantly reduced, though the return included a $254,000 loss in an offshore fund with a total of $223 million in assets.

Its president received $169,000 in compensation that year. The foundation gave $7.6 million to Winfrey’s girls leadership academy foundation, whose director made almost $300,000.

Smaller amounts went to numerous charities, including $250,000 to Minnie’s Food Pantry of Plano, Tx. Minnie’s executive director, Cheryl Jackson, was paid $188,000, according to the entity’s 2017 return. She started the organization in 2008, naming it after her mother. Jackson at one time experienced hunger and a need for food herself, and has attracted support from not only Winfrey but Martha Stewart, Rihanna, and Kevin Bacon, according to the charity’s website.

Her organization is by no means the only one that seems to pay top officials well to help the needy. The Chicago Coalition for the Homeless, which Charity Navigator gave a perfect score for accountability and financial health, paid its executive director $107,000 in 2017. At least two others made more than $100,000. The CEO of the National Alliance to End Homelessness in Washington, D.C., earned $276,000 in 2017. At least four others there made more than $123,000.

Lucrative pay for top officials at charities

Other organizations viewed as working more from the liberal side pay their top people well.

Anthony Romero, CEO of the ACLU, took in $561,000 in 2018. The deputy director made even more at $604,000. Nine others received more than $300,000. The Sierra Club’s 2017 tax return lists 16 officials pulling in at least $165,000. The executive director made $302,000. That’s relatively little compared to compensation at the Nature Conservancy, whose leader topped $800,000 in 2018. Some 27 others took in more than $300,000 there.

Conservative charitable nonprofits, of course, do much of the same, if not more. Wayne LaPierre, CEO of the National Rifle Association, took in $1.4 million in 2017. Another NRA official made $1.1 million, while seven others hauled in more than $700,000. The president of Judicial Watch earned $328,000 in 2017. The treasurer made even more at $361,000. Seven others took in at least $170,000. The National Right to Life Committee is one of the more fiscal conservative national nonprofits, paying its director $123,000 in 2017. Three others made more than $100,000.

The non-political ones can be even more lucrative. Harry Johns, president of the Alzheimer’s Association, took in almost $2 million in 2018. Five others made more than $500,000. The leader of the American Cancer Society amassed almost $800,000, and three officials hauled in even more due to outgoing packages.

The national Boy Scouts office gave its leader $870,000 in 2017. Nine others made more than $500,000. The Girl Scouts paid its national leader almost $600,000 in 2017, with several others taking in more than $400,000. Then there are the regional scouting councils, where officials make as much as $300,000.

Meanwhile, thousands of volunteers work for free, even spending their own money to keep the local troops afloat. Local Scouts only get 20 to 30 percent of the money they make in cookie and popcorn fundraisers, with most funds going to the national offices.

In a study released in 2019, the Chronicle of Philanthropy found an average annual compensation of $492,180 for top nonprofit officials. However, that was skewed by many of them working for hospitals and private universities.

The following is a chart of nonprofit organizations and compensation for their three highest-paid officials. Universities and medical centers were not included. Churches were also not included, as they are not even required to file a form 990 with the IRS.

Organization ……… Compensation range for 3 highest paid ….. Year
American Cancer Society …..… $1.16M — $2.57M ………………. 2017
Alzheimer’s Assn ………………. $536k — $1.98M ………..………. 2017
United Way Worldwide ……..… $363k — $1.66M …..……………. 2017
NRA …………………………..…. $844k — $1.43M ……………..… 2017
American Jewish Committee …. $336k — $874k …………………. 2017
National Boy Scouts …………….. $622k — $870k …………………. 2017
Boys & Girls Clubs ……………….. $440k — $847k …………………. 2017
Nature Conservancy ……………. $697k — $818k ………………… 2018
Michael J. Fox for Parkinson …... $404k — $720k ………………….. 2017
Goodwill Industries ……………. $306k — $717k …………………. 2017
Red Cross ………………………… $622k — $682k ………………… 2017
ACLU …………………………….. $421k — $604k ………………… 2018
Girl Scouts USA ………………….. $405k — $581k …………………. 2017
Big Brothers Big Sisters ………….. $202k — $487k …………………2018
American Lung Assn …………….. $225k — $466k ………………… 2017
Cancer Research Institute ………. $294k — $464k ………….……. 2017
Earthjustice ………………………. $293k — $437k ……………….. 2017
FAIR ……………………………….. $191k — $427k …………….…… 2017
Humane Society US ………………. $260k — $425k ……………… 2017 Oxfam US …………………………. $283k — $407k ………………. 2017
Judicial Watch ……………………. $291k — $361k ……………….. 2017
Meals on Wheels America ……….. $180k — $339k ………………. 2017
Christopher Reeve Foundation …. $190k — $330k ………………… 2017
Sierra Club ……………………..… $241k — $302k ……………….. 2017
Oprah Foundation/Academy ….. $169k — $294k ………………….. 2017
NA to End Homelessness ….……. $151k — $276k ……………….…. 2017
Feed My Starving Children ……… $190k — $267k ………………… 2017
Chicago Scholars ……………….. $150k — $254k ………………… 2018
Doctors Without Borders …………. $214k — $249k ….…………… 2017
After School Matters ……………. $165k — $242k ………………… 2018
Partnership Drug-Free Kids …….. $169k — $218k ………………… 2017
AFSC [Quakers] …………………. $160k — $192k …………………. 2017
Minnie’s Food Pantry …………….. NA — $188k …………………… 2017
Hunger Project …………………… $174k — $185k ………………… 2017
Africare ……………………………. $128k — $160k ……………….. 2017
National Right to Life …………… $107k — $123k ………………… 2017
Chicago Cltn for Homeless ….…. $100k — $107k ………………….. 2017
Stepping Stone Shelter ……….…… NA — $47k ………..………….. 2017
Average US worker …………………… $47k ……………………… 2018
Sources: IRS 990 forms, Charity Navigator

Of course, small organizations don’t pay their leaders near as much as the larger ones. The director of Stepping Stone Shelter in Liberal, Ks., earned $47,000 in 2017. A similar leader of Stepping Stones Shelter in Rockville, Md., made $64,000 in 2018.

Advocates from the larger organizations justify the hefty salaries for top officials by saying they could make more with private businesses and they raise much more funds than lower paid directors. The top nonprofit execs are in high demand, and the size of the organization often drives salaries as well, according to Nonprofit Quarterly.

I limit what I give to larger charities, giving to smaller groups, though I volunteered much time to Scouts and youth sports. And I sometimes hand money directly to homeless people I come across. Many advocates advise against that, but who is to say the homeless don’t deserve to spend money how they want?

Benefits of being a nonprofit vs. a for-profit entity

Nonprofit organizations gain numerous benefits over for-profit entities besides being exempt from federal income taxes if they qualify for 501(c) status.

Most are also exempt from paying local sales taxes and property taxes. Nonprofits do pay employee taxes, such as for Social Security and Medicare. But since many use mostly volunteers, their employee taxes are usually much less than for-profit entities. In 2016, some 25 percent of U.S. adults volunteered for them, contributing about 8.7 billion hours in “free” labor, according to the National Center for Charitable Statistics. The value of those hours was some $187 billion.

Having contributions be tax deductible is another key benefit. A for-profit entity has to raise money from investors who don’t get tax deductions. Individuals and other organizations are more likely to contribute to nonprofits since they reduce their own taxes. In 2016, private giving from individuals, foundations, and businesses totaled $390 billion, an increase of 1.4 percent from 2015, according to the NCCS.

A nonprofit foundation — many of which have different goals than the general, issue-driven nonprofit organizations — formed by wealthy people usually gives their founders public relations points. They are seen as “giving back” to the community, when in many cases, it’s done as much to reduce their tax bills as help a cause. The charities are only legally required to spend 5 percent of their assets on actual charity work.

Through these organizations, the very wealthy often funnel money back to themselves, their family, and friends. And they gain invaluable public exposure that is often positive and can help them gain more income. They can also avoid paying estate taxes and protect the donations from divorce proceedings and creditors.

Little wonder that the number of nonprofits registered with the IRS grew by about 10 percent between 2005 and 2015 to 1.56 million, according to the NCCS. Nonprofits contributed some $985.4 billion to the US economy in 2015, about 5.4 percent of the country’s gross domestic product.

Many people give to charities, believing their donations are going more to the cause. But growing nonprofit executives’ salaries is impacting how much goes to help the cause. [Kat Yukawa photo/Unsplash]

Nonprofit advocates cite benefits to the community in reducing what public entities would have to pay to do similar work. They say volunteers obtain invaluable work experience, and their hours often lead to paying positions. They also pay plenty of taxes and fees, according to a 2019 article in Nonprofit Quarterly. In 2015, U.S. nonprofits paid $243 billion in taxes, withholding and fees, while benefiting from a value of $137 billion in tax exemptions and deductions, according to Nonprofit Quarterly.

That may be so, but many individuals who found or run these organizations gain personal benefits that generally aren’t disclosed. If those services were run by for-profit businesses, the taxes paid would likely be substantially greater. I’m not advocating for that, just pointing out, once again, that things are not always as they seem.

Wealthy claim they pay a greater share of taxes

Many wealthy people and their public relations representatives say they deserve more breaks in the way of charitable foundations since they pay more taxes. In 2017, Americans making more than $5 million annually paid about 14 percent of all income taxes collected, while having some 8 percent of total adjusted gross income, according to IRS figures. Those making the average American salary of between $30,000 and $50,000 paid 3.7 percent of taxes while amassing 9.6 percent of adjusted income.

On the surface, that looks like the very rich paid a higher share of what they made in taxes than average American workers. The problem with looking at adjusted income is that doesn’t account for money hidden in foreign subsidiaries and other loopholes. The very rich are better able to find the deductions and loopholes that don’t generally get put on tax returns under total income. Who has the funds to invest in accountants and tax lawyers to find tax breaks, as well as fight the IRS in court for the right to continue to take these loopholes? Not average Americans.

For every dollar the wealthy donates to charity, other taxpayers have to make up from 37 to 57 cents in the form of lost tax revenue, according to Nonprofit Quarterly. Moreover, charitable giving has become more top heavy in recent years, with wealthier people giving a significantly greater share, according to a report by the Institute for Policy Studies.

The risks with that top-heavy giving trend include the rise of tax avoidance philanthropy, volatility and unpredictability in funding, and an “increased bias toward funding heavily major donor directed boutique organizations and projects,” IPS says.

So how do you slow these seemingly runaway charitable salaries? In the 2017 tax law, Congress tried to address that by implementing a 21 percent tax on nonprofits that pay executives more than $1 million. The Chronicle of Philanthropy found more than 200 organizations that do so, though most are universities and hospitals.

Like I said before, I research any charity I plan to give to on sites such as Charity Navigator and try to limit giving to those whose salaries are closer to the norm. I look at the form 990s and what top employees are being paid, not the ratings, which often give more efficient marks than deserved since program expenses usually include staff salaries and other administrative costs, not just money going to the cause.

If more people did some research before giving, the larger organizations might get the message. But that can’t always be done. When there is a crisis, people give to the American Red Cross and other established ones. And the trend of more giving from super wealthier people doesn’t bode well in terms of seeing progress on this front anytime soon.

Written by

Written for 45+ newspapers/mags. Written some books — see https://www.amazon.com/Kevin-J.-Shay/e/B004BCQRTG. Visited 48 states, 30+ countries.

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