Tax Guru – Ker$tetter Letter

Charitable Accounting Tricks

It’s not just the big evil corporations that have been using creative accounting techniques to paint a different picture of their finances. One way that charities are evaluated is by the percentages of their revenues that are spent on fundraising activities, administration, and providing the actual services they were established for.

With big middleman charities, such as United Way, under continuous scrutiny for their million dollar salaries and other very lucrative perks for top executives, it shouldn’t surprise anyone that they would be playing games with their numbers. By using accounting tricks to inflate revenues and reduce certain expenses, they are able to shrink the perceived percentage of revenue used for administrative, as described in this NY Times article.

As I have said for decades, your charitable donations are much more effective when given directly to the organizations you support that provide actual charitable services. Giving to middlemen means that a good chunk of your money will never benefit any actual charitable cause; but will instead feather the nests of executives of the middleman organization.

KMK