IRS Validation of Charity Fraud Has Been Met With Silence

by Gary Snyder

One year ago, a fascinating, but not surprising, Internal Revenue research report adds to the overwhelming evidence that there is “significant diversion” of charitable assets. This buttresses other research that has suggested it is a $51 billion abuse.

As a result of the report, both the IRS and charity sector leaders said that they would address this shocking problem. Their response, however, has been underwhelming…non-existent. In addition regulators, academics, private consultants and public officials have failed to even acknowledge the bad-behavior.

There is a conclusion that seems evident. The IRS study reflects a small percentage of a much bigger problem. Because the report is based on self-reporting the IRS believed that additional information was needed. The IRS has not followed up in any public manner as to how it was going to tackle the problem.

The study’s underpinnings point to why the problem is so vast. It shows the following:

• only 29% of the perpetrators resulted in criminal or civil charges;
• just 16% ended in incarceration or probation;
• only 3% resulted in fully-paid restitution;
• just 4% ended in partial restitution

So obviously, the likelihood of getting caught and suffering consequences is extremely remote.

So with little interest on the part of decision-makers and with little chance of getting caught, we can be certain of the direction of charity fraud.   

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)