New York and Arizona to Investigate Sham 9/11 Charities: It’s About Time!

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August 29, 2011; Source: Associated Press) via Rapid City Journal | Following the Associated Press story about the many 9/11 charities that fell short of delivering what they promised, with a few functioning as scams and frauds, two states, New York and Arizona, have announced 9/11 charity reviews. These two states host a couple of the worst predators to allegedly rip off charitable donors while wearing a 9/11 cloak: Arizona is home to the American Quilt Memorial charity that raised $700,000 for a never-delivered 9/11 quilt, and New York has several of the questionable charities outed by AP, including Urban Life Ministries, which raised $4 million, most of which AP reported the charity somehow cannot account for.

But something’s really wrong here: This is 10 years after the fact! As a matter of governmental oversight of nonprofits, the New York and Arizona announcements highlight how excruciatingly far we are from “real-time” oversight and accountability. Give credit to the AP and to the press in general on this score: their reporting is an example of the necessary watchdog role of the Fourth Estate.

And where is the IRS? Remember that in the wake of 9/11, partially due to pressure from politicians who had their own 9/11 charitable endeavors—such as New York City Mayor Rudy Giuliani—the IRS fast-tracked approval of tax-exempt charity applications from 9/11 nonprofits. The IRS review of these groups was thinner, much thinner than it usually is. Shouldn’t the IRS now be actively engaged and leading a review of 9/11 charities given the Associated Press investigation?

So what happens now, 10 years after 9/11? Are these slimeballs going to go to jail? Or will they be able to avoid prosecution, say that they “tried their best” or that they lacked the skills and knowledge to do the kind of accounting that running a nonprofit demands?

And then there is the nonprofit sector’s own muscularly indignant response to enhanced governmental oversight, arguing that self-regulation is sufficient. Well, self-regulation didn’t do much or anything to reign in the excesses of 9/11 predators. Nor did it do much for the well-intentioned organizations formed in the wake of 9/11 by victims’ families and others that simply lacked the knowledge, wherewithal and training to function with any sort of effectiveness. The long term damage of documented misspending and ineffectiveness of charities like those reviewed in the AP article is serious.  Government has to act to get rid of the charitable predators, but so does the nonprofit sector, which has the additional challenge of helping improve the performance of those charities that want to do a good job but aren’t structured and managed in a way to get there.

Truth be told, a number of new 9/11 charities did good work, but so did a great number of already-existing nonprofits that were in position to deliver important services and advocacy to deal with a host of 9/11-related issues and needs. Our sector needs a vigorous dialogue about what nonprofits do and how government carries out its regulatory oversight functions. We need to figure out what works well and what doesn’t work quite so well. And we shouldn’t have to wait for 10-year anniversaries to do so.—Rick Cohen

  • Isabelle Cl

    These are exactly the types of situations that breed distrust for all nonprofits. When I say that I have an MA in nonprofit management, I get this wink-wink-nudge-nudge response followed by a “out to make money for yourself huh?”. It’s extremely frustrating!
    “Our sector needs a vigorous dialogue about what nonprofits do and how government carries out its regulatory oversight functions” should be followed with !!!!! because it is beyond irresponsible for the government to have ignored the significance of our sector for so long.
    My private sector peers often argue that theirs is the sector that brings in the money, makes the profit, etc. At this point it all becomes very much like an elementary school-yard when I respond that our sector saves the government from having to spend billions of dollars to provide for the sick, poor, and otherwise disadvantaged citizens that it would be charged to take care of!(And this is where I’d stick my tongue out at the private sector folk).

  • David Warlick

    There are no accounting standards for Form 990. The IRS, AICPA, and state governments have never promulgated any definitions or rules of what are Program expenses. I look at numerous Form 990s and see in Programs crazy things like ED salaries, 401(k), accountants, auditors, rent, depreciation, travel, telephones, conferences, and special fundraising events. Excuse me, but how do these expenditures help at-risk members of society? I know as an accountant myself that I add value to Management, but not to any Programs. So, follow these two steps: (1) Set some accounting standards. (2) Then criticize or jail the EDs and CEOs who don’t follow the standards. If you do the opposite, that is set no rules or standards, then don’t feign alarm and wring your hands that the broken system is being abused. The abuse is pervasive. Need proof? Read any random Form 990, assuming the NPO didn’t hide behind the opaque 990-EZ or 990-N.