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Charity Fraud is Big Business, by Tavie Meier

This piece was originally published on The Note Passer. Written by Tavie Meier of MadeFAIR. Illustrated by Elizabeth Stilwell.
charity fraud


Imagine if someone said, “I wish there’d be an earthquake that destroys the lives and homes of thousands so we can give money to them.”

That’s messed up, right?

FOR-PROFIT/NON-PROFIT: THE SAME, BUT DIFFERENT


A charity, by nature of its own mission, shouldn’t want to exist. Fundamentally, its existence hinges on people suffering from natural disasters or societal ailments like systematic oppression and war. The people who receive their charitable services function as their "consumers." This dynamic is often overlooked because charities don’t receive money from their consumers, but instead appeal to donors for the funds to deliver services.

The perversity of this economic model means that, to meet the demand that is human suffering, charities supply aid for consumption. A noble effort to be sure, but one that has been normalized within the non-profit industry, with organizations supplying aid for years, even decades, as well as mishandling funds. Charities leverage this demand in order to extract money from donors because without it, their projects, jobs, and services wouldn’t exist. But what should happen when there is a lack of demand for charity?

In the for-profit industry, when there’s no consumer demand for a product or service, businesses shut down. In order for a business to sustain itself, it requires consumers to buy what it's selling. For-profit businesses want money from their consumers; in order to survive in a competitive market, they need a good product and happy customers.

charity fraud


Conversely, charities should exist so their consumers can eventually sustain themselves. Markets will not exert the same pressure on non-profits, so it's entirely possible for several charities to deliver the same services despite poorly-executed missions and underserved consumers. If a charity does its job to perfection (or even just very well), it will reduce the demand both for its services and the amount of donor funds needed. Unlike for-profit businesses, charities should explain how, someday, their success will put them out of business.

When there is a lack of demand, charities that work only to keep their doors open are, at best wasting money, and at worst perpetuating the social problems they originally formed to fix.

WHO’S DOING IT WRONG?


When NPR and ProPublica ran an investigation on The Red Cross’ response to the Haitian earthquake in 2011, they found the organization raised an unprecedented $500 million to build six homes. They also found most of the staggering sum went to administration and non-service line items, and The Red Cross kept raising money after it had enough to complete emergency aid services — the organization’s mission — in order to pay off their $100 million deficit. To do this, they marketed development projects to donors and then failed to follow through with their promises.

The Red Cross’ need to sustain itself trumped the genuine needs of their consumers, leaving earthquake victims underserved and out of luck. Jean Jean Flaubert, the Haitian project manager for the Campeche neighborhood project, stated,

What the Red Cross told us is that they are coming here to change Campeche. Totally change it…. Now I do not understand the change that they are talking about. I think the Red Cross is working for themselves. 

This is, by no means, a “third world problem.” Flaubert’s sentiment about The Red Cross was solidified after Hurricane Sandy when 40% of available rescue vehicles were diverted to serve as backdrops for news conferences.

Outside of disaster relief, there’s a much bigger charitable structure that has enjoyed increasing donations year after year…after year, after year. In 2014, Americans set records for donating to charitable causes, most of which went to traditional charities. This model is so deeply-embedded in our giving culture that most people don’t look twice at its effectiveness.

Cambodia, one of the world’s poorest nations, attracted 450 INGOs (international non-governmental organizations) in the 1990s. Recently, Oxfam advocated for exit strategies to phase themselves and other INGOs out of the country. In this 2014 Phnom Penh Post article, Kevin Ponniah reports:

“If we INGOs are not thinking about our role in the future, we are not helping Cambodia,” said Sophavy Ty, an Oxfam program director.

The INGO study says that while such groups still have an important role to play, the development situation that drew about 450 INGOs to the Kingdom in the first place – Cambodians desperately in need of basic assistance – has changed..
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… “International NGOs should not be looking for a lifelong job in any country, and Cambodia is the same.”

World Vision, another INGO, wholeheartedly disagrees. Chris MacQueen, Director of Strategy at World Vision’s Cambodia office stated,

While malnutrition in children under five hangs static at 40%, and more than 230,000 children are forcibly involved in the worst forms of child labor…and while 50% of children by grade six are functionally illiterate…we will focus on the job at hand.

Chris’ “job at hand” has existed for nearly 23 years (since the UN’s 1993 occupation). If MacQueen’s statistics are to be taken at face value, then he’s actually advertising World Vision’s failure. The 450 INGOs need to reassess the services they’re offering their consumers, especially if malnutrition in children is “hanging static.”

Even with full financial transparency provided to us by sites like Charity Navigator, and news publications being increasingly more critical of charity, they are written through the donor’s gaze, addressing ways for people to get the most bang for their charitable buck. In fact, Charity Navigator rates both the Red Cross and World Vision with 4/4 stars for “accountability and transparency,” and has no feature to measure an organization’s impact on their consumers...

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2 comments

  1. very concise piece - i have often thought that a good government should be able to take care of its citizens and national charities were absolving them of this responsibility

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    1. yeah, I think that's a big reason why the US has such a hard time implementing comprehensive social programs. We've relied on private and church aid for so long that we think we don't need government programs, but we don't realize how many people are slipping through the cracks.

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