tag:theconversation.com,2011:/us/topics/charitable-donations-64808/articlesCharitable donations – The Conversation2023-01-17T13:33:47Ztag:theconversation.com,2011:article/1929832023-01-17T13:33:47Z2023-01-17T13:33:47ZAllegations that the charity George Santos claims to have run was fake highlight how scams divert money from worthy causes<figure><img src="https://images.theconversation.com/files/504310/original/file-20230112-4958-9ryu0l.jpg?ixlib=rb-1.1.0&rect=126%2C111%2C4847%2C2632&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Did he run an animal rescue?</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/rep-george-santos-leaves-the-u-s-capitol-on-january-12-2023-news-photo/1456010506">Win McNamee/Getty Images</a></span></figcaption></figure><p>Rep. George Santos, the New York Republican whose 2022 election to the House of Representatives flipped a seat previously held by a Democrat, faces pressure to resign for having <a href="https://www.nytimes.com/2023/01/11/nyregion/george-santos-resume.html">reportedly lied extensively</a> about his education, employment history and religious heritage. He also faces allegations that he <a href="https://www.washingtonpost.com/investigations/2023/01/11/george-santos-harbor-city-capital/">may have participated</a> in <a href="https://www.cnn.com/2023/01/02/politics/george-santos-brazil-fraud-case/index.html">financial fraud</a>.</p>
<p>When Santos apologized for having “<a href="https://www.axios.com/2022/12/27/george-santos-admits-embellishing-resume">embellished</a>” <a href="https://www.nytimes.com/interactive/2023/01/11/us/resume-of-george-santos.html">his resume</a>, he also said, “We do stupid things in life.”</p>
<p>Because I’m a <a href="https://scholar.google.com/citations?hl=en&user=FJ9Y6QMAAAAJ">nonprofit accounting scholar</a>, what has really caught my eye are the reports that Santos fabricated a charity. On an <a href="https://web.archive.org/web/20200811235634/https://georgeforny.com/about/">early version of his campaign website</a>, the freshman lawmaker claimed to have founded and run what has been alleged to be a fake nonprofit animal rescue group called <a href="https://thehill.com/homenews/house/3791375-list-of-george-santos-falsehoods-continues-to-grow-amid-apology-tour/">Friends of Pets United</a>.</p>
<p>Santos says the group rescued 2,400 dogs and 280 cats and that it trapped, neutered and released over 3,000 cats from 2013 to 2018. Trouble is, there’s no evidence that has been presented publicly showing the charity ever existed. </p>
<p>As media outlets have reported, <a href="https://www.nytimes.com/2022/12/19/nyregion/george-santos-ny-republicans.html">Friends of Pets United has no website</a>. <a href="https://twitter.com/whstancil/status/1604841168851947521">There’s no record</a> of the Internal Revenue Service granting the organization nonprofit status or of a group by that name <a href="https://candid.org/research-and-verify-nonprofits/990-finder">annually filing the required paperwork</a> with the IRS. And it is further alleged that a fundraising event he held with <a href="https://www.snopes.com/news/2022/12/29/claims-by-us-rep-elect-george-santos/">another New Jersey animal rescue group</a> never received any of the funds it was promised.</p>
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<h2>Fake charities are a real problem</h2>
<p>If Santos’ animal rescue turns out to be the scam <a href="https://www.theguardian.com/us-news/2022/dec/19/george-santos-new-york-republican-resume">it is alleged to be</a>, it’s unlikely to be his <a href="https://www.yahoo.com/news/mysterious-unregistered-fund-raised-big-131005823.html">biggest legal</a> or <a href="https://www.cnn.com/2023/01/11/politics/george-santos-nassau-county-resign/index.html">political liability</a>.</p>
<p>Regardless of what the stakes are in Santos’ case, fake charities are a serious problem. Their <a href="https://www.fcc.gov/scam-charities-will-take-your-money-and-run">scams divert donations</a> that would probably <a href="https://theconversation.com/donor-beware-pause-before-you-give-to-any-cause-188117">otherwise support legitimate causes</a> that <a href="https://howcharitieswork.com/about-charities/what-is-a-charity/">benefit society</a> in one way or another. And they can <a href="https://doi.org/10.5465/amp.2018.0027">undercut donors’ confidence</a>, discouraging charitable giving overall.</p>
<p>The term “fake charity” encompasses a lot of different schemes.</p>
<p>In one common scenario, someone <a href="https://www.fcc.gov/scam-charities-will-take-your-money-and-run">pretends to represent a real charity</a> and pockets money that should have gone to that organization. The fake charity in this case is the fraudster posing as someone authorized to raise money on behalf of the legitimate charity. The fraudster will ask deceived donors to give them money directly or to make a payment through a separate website that turns out to have no ties with the valid charity.</p>
<p>It’s also not unusual for someone to set up a fictitious charity – often with a <a href="https://www.cnbc.com/2022/07/07/how-to-avoid-charity-impersonation-scams-in-times-of-crisis.html">name that sounds much like a legitimate cause</a> – to fool donors into thinking they are giving to another, valid, organization. Some of these impersonators go to elaborate lengths to develop their scheme, perhaps building a website or even establishing a social media presence.</p>
<p>Sometimes charitable fraud is committed by the donors themselves. When that happens, the donor <a href="https://www.cleveland.com/court-justice/2022/08/former-independence-financial-adviser-charged-in-fake-charity-scheme-that-provided-tax-shelter-for-wealthy-clients.html">seeks out illegitimate tax deductions</a> by donating to groups they know are fake nonprofits.</p>
<h2>Role of the IRS</h2>
<p>All fake charities have one thing in common: They aren’t registered and approved by the IRS.</p>
<p>The IRS regulates charities and <a href="https://www.irs.gov/charities-and-nonprofits">evaluates and approves requests for 501(c)(3) nonprofit status</a>.</p>
<p>This status provides two benefits. The roughly <a href="https://www.nptrust.org/philanthropic-resources/charitable-giving-statistics/">1.5 million groups</a> in this category – ranging from Planned Parenthood to your local food pantry and <a href="https://theconversation.com/whats-a-church-that-can-depend-on-the-eye-of-the-beholder-or-paperwork-filed-with-the-irs-130517">neighborhood church</a> – generally don’t have to pay taxes on their income.</p>
<p>In addition, some of their donors can deduct any donations they make from their taxable income through the <a href="https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions">charitable deduction</a>, which is an incentive to support those groups.</p>
<p>Charities must first register within their state and then apply with the IRS for recognition. </p>
<p>To be a valid charity, the organization must pay a fee to have its charitable application reviewed and must declare its intended <a href="https://www.irs.gov/charities-non-profits/charitable-organizations/exempt-purposes-internal-revenue-code-section-501c3">charitable purpose</a>. The application process can take as <a href="https://www.forbes.com/advisor/business/501c3-application-online/">little as four weeks</a> or over six months for more complex applications. </p>
<p>The IRS maintains a <a href="https://www.irs.gov/charities-non-profits/tax-exempt-organization-search">list of valid charities</a>. Charities must comply with <a href="https://theconversation.com/whats-a-990-form-a-charity-accounting-expert-explains-175019">tax return filing requirements</a> to stay on the approved list. If not, the charitable status will be revoked, although the charity may submit an application for reinstatement. </p>
<p>If a charity does not appear in the IRS database, it could simply be that it’s still being launched and awaiting approval. Charities can begin operating while their IRS application is pending and have their charitable status retroactively recognized. </p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/3y_C03YkAjs?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">‘Saturday Night Live’ lampooned fake charities by concocting an imaginary group that gives men’s sweatshirts to chilly, single women.</span></figcaption>
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<h2>Don’t be fooled</h2>
<p><a href="https://nonprofitrisk.org/resources/articles/a-violation-of-trust-fraud-risk-in-nonprofit-organizations/">Nonprofit fraud</a> constituted about 9% of all fraud cases reported in 2022, the Association of Certified Fraud Examiners said in its <a href="https://legacy.acfe.com/report-to-the-nations/2022/">annual international report</a>.</p>
<p>Nowadays, fake donation requests also occur with crowdfunding platforms, when people pretend to raise funds informally to exploit the public. In one prominent example, three people have been found guilty of orchestrating a <a href="https://www.nytimes.com/2023/01/08/nyregion/katelyn-mcclure-gofundme-scam-sentenced.html">GoFundMe scam</a> that raised more than US$400,000 in 2017 from 14,000 donors who were duped into believing they were helping a homeless veteran.</p>
<p>The <a href="https://doi.org/10.1177/0899764014555987">news media</a> and <a href="https://www.charitynavigator.org/">charity monitoring websites</a>, such as Charity Navigator, try to keep track of these scams. </p>
<p>But the public has a role to play too. If you suspect that a charity <a href="https://www.charitynavigator.org/donor-basics/protect-your-giving/avoid-charity-scams/?bay=content.view&cpid=6506">asking you for donations is a fake</a>, you can help stop them by <a href="https://tips.fbi.gov/">reporting any suspected fraud to the FBI</a> or local law enforcement.</p><img src="https://counter.theconversation.com/content/192983/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sarah Webber does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When a fake charity is uncovered, headlines abound with details of the fraud, while donors are eager to make sure they weren’t one of the victims of the scheme.Sarah Webber, Associate Professor of Accounting, University of DaytonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1827542022-05-13T02:51:25Z2022-05-13T02:51:25ZWe all lose when charities compete with each other. They should join forces<figure><img src="https://images.theconversation.com/files/462934/original/file-20220513-12-s96mpo.jpg?ixlib=rb-1.1.0&rect=0%2C154%2C788%2C393&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>You want to help Ukrainians in need. Should you donate to UNICEF, UNHCR, Red Cross, World Vision, Caritas, Save the Children or some other charitable organisation? </p>
<p>There are so many charities, and charitable causes, to choose from. </p>
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<p>
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Read more:
<a href="https://theconversation.com/how-to-responsibly-donate-to-ukrainian-causes-178391">How to responsibly donate to Ukrainian causes</a>
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<p>Australia, for example, has more than 57,500 registered charities (for a population of 25 million). The UK (population 67 million) has more <a href="https://www.civilsociety.co.uk/voices/there-are-more-than-twice-as-many-charities-in-the-uk-as-you-ve-been-told.html">more than 200,000</a>. The US (population 350 million) has close to <a href="https://nccs.urban.org/publication/nonprofit-sector-brief-2019#finances">1.5 million</a>.</p>
<p>They’re vying against direct competitors as well as every other charity and cause. Suicide prevention is up against wilderness conservation. Cancer research against climate change activism. Refugee aid against the arts.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/celebrity-charities-just-compete-with-all-other-charities-so-why-start-one-70711">Celebrity charities just compete with all other charities – so why start one?</a>
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<p>Not all actively fundraise – in Australia only <a href="https://fia.org.au/wp-content/uploads/2020/04/FIA-Infographic.pdf">about 40% do</a> – but that still leaves thousands competing for your money. </p>
<p>And that competition is hurting them.</p>
<h2>The downsides of competition</h2>
<p>Research by University of Washington economist Bijetri Bose suggests greater competition among non-profits marginally increases aggregate donations but <a href="https://econ.washington.edu/sites/econ/files/old-site-uploads/2014/11/Bose_jmpaper.pdf">reduces average donations</a> per organisation. Fundraising costs also escalate with greater competition.</p>
<p>There are concerns aggressive marketing, from phone calls to junk mail to “edgy” advertising, is turning people off donating to any charity. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/charities-are-contributing-to-growing-mistrust-of-mental-health-text-support-heres-why-179056">Charities are contributing to growing mistrust of mental-health text support — here's why</a>
</strong>
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<p>A classic example is the UK <a href="https://pancreaticcanceraction.org/">Pancreatic Cancer Action’s</a> “I wish I had” campaign. It compared the 3% survival rate for pancreatic cancer to 97% for testicular cancer and 85% for breast cancer. The campaign attracted attention, but not <a href="https://www.theguardian.com/voluntary-sector-network/2014/feb/12/pancreatic-cancer-action-controversial-advert">in the way</a> the organisation hoped.</p>
<figure class="align-center ">
<img alt="The UK Pancreatic Cancer Action's 'I wish I had breast cancer' campaign proved controversial." src="https://images.theconversation.com/files/462373/original/file-20220511-24-gk9ng9.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/462373/original/file-20220511-24-gk9ng9.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=360&fit=crop&dpr=1 600w, https://images.theconversation.com/files/462373/original/file-20220511-24-gk9ng9.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=360&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/462373/original/file-20220511-24-gk9ng9.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=360&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/462373/original/file-20220511-24-gk9ng9.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=453&fit=crop&dpr=1 754w, https://images.theconversation.com/files/462373/original/file-20220511-24-gk9ng9.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=453&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/462373/original/file-20220511-24-gk9ng9.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=453&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The UK Pancreatic Cancer Action’s ‘I wish I had breast cancer’ campaign proved controversial.</span>
<span class="attribution"><span class="source">UK Pancreatic Cancer Action</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
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<p>Though there’s no hard data proving competition is contributing to donor fatigue, there is strong anecdotal evidence. </p>
<p>The UK’s Fundraising Regulator has been cracking down on aggressive fundraising since a 2015 case in which a 92-year-old woman committed suicide after receiving <a href="https://www.bbc.com/news/uk-40490936">466 mailings from 99 charities</a> in a year. Last month it updated its service to stop direct marketing communications from charities, allowing people to block <a href="https://www.fundraisingregulator.org.uk/more-from-us/news/fundraising-regulator-strengthens-fundraising-preference-service-following">ten charities at a time</a>.</p>
<p>In the US, the Indiana University Lilly Family School of Philanthropy has found that even though total donations have been increasing, the share of Americans donating has declined – from two-thirds in 2000 <a href="https://philanthropy.iupui.edu/news-events/news-item/latest-data-shows-new-low-in-share-of-americans-who-donated-to-charity.html?id=363">to half in 2018</a>. </p>
<p>The report doesn’t speculate on the causes, but given the well-established phenomenon of choice overload, it’s reasonable to assume too much competition plays a part.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/does-choice-overload-you-it-depends-on-your-personality-take-the-test-122196">Does choice overload you? It depends on your personality – take the test</a>
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<h2>Unfair competition</h2>
<p>As well as the issues already mentioned, competition generally disadvantages smaller charities.</p>
<p>This was highlighted in <a href="https://www.civilsociety.co.uk/news/charities-competitive-behaviours-in-contracting-negatively-impacting-beneficiaries.html">a 2020 report</a> by Britain’s National Council for Voluntary Organisations, warning of competitive behaviour’s “negative impact on the sector, people and places”. </p>
<p>The report’s focus was mostly on competition in bidding for government service contract. but its conclusions also apply to competition for public donations </p>
<p>The “uncool” causes also lose out. This is well-known in conservation fundraising, where large and cute animals outdo <a href="https://www.smithsonianmag.com/science-nature/are-ugly-animals-lost-cause-180963807/">ugly ones</a>. </p>
<figure class="align-center ">
<img alt="WWF advertisement featuring dolpphins." src="https://images.theconversation.com/files/462699/original/file-20220512-23-exx33b.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/462699/original/file-20220512-23-exx33b.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=300&fit=crop&dpr=1 600w, https://images.theconversation.com/files/462699/original/file-20220512-23-exx33b.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=300&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/462699/original/file-20220512-23-exx33b.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=300&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/462699/original/file-20220512-23-exx33b.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=377&fit=crop&dpr=1 754w, https://images.theconversation.com/files/462699/original/file-20220512-23-exx33b.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=377&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/462699/original/file-20220512-23-exx33b.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=377&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Most people would rather save dolphins than blobfish.</span>
<span class="attribution"><span class="source">WWF</span></span>
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<p>It also occurs <a href="http://eprints.gla.ac.uk/77283/">with diseases</a>. The breast cancer lobby in Australia, for example, has been likened to a “<a href="https://www.smh.com.au/lifestyle/health-and-wellness/pink-steamrolls-all-on-path-to-cancer-kudos-20110108-19j9n.html">pink steamroller</a>”, diverting funding and public awareness away from other forms of cancer. </p>
<p>Celebrity power has contributed to this. Breast cancer survivor <a href="https://www.theguardian.com/film/2020/oct/26/olivia-newton-john-i-dont-wish-cancer-on-anyone-else-but-for-me-it-has-been-a-gift">Olivia Newton-John</a>, for example, has been a passionate fundraiser for research, establishing the <a href="https://www.onjcancercentre.org/">Olivia Newton-John Cancer Wellness & Research Centre</a>.</p>
<figure class="align-center ">
<img alt="Olivia Newton-John addresses the Victorian Comprehensive Cancer Centre Research Conference in Melbourne in September 2019." src="https://images.theconversation.com/files/462687/original/file-20220512-5542-pm0lu1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/462687/original/file-20220512-5542-pm0lu1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=429&fit=crop&dpr=1 600w, https://images.theconversation.com/files/462687/original/file-20220512-5542-pm0lu1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=429&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/462687/original/file-20220512-5542-pm0lu1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=429&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/462687/original/file-20220512-5542-pm0lu1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=539&fit=crop&dpr=1 754w, https://images.theconversation.com/files/462687/original/file-20220512-5542-pm0lu1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=539&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/462687/original/file-20220512-5542-pm0lu1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=539&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Olivia Newton-John addresses the Victorian Comprehensive Cancer Centre Research Conference in Melbourne in September 2019.</span>
<span class="attribution"><span class="source">David Crosling/AAP</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>So too has champion cricketer Glenn McGrath, who established the <a href="https://www.mcgrathfoundation.com.au/">McGrath Foundation</a> after his wife Jane died of breast cancer. The foundation has a high-profile association with Cricket Australia, which hosts the annual <a href="https://www.pinktest.com.au/">Sydney Pink Test</a> to raise money for breast cancer services.</p>
<h2>Is more co-operation possible?</h2>
<p>Could charities compete less and co-operate more? </p>
<p>Co-operative marketing structures are common in sectors such as agriculture. They are also used in retailing, where small independent stores, travel agents and newsagencies have pooled their marketing resources to compete with large corporate rivals.</p>
<p>Applying this approach would mean, for example, that cancer charities – breast, bowel, leukaemia, lung, myeloma, ovarian, pancreatic and prostate – would fund campaigns coordinated by an umbrella organisation. Proceeds could then be split more equitably, based on expert input about research and support needs. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-market-is-not-our-master-only-state-led-business-cooperation-will-drive-real-economic-recovery-141532">The market is not our master — only state-led business cooperation will drive real economic recovery</a>
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</em>
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<p>The benefits of greater co-operation have been <a href="https://www.charityconnect.co.uk/post/5-ways-charities-can-benefit-from-collaboration/145">talked about for years</a> with no much progress made. </p>
<p>But there’s nothing like an idea whose time has come, and with every passing year the case for charitable co-operation grows.</p><img src="https://counter.theconversation.com/content/182754/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Competition is hurting charities and the causes for which they raise funds. There must be a better way.David Waller, Associate Professor, University of Technology SydneyPhillip Morgan, Associate lecturer, University of NewcastleLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1730562021-12-02T05:58:48Z2021-12-02T05:58:48ZAre charities being silenced? Why a new law is alarming activists and could scuttle their election campaigns<p>The final two sitting weeks of parliament this year have provided both good and bad news for Australian charities.</p>
<p>Last week provided the good news, with <a href="https://www.legislation.gov.au/Details/F2021L00863">new government regulations</a> that would have curtailed the ability of charities to engage in protest <a href="https://www.theguardian.com/australia-news/2021/nov/25/senate-scuttles-coalition-crackdown-on-charity-advocacy-work">disallowed by the Senate</a>, meaning they will not take effect. </p>
<p>Charities were relieved to see this, as many faced the prospect of having to pull back on certain advocacy activities.</p>
<p>But this week brought the bad news, with <a href="https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r6752">changes to electoral laws</a> passed by parliament that will impose more regulation on charities and other organisations that engage in the electoral process. </p>
<p>Despite intense lobbying by a coalition of charities, a last-minute <a href="https://probonoaustralia.com.au/news/2021/12/charities-shocked-and-angry-as-deal-done-on-political-campaigners-bill/">deal between the Morrison government and the opposition</a> led to the bill’s passage, albeit with some amendments that slightly lessen its negative impact.</p>
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<h2>What the new law does</h2>
<p>One of the main changes in the new law is the introduction of a lower threshold for organisations having to register as a so-called “political campaigner”.</p>
<p>Previously, an organisation had to register as a political campaigner if it exceeded $500,000 in electoral expenditure (money spent on campaigns, advertising and any other advocacy work seeking to influence voters in an election) in any of the past three years. The bill sought to lower this threshold considerably to $100,000. </p>
<p>As part of the deal between the government and opposition, this threshold was changed to $250,000 in the final version of the bill that was passed. This is an improvement on the original proposal of $100,000, but it still means many charities will be captured by the change.</p>
<p>More charities will now be required to register as political campaigners and be subject to the additional reporting obligations this entails, including identifying their larger donors. </p>
<p>Opponents of the bill fear it will act like a spending cap, with charities stepping back from campaigning to not trigger the additional requirements that come with being a political campaigner.</p>
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<p>In addition to lowering the threshold, the bill also broadens the type of expenditure that is relevant for determining if an organisation is subject to any reporting and other obligations. </p>
<p>Now, any expenditure “in relation to an election” must be counted, but there is no guidance as to what this actually means. This is a significant source of uncertainty for charities, and again may lead many to be more cautious when engaging in the democratic process.</p>
<p>Another problematic element of the bill is the fact it will apply retrospectively to money already spent by an organisation. Charities will have to look back at their spending and see if it constitutes an “electoral expenditure” using the more vague definition now in place, and determine whether this places them in the category of a political campaigner. </p>
<p>Pages and pages of legal advice will be needed, but lawyers won’t have much to go on given the scant detail provided in the bill.</p>
<p>One positive outcome, however, is that “political campaigners” will actually no longer be referred to by this name – the term will change to “significant third parties”. </p>
<p>This is a welcome change, given the term “political campaigner” could lead to people conflating charities and other organisations with political parties – despite the fact they are not seeking elected office and focus on issues-based campaigning.</p>
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<h2>Advocacy by charities is important and already regulated</h2>
<p>Ultimately, the bill is a problem because it will hinder the advocacy activities of charities. And advocacy is <a href="https://theconversation.com/explainer-what-are-the-limits-to-charities-advancing-political-causes-71466">one of the key ways</a> that charities can address the root causes of the social and environmental challenges they seek to ameliorate. This often requires changing government policy. </p>
<p>Charities can lobby and campaign to do this – provided they stop short of endorsing and supporting particular parties or candidates.</p>
<p>Advocacy activities can still take place in the context of an election, though. For example, charities can take out advertisements outlining or critiquing the positions of different political parties on issues as diverse as climate change or the amount of JobSeeker payments.</p>
<p>Charities are already regulated when they incur “electoral expenditures”, with the <a href="http://www8.austlii.edu.au/cgi-bin/viewdb/au/legis/cth/consol_act/cea1918233/">Commonwealth Electoral Act 1918</a> imposing various obligations on them (and any other organisations similarly involved in the electoral process).</p>
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Read more:
<a href="https://theconversation.com/the-government-is-clamping-down-on-charities-and-it-could-have-a-chilling-effect-on-peaceful-protest-163493">The government is clamping down on charities — and it could have a chilling effect on peaceful protest</a>
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<p>They may be classified as a “<a href="https://www.aec.gov.au/parties_and_representatives/financial_disclosure/guides/third-parties/index.htm">third party</a>” organisation or need to register as a <a href="https://www.aec.gov.au/Parties_and_Representatives/financial_disclosure/who-needs-to-register.htm">political campaigner</a>“. </p>
<p>A certain level of such regulation is necessary, in the interests of promoting transparency and integrity in elections. The problem with the bill is that it takes things too far.</p>
<h2>A poor process leads to a poor outcome</h2>
<p>Otto Von Bismarck is believed to have once said, "Laws are like sausages. Better not to see them being made.”</p>
<p>The statement rings true given the developments this week. The changes to electoral laws were rushed through parliament, without even being referred to a committee inquiry to examine the details of the bill and its implications. </p>
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Read more:
<a href="https://theconversation.com/infographic-a-snapshot-of-charities-and-giving-in-australia-66672">Infographic: a snapshot of charities and giving in Australia</a>
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<p>A last-minute deal saw some of the problematic elements of the bill wound back, but what was passed remains deeply flawed.</p>
<p>More charities will now be subject to additional reporting and other obligations under the electoral laws, and there is now more uncertainty about what spending counts as “electoral expenditure”. </p>
<p>This may mean charities will be more reluctant to engage in advocacy, especially where any link can be made between their work and an election. This would lead to less debate about the various social and environmental challenges we confront as a nation. </p>
<p>We need more engagement in our democratic process in Australia, not less, and this bill represents a setback in that regard.</p>
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<p>_Correction: The article has been amended to clarify the change to the definition of the electoral expenditure contained in the bill. _</p><img src="https://counter.theconversation.com/content/173056/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Krystian Seibert was an adviser to a former Australian Assistant Treasurer between 2012 and 2013, where he oversaw the establishment of the Australian Charities and Not-for-profits Commission and its regulatory framework, including the Charities Act 2013. He has provided advice and support to Hands Off Our Charities, an alliance of charities that opposed the bill.</span></em></p>Charities fear the new law will act like a spending cap, forcing them to step back from campaigning to avoid triggering additional reporting obligations.Krystian Seibert, Industry Fellow, Centre for Social Impact, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1597822021-06-01T14:02:42Z2021-06-01T14:02:42ZHow to ensure your charity donations truly help your local community<figure><img src="https://images.theconversation.com/files/402904/original/file-20210526-21-z29w07.JPG?ixlib=rb-1.1.0&rect=495%2C342%2C5511%2C3665&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Staff members wear gloves, face shields and gowns as they hand out meals at lunchtime at the Shepherds of Good Hope soup kitchen in Ottawa in 2020. </span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Justin Tang </span></span></figcaption></figure><p>Since the onset of the COVID-19 pandemic, <a href="https://imaginecanada.ca/en/360/ongoing-impacts-covid-19-crisis-charitable-sector">the charitable sector</a> has provided vital support and services to Canadians through nearly 86,000 registered charities that, in 2018, <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/200214/dq200214a-eng.htm">received about $10 billion in donations</a>.</p>
<p>In 2020, however, <a href="https://www.charityintelligence.ca/index.php">Charity Intelligence Canada reported</a> that a <a href="https://www.charityintelligence.ca/giving-with-impact/top-impact-charities">substantial proportion</a> of charitable donations are wasted on large charities that aren’t transparent about the impact of each dollar donated. </p>
<p>Given the <a href="https://www150.statcan.gc.ca/n1/en/pub/11-631-x/11-631-x2020004-eng.pdf?st=KcnZSzGz">unprecedented socio-economic impacts </a> of the ongoing COVID-19 pandemic, Canadians must think critically about where they donate to ensure every dollar counts. We encourage Canadians to consider place-based giving, or donating “<a href="https://milkeninstitute.org/articles/going-local-power-place-based-philanthropy">at home</a>,” through local community foundations that are well-positioned to navigate and bolster the post-pandemic recovery.</p>
<h2>Transparency in charitable giving</h2>
<p>Canadian charitable organizations are under increased scrutiny about the transparency of their operations, in part due to the ongoing WE Charity scandal that features reports of <a href="https://nationalpost.com/news/canada/donor-says-he-raised-hundreds-of-thousands-for-we-in-honour-of-dead-son-and-they-removed-his-name">misused charitable dollars</a> and <a href="https://www.theglobeandmail.com/politics/article-trudeau-cleared-in-we-charity-controversy-but-ethics-commissioner/">alleged conflicts of interest</a>. </p>
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Read more:
<a href="https://theconversation.com/we-charity-demise-shows-why-trust-transparency-are-so-critical-for-ngos-146011">WE Charity demise shows why trust, transparency are so critical for NGOs</a>
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<p><a href="https://angusreid.org/covid-we-charity-giving/">A recent survey</a> conducted by the Angus Reid Institute found that since the WE controversy, more than half of donors “say the scandal leads them to question the governance and transparency in the charity sector more broadly.” </p>
<p>Despite this trend, the Canada Revenue Agency <a href="https://www.canadiancharitylaw.ca/blog/despite-we-charity-scandal-and-5-months-of-intense-coverage-the-federal-government-is-reducing-transparency-on-the-charitable-sector/">reduced transparency</a> in the charitable sector by changing reporting requirements for charities engaged in non-partisan political activities. The new requirements amount to the public having “far less visibility as to what certain charities are doing,” <a href="https://www.canadiancharitylaw.ca/blog/despite-we-charity-scandal-and-5-months-of-intense-coverage-the-federal-government-is-reducing-transparency-on-the-charitable-sector/">according to Mark Blumberg</a>, a lawyer who works almost exclusively in the areas of non-profit and charity law.</p>
<figure class="align-center ">
<img alt="Marc and Craig Kielburger at WE Day celebrations." src="https://images.theconversation.com/files/402982/original/file-20210526-21-aof9fy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/402982/original/file-20210526-21-aof9fy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=422&fit=crop&dpr=1 600w, https://images.theconversation.com/files/402982/original/file-20210526-21-aof9fy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=422&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/402982/original/file-20210526-21-aof9fy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=422&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/402982/original/file-20210526-21-aof9fy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=530&fit=crop&dpr=1 754w, https://images.theconversation.com/files/402982/original/file-20210526-21-aof9fy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=530&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/402982/original/file-20210526-21-aof9fy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=530&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Marc, left, and Craig Kielburger, co-founders of WE Charity, are seen at WE Day celebrations in 2011.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Geoff Robins</span></span>
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<p>Given this disconnect between public concerns and government response, Canadians are left with the responsibility to verify the impact of their charitable dollars.</p>
<p>This is not to devalue or question the ethics of Canadian charities or government action. But the current climate around transparency in the charitable sector illustrates the advantages of local, place-based giving through Canadian community foundations. </p>
<p><a href="https://communityfoundations.ca/our-purpose/">Community Foundations of Canada</a>, the leadership organization for Canada’s 191 local community foundations, advises empowering local voices through <a href="https://communityfoundations.ca/wp-content/uploads/2019/04/Vital-Conversations-Guide.pdf">vital conversations</a> and offering locally relevant services. These foundations have the potential to become key drivers of local community development and revitalization in the post-pandemic era. </p>
<h2>Local voices respond to a global crisis</h2>
<p>These community foundations are deeply embedded in local regions and municipalities, often governed by board directors who live and work in the area. Through grants, training and other initiatives supporting local organizations, Canadian community foundations <a href="https://www.mckinsey.com/industries/public-and-social-sector/our-insights/a-transformative-moment-for-philanthropy">have spurred resilience</a> and sustainable development in response to local challenges related to COVID-19.</p>
<p>Recovery requires <a href="https://policyoptions.irpp.org/magazines/october-2020/rural-canadians-need-to-be-included-in-pandemic-recovery-plans/">innovative local solutions</a> to the unique and diverse challenges that Canadian communities face. For example, the Oxford Community Foundation in Ontario has <a href="https://www.woodstocksentinelreview.com/news/local-news/oxford-community-foundation-announces-local-grant-funding">funded local services</a> to address domestic violence. These services <a href="https://doi-org.subzero.lib.uoguelph.ca/10.1007/s10896-020-00212-x">are crucial</a> as lockdown measures continue, but access to these services in rural regions <a href="https://novascotia.ca/news/release/?id=20210205001">have long been a challenge</a>. </p>
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<img alt="Yellow police tape in front of a police cruiser." src="https://images.theconversation.com/files/402980/original/file-20210526-21-f4553.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/402980/original/file-20210526-21-f4553.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=358&fit=crop&dpr=1 600w, https://images.theconversation.com/files/402980/original/file-20210526-21-f4553.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=358&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/402980/original/file-20210526-21-f4553.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=358&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/402980/original/file-20210526-21-f4553.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=450&fit=crop&dpr=1 754w, https://images.theconversation.com/files/402980/original/file-20210526-21-f4553.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=450&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/402980/original/file-20210526-21-f4553.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=450&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Domestic violence has increased throughout the COVID-19 pandemic, and some local charities are making efforts to help those victimized by it.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Jeff McIntosh</span></span>
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<p>Despite the pervasive impacts of the COVID-19 pandemic, community foundations have proven to be flexible and innovative, their relatively small scale and local focus allowing them to respond quickly to the evolving needs of their communities. </p>
<p>A <a href="https://www.canadahelps.org/en/the-giving-report/download-the-report/">recent report</a> from <a href="https://www.canadahelps.org/en/">CanadaHelps</a>, dedicated to increasing charitable giving across the country, indicates that while the total dollar amount of donations has decreased, there are promising new trends in online giving. This flexibility in the philanthropic sector is vital.</p>
<p>The Healthy Communities Initiative, <a href="https://communityfoundations.ca/initiatives/chci/">a $31 million federal government initiative</a>, is managed and dispersed through a local community foundation collaborative. It considers “innovative digital solutions” as one of three pillars toward local community recovery. </p>
<h2>Helping under-served communities</h2>
<p>Without established connections to local communities, transnational or national Canadian charities are at a disadvantage in understanding and addressing local needs, particularly in rural areas, which are all too frequently ignored and under-served. Data-driven, evidence-based solutions designed by local community voices can build momentum toward post-pandemic recovery — <a href="https://policyoptions.irpp.org/magazines/april-2021/canadian-not-for-profit-digital-projects-face-funding-and-policy-barriers/">with adequate funding and supportive policy</a>.</p>
<p>Issues persist in the sector with local, place-based organizations working hard to retain adequate funding to meet the demand for services in their region. Arthur Bull, the former chairman of the <a href="https://www.rcfofns.com/">Rural Communities Foundation of Nova Scotia</a>, says that despite local pockets of wealth across Canada, <a href="https://philab.uqam.ca/en/home-blog/philab-interviews-arthur-bull-former-chair-of-rural-communities-foundation-of-nova-scotia/">the reality is</a> that “very little [wealth] goes to helping people build vibrant communities, dealing with local issues.” </p>
<p>Community foundations are uniquely connected to help address this gap within their local service areas and therefore have the potential to effectively facilitate recovery efforts post-pandemic.</p>
<h2>Best practices</h2>
<p>We are currently working with a <a href="http://ruralresilience.ca/project/currentprojects/place-based-endowments-in-the-periphery/">team of researchers</a> from across Canada to investigate the connections between philanthropy and community to understand and inform best practices. This will help organizations maximize their impact. </p>
<p>Coupled with the growing uncertainty surrounding transparency in the charitable sector, place-based charitable giving can provide peace of mind for Canadians to better understand the impact of their donated dollars.</p>
<p>Instead of wondering if their donation was misused or helped to <a href="https://budgeting.thenest.com/charitable-organizations-legitimate-26150.html">cushion senior executives’ salaries</a>, Canadians can give to their communities through community foundations — and take comfort in seeing the tangible, local results from their donations.</p><img src="https://counter.theconversation.com/content/159782/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>I coordinate the PhiLab Atlantic Hub - a research partnership network of university researchers and community foundations and other NGOs in the philanthropic sector. We aim to support the philanthropic sector (particularly in rural Canada) through evidence-based approaches to sustainable community development.
This article was written by members of a research team studying the impacts of local community foundations and philanthropy in rural regions. The research project is funded by the Social Sciences and Humanities Research Council of Canada (SSHRC). </span></em></p><p class="fine-print"><em><span>Lou Helps does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Canadians should consider place-based giving, or donating ‘at home,’ through local community foundations that are well-positioned to navigate and bolster the post-pandemic recovery.Brady Reid, PhD Student, University of GuelphLou Helps, PhD Student, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1351702020-05-22T12:18:59Z2020-05-22T12:18:59ZWhy Ford, Chanel and other companies pitch in during a crisis – without the government ordering them to<figure><img src="https://images.theconversation.com/files/336859/original/file-20200521-102647-gbww8q.jpg?ixlib=rb-1.1.0&rect=50%2C179%2C3690%2C2311&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Ford employees assemble ventilators. </span> <span class="attribution"><span class="source">AP Photo/Carlos Osorio</span></span></figcaption></figure><p><a href="https://www.who.int/news-room/detail/03-03-2020-shortage-of-personal-protective-equipment-endangering-health-workers-worldwide">Severe shortages of critical medical supplies</a> have prompted governments to compel private companies to fill the gap. In the U.S., President Donald Trump invoked rarely used powers to force <a href="https://www.nytimes.com/2020/03/30/business/gm-ventilators-coronavirus-trump.html">General Motors</a> to make ventilators, while the leaders of <a href="https://www.ft.com/content/42f636be-751d-4ebf-9b55-bf313014769f">France</a>, the <a href="https://www.autocar.co.uk/car-news/industry/government-ask-uk-manufacturers-build-ventilators">U.K.</a> and <a href="https://www.japantimes.co.jp/news/2020/02/28/national/mask-makers-distance-abes-coronavirus-guarantee/#.XsbHpBNKgnc">Japan</a> have put pressure on companies to make more medical supplies. </p>
<p>But, judging by how many non-medical companies have voluntarily stepped up to shift their manufacturing might to produce health care supplies – including GM rival <a href="https://www.businessinsider.com/ford-making-ventilators-to-fight-coronavirus-how-many-when-ge-2020-3">Ford</a> – it seems hardly necessary. </p>
<p>Fashion brands such as <a href="https://www.ft.com/content/e9c2bae4-6909-11ea-800d-da70cff6e4d3">LVMH</a>, <a href="https://www.reuters.com/article/us-health-coronavirus-france-chanel/chanel-turns-its-workshops-to-making-face-masks-as-coronavirus-spreads-idUSKBN21G0JP">Chanel</a> and <a href="https://wwd.com/beauty-industry-news/beauty-features/loreal-launches-sweeping-program-to-combat-covid-1203539626/">L’Oreal</a> <a href="https://www.businessinsider.com/dior-reopens-baby-dior-factory-to-start-making-face-masks-2020-4">are transforming their factories</a> to mass produce face masks. Spirit and beer makers <a href="https://www.nasdaq.com/articles/anheuser-busch-starts-making-hand-sanitizer-alongside-its-beer-2020-03-23">Anheuser-Busch</a>, <a href="https://www.adweek.com/creativity/diageo-and-anheuser-busch-join-alcohol-brands-pivoting-to-free-sanitizer/">Diageo</a>, <a href="https://www.businessinsider.com/coors-beer-company-makes-hand-sanitizer-amid-coronavirus-pandemic-2020-3">Molson Coors</a> and <a href="https://www.bevindustry.com/articles/92934-bacardi-launches-production-of-hand-sanitizer-at-puerto-rico-distillery">Bacardi</a> are shifting some of their production and distribution towards hand sanitizer. And automakers <a href="https://www.bloomberg.com/news/articles/2020-03-27/toyota-shifts-factories-to-face-shields-will-help-device-makers">Toyota</a>, <a href="https://www.reuters.com/article/us-health-coronavirus-volkswagen-ventila/volkswagen-tests-ventilator-output-as-carmakers-join-coronavirus-fight-idUSKBN2172VH">Volkswagen</a> and <a href="https://www.reuters.com/article/us-health-coranavirus-fiat-chrysler-vent/fiat-chrysler-starts-ventilator-component-output-in-italy-idUSKBN21L1FA">Fiat Chrysler</a> are leveraging their 3D printing capabilities to produce face shields and are <a href="https://www.msn.com/en-us/money/companies/ford-partners-with-3m-and-ge-healthcare-to-make-respirators-ventilators-to-fight-coronavirus/ar-BB11DicJ">partnering</a> with other companies to make ventilators.</p>
<p>And that’s just three industries. In all, hundreds of companies across the globe have committed money, supplies and know-how to help with the COVID-19 response, according to the U.S. Chamber of Commerce Foundation’s <a href="https://www.uschamberfoundation.org/aid-event/corporate-aid-tracker-covid-19-business-action">corporate aid tracker</a>. </p>
<p>Why are these companies being so generous? </p>
<p>As <a href="https://kelley.iu.edu/faculty-research/faculty-directory/profile.cshtml?id=EMAFIKRE">scholars</a> of <a href="https://scholar.google.com/citations?user=DFjwsYUAAAAJ&hl=en&oi=ao">corporate social responsibility</a>, we believe altruism certainly plays a role for many of them, but it’s not the only motivator. Research on company behavior points to two others: <a href="https://www.ingentaconnect.com/content/mcb/168/2015/00000020/00000002/art00003">bolstering reputation</a> and <a href="https://www.doi.org/10.1086/467466?mobileUi=0&">avoiding regulation</a>. </p>
<h2>Burnishing the brand</h2>
<p>In normal times, companies often undertake socially responsible initiatives to <a href="https://www.inc.com/maureen-kline/how-to-manage-your-companys-reputation.html">enhance their brand</a> and build a stronger relationship with consumers, investors and employees in order to drive profits. </p>
<p>What’s a socially responsible initiative? <a href="https://www.doi.org/10.1002/csr.132">There are many definitions</a>, but the way scholars like us think of it is it means taking voluntary action that is not prescribed by law or not necessary to comply with a regulation. </p>
<p>Reputation Institute, a management consultancy, found that people’s willingness to buy, recommend, work for or invest in a company <a href="https://www.forbes.com/sites/jacquelynsmith/2012/12/10/the-companies-with-the-best-csr-reputations/#49e60e384404">is significantly influenced</a> by their perceptions of its corporate social responsibility practices. So doing something that benefits people in their community can lead to <a href="http://dx.doi.org/10.2139/ssrn.2062429">higher sales</a>, <a href="https://philpapers.org/rec/SHIEDS">increase the company’s valuation</a> and <a href="https://doi.org/10.1108/14720701011085544">keep good employees around longer</a>. </p>
<p>But these are anything but normal times. Rather, it is a global crisis that has created a need for an <a href="https://unfoundation.org/blog/post/weekly-update-all-hands-on-deck-against-covid-19/">all hands on deck</a> response from everyone, including corporate America. In other words, <a href="https://www.forbes.com/sites/pamdanziger/2017/10/20/fire-floods-hurricanes-how-and-why-corporations-must-help/#10231fb67388">just like during natural disasters</a>, people expect companies to do their part – and not appearing to do so could damage a brand’s reputation. A <a href="https://www.conecomm.com/news-blog/2013-global-csr-study-release">2013 survey of citizens of 10 countries</a> that included the U.S., France, Brazil and China found that 9 in 10 people said they would boycott a company they believed behaved irresponsibly. </p>
<p>And this is especially true of industries that are more directly connected to the crisis. In the current situation, for example, there’s been a shortage of hand sanitizer, which fashion companies that make perfume <a href="https://tanksgoodnews.com/2020/03/17/lvmh-hand-sanitizer/">can easily produce</a>. And manufacturers are, as we’ve seen, <a href="https://www.wsj.com/articles/trump-lashes-out-at-general-motors-over-ventilators-11585327749">capable of repurposing</a> their assembly lines to build ventilators. </p>
<p>Not doing its part, in this environment, could result in a long-term hit to a company’s reputation. </p>
<h2>Eluding onerous regulations</h2>
<p>The other motivator is preempting government regulation, which becomes a greater risk during and after a crisis. </p>
<p>For instance, we saw <a href="https://corpgov.law.harvard.edu/2010/11/20/the-financial-panic-of-2008-and-financial-regulatory-reform/">more financial regulation</a> after Wall Street’s behavior sparked the Great Recession, and lawmakers from districts that suffer from hurricanes <a href="https://www.nber.org/papers/w25835">tend to support bills</a> promoting more environmental regulation. </p>
<p>So companies will often pursue voluntary self-regulation and take other proactive measures during a crisis in hopes of forestalling a more onerous government reaction. A recent <a href="https://web.stanford.edu/%7Etomz/pubs/MMT-APSR-2019.pdf">Stanford study</a> found that even a modest effort can work to effectively preempt regulation. </p>
<p>Furthermore, this allows companies to set the terms and control the agenda, <a href="https://store.hbr.org/product/profiting-from-environmental-regulatory-uncertainty-integrated-strategies-for-competitive-advantage/CMR498">allowing them to choose actions</a> that are in the interest of society, profitable, and avoid the costs and pains of complying with new regulations. </p>
<p>At the moment, companies may be stepping up to avoid a more draconian response from the government, such as when Trump invoked the <a href="https://www.washingtonpost.com/politics/2020/03/19/defense-production-act-trump-coronavirus/">Defense Production Act</a> against GM, which allows him to control and direct corporate resources towards production of critical equipment. This also gives the federal government priority in contracting, limiting a company’s ability to find the most efficient or profitable contracts.</p>
<p>So next time you read about a company doing something for the greater good, applaud the effort. But you could consider its other strategic motivations as well. </p>
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<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Ford is assembling ventilators, LVMH is making hand sanitizer, and Chanel is making masks. Here’s why these and dozens of other companies are doing it.Elham Mafi-Kreft, Clinical Associate Professor of Business Economics, Indiana UniversitySteven Kreft, Clinical Professor of Business Economics and Public Policy, Indiana UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1373652020-05-08T12:19:01Z2020-05-08T12:19:01ZDrive-thru iftars and coronavirus task forces: How Muslims are observing obligations to the poor this Ramadan<figure><img src="https://images.theconversation.com/files/332767/original/file-20200505-83736-1adpcoc.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5296%2C3477&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Volunteers distributing drive-thru iftar meals outside an Islamic center in Falls Church, Virginia.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/volunteers-and-security-guards-wear-masks-as-they-news-photo/1211233175?adppopup=true">Andrew Caballero-Reynolds/AF via Getty Images</a></span></figcaption></figure><p>Many of the world’s <a href="https://www.pewresearch.org/fact-tank/2019/04/01/the-countries-with-the-10-largest-christian-populations-and-the-10-largest-muslim-populations/">1.8 billion Muslims</a> are experiencing the <a href="https://theconversation.com/why-ramadan-is-called-ramadan-6-questions-answered-77291">holy month of Ramadan</a> differently this year – disrupted by social distancing amid the COVID-19 pandemic. </p>
<p>Ramadan, which began on April 24, is the <a href="https://theconversation.com/why-ramadan-is-called-ramadan-6-questions-answered-77291">ninth month on the Islamic lunar calendar</a> during which Muslims are required to fast from food, drink and sexual activity from dawn to dusk.</p>
<p>It is also a time for Muslims to renew their faith and remind themselves of the best that they can be by performing acts of compassion. For many Muslims, Ramadan is centered around helping the poor. </p>
<p>As a <a href="https://philanthropy.iupui.edu/people-directory/siddiqui-shariq.html">scholar of Muslim philanthropy</a>, I have watched as people and institutions have adapted practices to accommodate social distancing rules. I have also observed how the crisis has exposed the vulnerability of Muslim nonprofits.</p>
<p>Muslims tend to give their “<a href="https://www-philanthropy-com.proxy.ulib.uits.iu.edu/article/Ramadan-Fundraising-Is-Like-an/246287">zakat</a>” – obligatory annual charitable payments – during Ramadan. In the U.S., this has traditionally meant fundraising “<a href="https://www.peacecatalyst.org/blog/2018/6/6/ramadan-101-what-is-iftar">iftars</a>” – the evening meal to break daily Ramadan fasts – or congregational fundraising at community prayers or volunteering.</p>
<p>Social distancing has made it hard to keep up this tradition.</p>
<h2>Anti-poverty efforts</h2>
<p>According to <a href="https://www.ispu.org/american-muslim-philanthropy-a-data-driven-comparative-profile/">a 2018 survey of Muslim philanthropic practices</a> by the Institute of Social Policy and Understanding, U.S. Muslims make efforts to alleviate poverty in America a high priority when giving to Muslim charities. In fact, the poll found it was the second-most important focus of philanthropy after supporting their places of worship. Education and international relief rounded out their top four priorities. </p>
<p>When it comes to giving to non-Muslim charities, Muslims likewise spent more on groups that deal with poverty within the United States than other countries.</p>
<p>Civil rights organizations ranked below foreign and domestic anti-poverty efforts even as Muslims <a href="https://www.npr.org/local/309/2019/05/03/720057760/study-shows-islamophobia-is-growing-in-the-u-s-some-say-it-s-rising-in-chicago-too">face a rising tide of Islamophobia</a>. At a time when many Muslims in the U.S. are <a href="https://www.pewforum.org/2017/07/26/findings-from-pew-research-centers-2017-survey-of-us-muslims/">feeling marginalized or at risk of hostility</a>, they are still prioritizing the needs of others. In fact, they are just as likely to give to causes outside their faith as those within, and of all faiths are <a href="https://www.ispu.org/american-muslim-philanthropy-a-data-driven-comparative-profile/">the most likely to give to poverty causes</a> outside their religion.</p>
<p>Similarly, a <a href="https://www-alliancemagazine-org.proxy.ulib.uits.iu.edu/feature/muslim-philanthropy-the-british-way/">recent survey of British Muslims</a> found that younger U.K. Muslims are passionate about reducing domestic inequality and poverty and that they are focusing on efforts within their own borders rather than Muslims in other countries.</p>
<p>The economic downturn caused by the coronavirus will have <a href="https://www.washingtonpost.com/business/2020/04/20/coronavirus-recession-could-plunge-tens-millions-into-poverty-new-report-warns/">inevitably pushed many families</a> – Muslim and non-Muslim alike – into poverty. Even before the crisis, <a href="https://www.ispu.org/whats-the-hidden-story-behind-american-muslim-poverty/">more than a third of Muslim Americans</a> were below the poverty line – a higher proportion than that of the general population.</p>
<h2>Direct aid</h2>
<p>Despite the challenges brought about by social distancing, Muslims organizations have still found ways to channel money to those in need. In the United States, the <a href="https://isna.net/">Islamic Society of North America</a> has, for example, helped establish a <a href="https://isna.net/covid-19/">National Muslim COVID-19 Taskforce</a>. </p>
<p>Local community organizations have come together to develop their own Muslim COVID-19 task forces in places like Indianapolis and Chicago.</p>
<p>Some congregations are providing iftar food for those in need through <a href="https://aboutislam.net/muslim-issues/n-america/atlanta-muslims-feed-the-fasting-in-drive-thru-iftars/">drive-thru services</a> because the traditional community meals are all canceled. Some congregations and organizations like <a href="https://www.icnarelief.org/policies-2/">ICNA Relief</a> are dropping off at homes and apartment buildings.</p>
<p>These local efforts are supported by national networks. </p>
<p>The <a href="https://philanthropy.iupui.edu/institutes/lake-institute/muslim-initiative/programs.html">Community Collaboration Initiative</a>, established by the Muslim Philanthropy Initiative at the Lilly Family School of Philanthropy, where I am employed,“ has brought together 26 Muslim American nonprofits to find ways to collaborate.</p>
<p>While other Muslim relief organizations have increased domestic effort to distribute food and aid directly to people’s homes. </p>
<h2>Emergency funding</h2>
<p>Meanwhile <a href="http://fiqhcouncil.org/is-an-interest-bearing-loan-announced-by-us-government-under-cares-act-permissible-according-to-shariah/">guidance from religious bodies</a> like the Association of Muslim Jurists of America and the Fiqh Council of North America has meant that struggling Muslim families and businesses can apply for federal funds. They ruled that it was permissible to apply for loans under the <a href="https://www.congress.gov/bill/116th-congress/senate-bill/3548/text?q=product+actualizaci%C3%B3n">government’s CARES Act</a> despite the funds being subject to interest – which is <a href="https://www.wsj.com/articles/SB1047142445698534480">forbidden under Islamic law</a>. </p>
<p>I’ve already heard from a number of Muslim nonprofits that they are facing deep financial challenges as a result of the coronavirus crisis.</p>
<p>Muslim Americans represent <a href="https://www.pewresearch.org/fact-tank/2018/01/03/new-estimates-show-u-s-muslim-population-continues-to-grow/">around 1% of the U.S. population</a> and trend younger and poorer. This may explain why Muslim American nonprofits are vulnerable during times of economic hardship and may benefit from greater support from outside foundations and philanthropists. </p>
<p>Muslims in the U.S. have shown their resourcefulness in finding new ways of giving during the coronavirus-hit Ramadan. Many of the faith’s nonprofits may need to do likewise to keep afloat during the hard economic times to come.</p>
<p>[<em>You’re smart and curious about the world. So are The Conversation’s authors and editors.</em> <a href="https://theconversation.com/us/newsletters/weekly-highlights-61?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=weeklysmart">You can get our highlights each weekend</a>.]</p><img src="https://counter.theconversation.com/content/137365/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Shariq Siddiqui receives funding from Waraich Family Foundation, Proteus Fund, Islamic Relief USA, Doris Duke Islamic Arts Foundation, United Mission for Relief, PennyAppeal, Islamic Circle of North America, Mirza Family Foundation, Intuitive Solutions.
Shariq Siddiqui works for Indiana University.
Shariq Siddiqui serves on the board of Institute of Social Policy and Understanding and Center on Muslim Philanthropy,</span></em></p>Social distancing has made giving to the poor – an obligation under Islam – harder this Ramadan. Meanwhile Muslim nonprofits are feeling the strain of the economic downturn.Shariq Siddiqui, Assistant Professor & Director of the Muslim Philanthropy Initiative, IUPUILicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1120872019-07-30T12:37:20Z2019-07-30T12:37:20ZBudgeting for charity: A new way for the government to encourage giving<figure><img src="https://images.theconversation.com/files/265958/original/file-20190326-36252-11gvxqy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A proposed charitable law could simulate this sea of piggy banks.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/large-group-pink-piggy-banks-118848355?src=DJKRv9Af1ZK1CDbHcQDALg-2-54">Jakub Krechowicz/Shutterstock.com</a></span></figcaption></figure><p>U.S. tax laws can <a href="https://nonprofitchronicles.com/2019/01/30/rob-reich-philanthropy-needs-a-fix/">subsidize charitable giving by the wealthy</a>, through the <a href="https://www.thebalancesmb.com/tax-deductions-for-charitable-donations-2501942">charitable deduction</a>, especially following changes that <a href="https://theconversation.com/charity-and-taxes-4-questions-answered-89512">took effect in 2018</a>. But many Americans who are middle class and working class also <a href="https://www.philanthropyroundtable.org/almanac/statistics/who-gives">give some of their money away</a>.</p>
<p>One thing that matters most to the charities that rely on this giving is the <a href="https://www.networkforgood.com/nonprofitblog/4-ways-to-frame-your-monthly-ask/">predictability of this revenue</a>. Donors who give more predictably and more often make it easier for nonprofits to know what to expect, to plan ahead, and to <a href="https://www.networkforgood.com/nonprofitblog/recurring-gifts-the-key-to-sustainability/">pace their spending</a>.</p>
<p>As a <a href="https://scholar.google.com/citations?user=fADm9R4AAAAJ&hl=en&oi=ao">law professor</a> and a <a href="https://www.samford.edu/cumberlandlaw/directory/DiRusso-Alyssa">certified financial planner</a>, I believe charitable tax laws should be changed to make it easier for Americans to <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2718305">budget the money they give to charity</a>. In my opinion, giving more donors a tax break would lead to an increase in giving by encouraging all Americans to make donations part of a routine instead of an occasional splurge.</p>
<h2>Why people give</h2>
<p>For some people, the desire to give to charity is rooted in <a href="https://theconversation.com/an-ethical-guide-to-responsible-giving-87984">ethics or religious beliefs</a>. The Bible and the <a href="https://theconversation.com/american-jews-and-charitable-giving-an-enduring-tradition-87993">Torah</a> embrace the notion of a <a href="https://theconversation.com/why-faith-inspires-people-to-give-88206">tithe</a>, in which everyone sets aside a tenth of their earnings to give away. Other religions, such as <a href="http://irusa.org/the-importance-of-charity-and-giving-in-islam/">Islam</a>, encourage this kind of routine generosity too.</p>
<p>The primary reason most Americans say they give is out of <a href="https://theconversation.com/5-reasons-why-people-give-their-money-away-plus-1-why-they-dont-87801">concern for the well-being of others</a>. What holds them back? One reason is that in a country where most <a href="https://www.cnbc.com/2019/01/09/shutdown-highlights-that-4-in-5-us-workers-live-paycheck-to-paycheck.html">workers live paycheck to paycheck</a>, they are limited in what they can <a href="https://nptechforgood.com/2018/10/10/6-reasons-why-people-do-not-give-to-charity/">afford to give</a>.</p>
<p>And <a href="https://thehill.com/policy/finance/431495-charitable-giving-up-number-of-donors-down-in-first-year-under-trumps-tax-law">the number of donors is declining</a>, a <a href="https://theconversation.com/fewer-americans-are-giving-money-to-charity-but-total-donations-are-at-record-levels-anyway-98291">long-term trend</a>, even as the total <a href="http://afpfep.org/blog/fundraising-effectiveness-project-quarterly-fundraising-report-for-q4-2018/">dollars raised are rising</a>.</p>
<p>Until 2018, <a href="https://www.aarp.org/money/taxes/info-2018/new-standard-deduction-fd.html">roughly a third of taxpayers itemized deductions</a> and got a direct decrease in their tax liability tied to how much they gave. Because the new tax law <a href="https://nonprofitquarterly.org/2019/01/23/2018-year-end-giving-well-its-complicated/">enacted that year</a> doubled the standard deduction, far fewer taxpayers can reduce their tax liability by itemizing any longer.</p>
<p>Only about <a href="https://econweb.ucsd.edu/%7Ejandreon/AndreoniDurnford20190715a.pdf">10% could itemize in 2018</a>, with 8.5% of them using the charitable deduction, according to research by the behavioral economist <a href="https://scholar.google.com/citations?user=FvzjvLoAAAAJ&hl=en&oi=sra">James Andreoni</a> and Jon Durnford of the Datalake Nonprofit Research firm.</p>
<p>It may take years to see how <a href="https://www.congress.gov/bill/115th-congress/house-bill/1/text">the tax reform package</a> changes giving patterns. Inflation-adjusted giving <a href="https://theconversation.com/american-giving-lost-some-ground-in-2018-amid-tax-changes-and-stock-market-losses-118892">fell by 1.7% in 2018</a> to US$427.71 billion, according to a <a href="https://givingusa.org/tag/giving-usa-2019/">Giving USA</a> report.</p>
<p>But there are steps Congress can take now to make charitable giving more affordable and widespread.</p>
<p><iframe id="SYk8S" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/SYk8S/6/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>Budgeting for charity</h2>
<p>If you want to give to charity, credit counseling agencies recommend making <a href="https://credit.org/2017/01/20/charitable-giving-on-a-budget/">charitable giving part of your financial plans</a>, so you can make donations that don’t undermine your financial security.</p>
<p>Another advantage, the financial adviser and writer Priya Malani explains, is that <a href="https://www.huffpost.com/entry/how-to-donate-to-charity-on-a-budget_n_5a0cc106e4b0c0b2f2f79024">setting money aside</a> makes following through on a meaningful donation more likely.</p>
<p>Even when donors primarily aim to help the charity, they can afford to give more when making their gift costs less due to a tax break. Under current law, for the <a href="https://taxfoundation.org/2019-tax-brackets/">high-tax-bracket taxpayers</a> who take advantage of the <a href="https://www.crfb.org/blogs/tax-break-down-charitable-deduction">charitable deduction</a>, donations <a href="https://www.cbpp.org/research/federal-tax/policy-basics-tax-exemptions-deductions-and-credits">can cost them only two-thirds as much</a> as the value of their charitable gifts when they claim the tax break. </p>
<h2>Flexible giving accounts</h2>
<p>The <a href="https://www.congress.gov/bill/116th-congress/house-bill/4002">Everyday Philanthropist Act</a>, a bipartisan bill, would allow workers to set aside up to $2,700 in pre-tax dollars in a <a href="https://theconversation.com/a-proposed-tax-break-for-the-masses-designed-to-spur-giving-103976">flexible giving account</a> to budget for gifts to charity.</p>
<p>These accounts would be modeled after the <a href="https://www.healthcare.gov/have-job-based-coverage/flexible-spending-accounts/">flexible spending accounts</a> many taxpayers use to offset some of their dependent care and medical expenses. Because they make it possible to spend pre-tax earnings, the net cost to participants is less than the net gain for the causes they support.</p>
<p>Reps. <a href="https://buchanan.house.gov/media-center/press-releases/buchanan-suozzi-introduce-bill-promote-charitable-donations">Vern Buchanan, a Florida Republican, and Tom Suozzi, a New York Democrat</a>, introduced the legislation in the House of Representatives for a second time in July 2019. So far, no companion legislation is pending in the Senate.</p>
<p>Flexible giving accounts would offer an efficient method to budget for charitable giving because they prompt monthly contributions. Funding <a href="https://www.businessinsider.com/how-automated-savings-investing-works-2018-12">savings through automatic withdrawals</a> is an effective way to save because it doesn’t require ongoing effort.</p>
<p>This would encourage people to pace their giving in a way that makes donations more predictable for charities. Most people can more easily afford making small payments each month instead of big annual ones, and charities benefit from <a href="https://www.charities.org/why-workplace-giving-matters">coordinated giving</a>. Nonprofits value sustaining donors for a variety of reasons, not the least of which is <a href="https://npengage.com/nonprofit-fundraising/five-reasons-why-every-nonprofit-needs-a-sustained-giving-program/">predictable cash flows</a>.</p>
<p>What’s more, the tax savings would increase the amount Americans can give away. </p>
<p>Tax laws affect how donors manage their money and can <a href="https://theconversation.com/behavioral-economics-finally-goes-mainstream-4-essential-reads-88970">nudge givers</a> into better habits. The nonprofits these donors value are eager for more sources of <a href="https://www.usatoday.com/story/news/2018/12/26/giving-charitable-groups-bracing-drop-donations-year/2352327002/">stable support</a>. Charity may begin at home, but I believe charitable tax law changes should begin in the House – and the Senate.</p>
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<p class="fine-print"><em><span>Alyssa A. DiRusso does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It may be easier to give money away when you budget for it.Alyssa A. DiRusso, Professor of Law, Samford UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1141992019-04-04T19:14:39Z2019-04-04T19:14:39ZDear baby boomers: Australian philanthrophy needs your help<p>People experience philanthropy in Australia in a variety of ways, often without even realising it. It might be a new hospital wing that was constructed using funds from a generous donor, or an art exhibition made possible through the support of a group of philanthropic foundations. </p>
<p>Philanthropy played a key role <a href="http://www.starobserver.com.au/news/national-news/couple-wins-philanthropy-award-helping-raise-million-marriage-equality/170767">supporting the Yes campaign</a> in the 2017 marriage equality vote, and right now it’s funding advocacy to <a href="https://www.philanthropy.org.au/stories-raise-the-rate">lift the rate of Newstart</a>. </p>
<p>From time to time we hear about big pledges in the news. This week, for example, <a href="https://www.theaustralian.com.au/nation/palmer-fails-to-deliver-donation/news-story/77c591b71864a860eb7ca82b7c8b14a5">we learned</a> that a pledge by Clive Palmer made in 2008 to donate A$100 million to Indigenous communities has turned out to be an empty one.</p>
<p>But philanthropy can still be surrounded by an aura of mystery. Here’s a picture of what it looks like in Australia, and why we have an opportunity to improve our giving culture.</p>
<h2>How much do we give?</h2>
<p>Total giving to Australian charities in 2016 was A$10.5 billion, according to data from the <a href="https://www.acnc.gov.au/tools/reports/australian-charities-report">Australian Charities and Not-for-profits Commission</a>. Most of that is on the smaller end of the scale. The bulk comes from monthly donations people make to a favourite charity, or one-off donations in response to a Christmas or disaster appeal.</p>
<p>About A$1.5 billion is what’s called “structured philanthropy”. This is philanthropy at the larger end of the scale, which tends to be planned and strategic, and generally involves using some sort of dedicated legal structure to facilitate it, such as a philanthropic foundation.</p>
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Read more:
<a href="https://theconversation.com/twiggy-forrest-donation-more-philanthropy-means-more-risk-taking-and-thats-good-78098">Twiggy Forrest donation: more philanthropy means more risk-taking – and that's good</a>
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<h2>‘Structured philanthropy’ in Australia</h2>
<p>Some individuals, families or businesses decide to establish a separate legal structure for a variety of reasons. For large-scale giving, they may wish to build a solid governance structure around it in order to enhance its effectiveness. They may want to involve their children more closely in the management of their giving. Or they may also want to build a legacy that can continue to contribute to the community after their death. </p>
<p>So, when it comes to deciding what kind of structure to use, what are the options available in Australia?</p>
<p>One option is what’s called the “private ancillary fund” (PAF). A PAF enables a donor to put aside an amount of money in a trust to support charities over the long term. Donations into the PAF are tax deductible, and are invested to generate a return over time. Every year, 5% of the PAF’s assets must be distributed as grants to what are called “<a href="https://abr.business.gov.au/Help/DGR">Item 1 deductible gift recipients</a>”. </p>
<p>Since their introduction in 2001, PAFs have grown relatively steadily. There are around 1,650 of them, <a href="https://data.gov.au/data/dataset/taxation-statistics-2015-16/resource/6a9547fc-2217-4f0b-a403-5117909f9ebb">according to data</a> from the Australian Taxation Office (ATO). Together they hold upwards of A$8 billion in assets, and distribute more than A$450 million in grants per year.</p>
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Read more:
<a href="https://theconversation.com/explainer-why-are-donations-to-some-charities-tax-deductible-72968">Explainer: why are donations to some charities tax-deductible?</a>
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<p>One alternative to a PAF is to establish what is commonly referred to as a “sub-fund”. They can be thought of as a form of “giving account” that sits within a larger public foundation. There are a range of providers with whom a donor can establish a sub-fund. These include <a href="http://australiancommunityphilanthropy.org.au/what-is-a-community-foundation/">community foundations</a>, wealth managers and trustee companies. </p>
<p>A donor makes tax deductible donations which are credited against their sub-fund. The assets credited against their name are invested together with the assets of all the other sub-funds managed by the provider, to generate a return. The donor can then make recommendations to the provider for grants to be made out of their sub-fund to “Item 1 deductible gift recipients”. </p>
<p>Until recently, there has been no data on sub-funds in Australia, but <a href="https://researchbank.swinburne.edu.au/items/68f5d8fa-1441-42b6-b73d-939e70a2e354/1/">my recent research</a> at Swinburne University found there were at least 1,995 sub-funds in Australia. They hold A$1 billion in assets, and distributed nearly A$57 million in 2017-18 via some 6,000 grants. There are indications that sub-funds are growing strongly, and the next iteration of this research in 2020 will provide more conclusive data on this.</p>
<p>There is also the option to establish a charitable trust. These are different from PAFs or sub-funds because you don’t get a tax deduction for any donations you make into them. But you can generally structure them to give to a much wider range of charities and other organisations. </p>
<p>According to <a href="https://www.jbwere.com.au/blog/2018/04/support_report_2018">one estimate</a>, there were 2,005 charitable trusts in 2016. They held assets of A$7.7 billion, and distributed A$507 million in grants. Many charitable trusts are set up through people’s wills, and only come into existence when a person dies. Because we don’t have estate taxes in Australia, the lack of a tax deduction isn’t a problem.</p>
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Read more:
<a href="https://theconversation.com/how-philanthropy-could-change-higher-education-funding-92260">How philanthropy could change higher education funding</a>
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<h2>Could we give more?</h2>
<p>There are some worrying trends in terms of our giving behaviour based on the latest data from the ATO. The proportion of taxpayers who claim a deduction for donating is in decline, although the average amount claimed is increasing. At the same time, 44% of taxpayers with a taxable income above A$1 million did not claim a single deduction for a donation to a “deductible gift recipient”.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/267232/original/file-20190403-177187-1cjary3.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/267232/original/file-20190403-177187-1cjary3.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=371&fit=crop&dpr=1 600w, https://images.theconversation.com/files/267232/original/file-20190403-177187-1cjary3.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=371&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/267232/original/file-20190403-177187-1cjary3.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=371&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/267232/original/file-20190403-177187-1cjary3.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=466&fit=crop&dpr=1 754w, https://images.theconversation.com/files/267232/original/file-20190403-177187-1cjary3.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=466&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/267232/original/file-20190403-177187-1cjary3.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=466&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Proportion of taxpayers claiming donations and the amount claimed.</span>
<span class="attribution"><span class="source">Australian Taxation Office, JBWere Philanthropic Services</span></span>
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<p>Australia is about to witness the largest intergenerational wealth transfer in our history, with estimates that in the next two decades <a href="https://www.moneymanagement.com.au/news/financial-planning/australians-unprepared-post-death-wealth-transfer">A$2.4 trillion</a> will pass from “baby boomers” to the next generation. But giving through bequests made in wills is currently low. </p>
<p><a href="https://www.swinburne.edu.au/media/swinburneeduau/research/research-centres/csis/documents/Encouraging-Charitable-Gifts-by-Australians-Baker.pdf">One study</a> estimated that in 2012, only 7.6% of wills had a charitable bequest, and they accounted for only 2.7% of the total value of estates. So, although Australians should be proud of the giving we do, there is clearly room for improvement. We really should have tens of thousands of PAFs, sub-funds and charitable trusts in Australia, not just a few thousand.</p>
<p>What will ultimately drive the growth of giving, both large and small, is the culture of giving we foster in Australia. Part of the solution, particularly at the larger end of the scale, is to ensure we have the right incentives and structures in place to encourage it. But we also need to look at other ways to inspire more giving – growing our culture of giving is not something you can do overnight.</p><img src="https://counter.theconversation.com/content/114199/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Krystian Seibert is also a Policy Adviser to Philanthropy Australia, the peak body for Australia's philanthropic sector. This work involves seeking to influence the policy framework for philanthropy so as to grow giving in Australia.</span></em></p>Australia is about to witness the largest intergenerational wealth transfer in our history, but giving through bequests in wills is currently low.Krystian Seibert, Industry Fellow, Centre for Social Impact, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1097032019-01-15T00:35:31Z2019-01-15T00:35:31ZDonating to charities shouldn’t result in tax breaks<figure><img src="https://images.theconversation.com/files/253297/original/file-20190110-43510-4ge53a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It's time to seriously rethink giving tax breaks for charitable donations, since ultimately taxpayers foot the bill for the deductions anyway.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>My smartphone is finally cooling off. It all started three weeks before Black Friday, in late November. Because I make most of my charitable contributions through a website, I need to offer my email address to receive a tax receipt. This has led to a proliferation of retailers and charitable organizations alike seeing me as fair game.</p>
<p>Weeks before Black Friday, I started to receive notices about “Black Friday in October.” Then when December arrived, I experienced increasingly persistent messages that I had only so many days “to make a donation to receive a tax receipt.”</p>
<p>The din continued until Dec. 31 as my phone became almost too hot to handle from the incoming barrage. Then all was quiet.</p>
<p>It’s my fault, of course. I could simply make out a cheque and mail it to the charities of my choice, but online giving is too easy. And getting immediate tax receipts via email allows me to easily corral all of the information to receive my just rewards in the form of a reduced tax bill.</p>
<h2>Are charity deductions a bribe?</h2>
<p>But as tax season approaches, now is a good time to ask whether it’s sound policy to offer what could be considered a bribe of reduced taxes in exchange for donating to charity. What are the positives and negatives from such a policy? What would be the effect of eliminating these tax benefits?</p>
<p>For every dollar I donate to an eligible charity, I get about 20 to 25 cents in the form of a tax refund. But the dirty little secret is that all taxpayers, including me, must make up these 25 cents through increased taxes.</p>
<p>And so, like all tax benefits, the charitable tax credit raises the overall tax burden.</p>
<p>Whenever government adjusts taxation rules to offer a deduction or credit, economists call this a “tax expenditure” to distinguish it from the direct expenditures authorized by treasury boards.</p>
<p>Just like any public spending, the taxpayer finances these tax expenditures. The more generous the relief granted for charitable donations, the more onerous becomes the tax burden.</p>
<p>Just how much money is involved? Last year the Canadian federal government made $289 billion in <a href="https://www.fin.gc.ca/taxexp-depfisc/2017/taxexp1702-eng.asp">tax expenditures</a>, of which $6.1 billion were the tax benefits associated with charitable donations. </p>
<p>This may seem a pittance in the big picture, but we need to delve deeper. Canada incurs much of its tax expenditures by giving up tax rights to provinces; this accounts for about $56 billion. The basic personal exemption accounted for $36 billon and the credits for investing in various registered savings plans cost the Canadian taxpayer $89 billion in lost tax revenues.</p>
<h2>Money could have alternate uses</h2>
<p>A better basis for comparison among tax expenditures is the GST exemptions on things like child care and tuition, which accounted for $5.7 billion in 2017. Among the direct expenditures, Canada’s public broadcaster, the CBC, has a budget of about $1.2 billion, the Department of Defence consumes $20 billion and the federal government spends $3.5 billion on the RCMP.</p>
<p>In this context, the $6 billion the federal government gives up because we make charitable contributions could have many alternate uses. So what’s the value of stimulating and encouraging charitable donations?</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/253296/original/file-20190110-43507-bocg22.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/253296/original/file-20190110-43507-bocg22.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=249&fit=crop&dpr=1 600w, https://images.theconversation.com/files/253296/original/file-20190110-43507-bocg22.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=249&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/253296/original/file-20190110-43507-bocg22.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=249&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/253296/original/file-20190110-43507-bocg22.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=313&fit=crop&dpr=1 754w, https://images.theconversation.com/files/253296/original/file-20190110-43507-bocg22.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=313&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/253296/original/file-20190110-43507-bocg22.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=313&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Giving tax deductions for charitable donations should be relegated to the past. Donors will likely give anyway, and taxpayers have to foot the bill for the deductions.</span>
<span class="attribution"><span class="source">Rawpixel/Unsplash</span></span>
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<p>When we donate to charities, we directly support a favoured cause at a discount. And perhaps the incentive of a tax credit may induce more giving. However, here’s the kicker: <a href="https://warwick.ac.uk/fac/soc/economics/staff/blockwood/giving-givers-130717.pdf">Recent research</a> suggests that most of us give not for the tax break, but the “warm glow.” And so it may be unnecessary to offer a tax reduction to stimulate charitable donations. </p>
<p>Because we all share in the burden of tax credits, we are unwittingly supporting charities we either do not care about or whose goals we don’t share. Sometimes charities appear to support a cause when masking a completely different goal. I recall the shock at seeing gun manufacturers’ displays at the annual show of Ducks Unlimited.</p>
<h2>Tax advantage is highlighted</h2>
<p>Many appeals from charities stress the tax advantage to the donor, tainting an altruistic act with selfishness.</p>
<p>The tax credit may also encourage charities and non-profits to become lazy, relying more on the lure of tax credits than showing donors their impact. With few exceptions, non-profits do not routinely subject their investments to independent audits to measure impact or report donation efficiency.</p>
<p>One recent counter-example is the Bill and Melinda Gates Foundation that appears to have spent almost half a billion U.S. dollars to <a href="https://www.businessinsider.com/bill-melinda-gates-foundation-education-initiative-failure-2018-6">improve teaching effectiveness</a> and failed.</p>
<p>Most of the big guns in Canada’s charity industry issue glossy annual reports replete with anecdotes of how they spend your dollars, but few issue systematic and independent audits to show the net impact of the charity’s investments.</p>
<h2>Where do charity dollars actually go?</h2>
<p>Donation efficiency — the percentage of donations that translate to direct service — requires work to learn what percentage of total revenues actually flow to end uses. </p>
<p>For example, based on its most recent financial statements, the Canadian Cancer Society <a href="http://www.cancer.ca/en/about-us/financial-statements/?region=on">directed 53 per cent</a> of its revenue to research and programs, its stated purpose for raising funds in the first place. The remainder went to fundraising, administration and advocacy. </p>
<p>Contrast this to the Canadian Red Cross, where based on its most recent annual report, <a href="https://www.redcross.ca/about-us/about-the-canadian-red-cross/annual-reports-and-strategy">90 per cent of revenues flow to programs</a>. One charity I support has a donation efficiency of <a href="https://apps.cra-arc.gc.ca/ebci/haip/srch/t3010form22quickview-eng.action?&fpe=2017-12-31&b=118779081RR0001">85 per cent based on independent financial audits.</a> </p>
<p>Several countries — namely Austria, Finland, Ireland, Italy, Sweden and Switzerland — have removed tax benefits for charitable donations. </p>
<p>It is time for Canada to follow suit. My phone will be thankful.</p><img src="https://counter.theconversation.com/content/109703/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gregory C Mason receives funding from the Thorlakson Foundation for research into telemedicine and electronic health records.</span></em></p>Several countries — namely Austria, Finland, Ireland, Italy, Sweden and Switzerland — have removed tax benefits for charitable donations. Here’s why Canada should follow suit.Gregory C Mason, Associate Professor of Economics, University of ManitobaLicensed as Creative Commons – attribution, no derivatives.