Helping Successful Families

become successful philanthropists


The New York Times recently reported that one person established 76 fraudulent charitable organizations, all with the same address: a post office box in Staten Island.[1]  All of the organizations were approved as public charities by the Internal Revenue Service, and all the organizations had names similar to the names of prominent public charities.  One of the frauds was the American Cancer Society of Michigan, for example.  And, yes, this “Michigan” organization also had a Staten Island PO Box.

In our work with donors and family foundations, we often ask, “What due diligence was done on a past gift?”  Frequently, the response we get is, “We checked Pub 78.”  For you younger folks, IRS Publication 78 was once a gigantic book published by the IRS every year that listed every public charity in the U.S.

Today, instead of Pub 78, there’s an online Tax Exempt Organization Search database (sometimes called Select Check).[2]  There, you can easily check an organization’s public charity status, or find out which organizations have had their status revoked.  (A nonprofit may have an exemption letter to show you, but the status may have been revoked due to a lack of reporting.)

Checking public charity status is not enough.  We’ve known for years that the charitable section of the IRS was woefully underfunded.  As this incident reveals, it is unable to do the most basic vetting necessary to ferret out frauds requesting public charity status.  Don’t get caught, like the Charities Aid Foundation of America, which sent more than $3,000 to several of these fraudulent organizations.

If you have a board member or a family member who wants to send $1,000 to an organization you’ve never heard of, go ahead and look it up in Select Check.  But making a personal visit is obviously the best way to ferret out imposters.  If that isn’t possible, consider the following actions that can help uncover fraud:

Ask for a list of board members, with affiliations.

Ask to see the latest certified financial audit.

Check the organization’s website.

Ask for a copy of a random policy that any legitimate nonprofit would have:  DEI, conflict of interest, etc.  Any legit organization should be able to provide these items within 24 hours.  If not, there may be an issue.

One important caveat:  Small neighborhood organizations may not have all these items and may not be able to quickly respond.  But they, too, may be deserving of support.  What to do?  Ask for a visit.

Don’t be sloppy.  A little due diligence will help you avoid fraudulent nonprofits and keep you out of the headlines.




Read More

How Can Major Gifts Go Wrong? Our May 2022 Newsletter

Goldman Sachs has recently re-published a helpful report on making large charitable gifts, which prompts me to return to this issue once again.

In our work, we see donors often making serious errors when making major gifts. These errors can end up undercutting—if not damaging—the intent of their gift, particularly over the long term. Indeed, the larger the gift, the more damage
these mistakes can make. Today, most donors are inclined to attach extensive restrictions on the use of a major gift. We find in our work that smart donors find a balance between no restrictions and too many. Just as the media is full of stories of unrestricted gifts being used for things a donor may not approve of, there are also stories of extensive restrictions leading to difficult, if not impossible, situations.

Here are four good guidelines when contemplating a major gift:

  • Use a gift agreement drafted by your advisors, not the agreement offered by
    the charity.
  • Specify how any unused funds will be managed if, for example, the project you
    are supporting comes in under budget.
  • If you are considering a naming gift, consider putting a time limit on the naming
  • Consider whether your gift should also include support for operations and/or

For the Goldman Sachs article and more, view the full May 2022 Philanthropy Matters Newsletter here.

Read More

Charitable Giving and COVID-19 in Northern Michigan

It has been nine months now since the pandemic began its furious disruption of life in Northern Michigan.  With more than 11,000 cases and 196 deaths, the virus has had a palpable impact on the region’s 17 counties.  The impact of COVID-19 has received considerable attention, but much of this focus has been on its impact on the for-profit sector.

Yet Michigan’s nonprofits have been disrupted as well, and they are fundamentally important to the quality of life in Michigan.  They make our communities a better and more enjoyable place to live (e.g., TART Trails, the State Theatre, and the Old Town Playhouse), but they also provide an important safety net for our most vulnerable residents (e.g., Goodwill Northern Michigan, Safe Harbor, and Manna Food Project).  Further, and no less important, Michigan’s 50,000 nonprofits employ 10.6 percent of the state’s nonfarm workforce.[1]


Read More


Once more, I read about how donors are abusing Donor Advised Funds (DAFs).  Billions of dollars are locked in these funds, rather than going to charity during the COVID-19 pandemic — when nonprofits need these funds the most, critics say.  (Washington Post 6/24/2020 article)

Well, yes, that’s true. 

If you create and give to a DAF, and the money sits in the fund earning interest, you’re getting a tax benefit now — but the public benefit hasn’t occurred and may not occur for many years.  Further, it’s true that if the fund is managed by an investment firm, such as Fidelity or Vanguard, they’re the only ones benefiting while the funds sit unused, due to investment fees.  (If your DAF is housed at a community foundation, the fees go to help the community foundation support its city or region, so in that case the fees are giving back.)

This critique always focuses on the difference between these gifts going directly to charity versus the gifts going to DAFs.  The donor gets the same tax benefit, but the public benefit is delayed in the case of the DAFs. 

For a moment, let’s consider the difference between a DAF and a private foundation.  A donor who creates a private foundation gets a tax benefit at the time of the gift, although the benefits can be slightly less attractive than a gift to a public charity, depending on the gift.  The private foundation is required by law to give away 5 percent of its assets each year.  The organizations that manage DAFs report that their funds, taken as a whole, give away about 20 percent every year.[1]  Thus, DAFs — again, taken as a group — are getting money into the hands of the charities that need it at a much higher rate than the private foundations. 

Critics complain about the $120 billion “locked away” in DAFs.  The top 10 U.S. private foundations alone have assets of more than $150 billion. 

The critics of DAFS have a valid argument, and I hope the #HalfMyDaf campaign will be successful.  But those critics that exhort DAF holders to distribute more should be aware that the DAFs’ wealthier brethren (private foundations) don’t have the same obligation and presently distribute much less on a pro rata basis. 

(Note: I would be happy to send you copies of the linked articles if you’re unable to access them.)

[1] National Philanthropic Trust, The 2019 DAF Report.  

Read More

Corporate Giving

For those interested in the role of corporate philanthropy in our society, an article in today’s New York Times reports on an interesting new study.

Scholars from the University of Chicago, Boston University, and the University of British Columbia (my alma mater!) reviewed the grants made from 1998 to 2015 by the foundations of Fortune 500 companies.

The researchers found that corporate foundations frequently give to the favorite charities of congressmen who chair committees that have oversight on issues affecting the corporations. “Firms deploy their charitable foundations as a form of tax-exempt influence seeking,” quoted from the study by the New York Times (4/4/2018 p. B1 and B4. Charitable Giving by Corporations Is Also About Getting, a New Study Finds, Eduardo Porter)

-Mark Neithercut, April 4, 2018

Read More