In early 2010, Haiti was rocked by a massive earthquake that shook the very foundation, literally and metaphorically, of the small Caribbean country.
A year later, then-Prime Minister Jean-Max Bellerive unveiled the updated figures: more than 316,000 dead, with nearly a million citizens effectively homeless.
Enter Wyclef Jean, the Haitian-born celebrity whose existing charity for Haiti, called Yéle, was thrust into the limelight. A recent article by the New York Times outlined the shortfalls and questionable ethics of Yéle, which garnered $16 million in donations.
That is, until the charity went out of business last month.
Simply put, Yéle is just another failed charity that selfishly squandered away the donations of good-hearted people. The solution isn’t to shun charities for this downfall. The solution is to dramatically increase the scrutiny of these organizations.
This should be done from top to bottom—state regulations can be revamped to provide limits as to the percentage of revenue charities can use. Watchdog organizations like the American Institute of Philanthropy can weed out the bad eggs. Individuals can choose to only open up their wallets after thorough research.
In 2003, the Madigan v. Telemarketing Associates U.S. Supreme Court case featured the attorney general of Illinois accusing Telemarketing Associates, a fundraising group, of fraud for retaining 85 percent of their charitable funds. The ruling held that states may “maintain fraud actions when fundraisers make false or misleading representations designed to deceive donors about how their donations will be used.”
Charities failing to tell their donors what percentage of their donation would actually go toward a given cause did not fall within those fraud allegations, however.
“These limitations do not disarm States from assuring that their residents are positioned to make informed choices about their charitable giving. States may maintain fraud actions when fundraisers make false or misleading representations designed to deceive donors about how their donations will be used,” said Justice Ruth Ginsburg.
Other court cases, like 1984’s Maryland v. Munson, found there to be no connection between the high operating costs by charities and fraud.
According to the Times article, Yéle spent $9.5 million on travel, salaries, consultants’ fees, as well as their offices and warehouse. Money meant to help Haiti was squandered while some programs faded away or never even got off the ground to begin with.
Yéle might not have committed fraud, but that doesn’t make their mismanagement of funds any less appalling. Mere selfishness and greed can’t be punished in the Supreme Court, but government regulations can be put in place to curb such unfortunate side effects of charity organizations.
In 2011, the American Institute of Philanthropy (AIP) revealed a new charity rating guide that handed out grades to charity organizations. Dozens received failing grades. The rating system is based off what percentage of charity funds go toward the actual goal the organization exists for.
The Better Business Bureau’s (BBB) “Standards for Charity Accountability” calls for assessments at least every two years for charities, and sets standards for an honest, prudent use of charitable funds. At least 65 percent of a charity’s total expenses must be for program activities.
Yéle is nowhere to be found on BBB’s or AIP’s websites.
And truly, organizations like this can only do so much; they’re not government organizations. They have no legal power. They can report a charity for fraud to the government, but there isn’t much leeway there.
Laws against theft and fraud already apply to charities—but the line is so blurred that it’s reached the point of ineffectiveness. The government can choose to implement standards like the ones BBB has and scrutinize these tax-exempt organizations harder by employing more IRS agents to monitor them.
Yéle is just the most recent of these high-profile charities failing at their goals while simultaneously being put under scrutiny for their operating costs. An article published by the Associated Press last year investigated numerous charities that popped up after 9/11 that failed altogether on their goals.
Until the government comes up with its own legal system of accountability for charities, all individuals can do is research what causes they wish to donate to and only open their wallets with discretion. Checking to see if the charity is on websites like BBB.org or CharityNavigator.org can help.
It’s up to us to not get screwed over by giving our money away to the greedy and corrupt—with or without the government’s help.