The Problem With NGOs

NGOs have been greatly abused by a relatively few. Sad because NGOs improve the lives of millions while the abusers grab the headlines. The solution, unfortunately, is more efficient oversight of NGOs. Until then, do your homework and ask the right questions.

What is an NGO?

NGO stands for non-governmental organization. One type of NGO is nonprofits. Within nonprofits, one category is public charities or 501(c)(3) organizations. Contributions to 501(c)(3) organizations are tax deductible.

Brief Background of NGOs

NGOs have been around for a long time. NGOs accelerated in the early 2000s with the G.W. Bush administration’s push to expand the work of faith-based initiatives and community programs. https://georgewbush-whitehouse.archives.gov/government/fbci/qr3.html. Concurrently, more of the uber rich figured out that rather than giving a large portion of their wealth to the government through taxation, wealth and power could be retained through 501(c)(3) private foundations. Both of these vehicles have been instrumental in improving the lives of millions around the globe. And both of these vehicles have been abused to circumvent political anti-corruption laws.

Vetting Your Favorite NGO

So, how do you check out your favorite 501(c)(3) charity? Start with the IRS website. https://apps.irs.gov/app/eos/. Confirm it is a public charity. Take a look at the IRS Form 990. If the charity has less than $50,000 in gross receipts, it came into existence through a simplified Form 1023-EZ filing which is seldom denied by the IRS. All you may find is confirmation that the charity filed the annual Form 990-N, which is an electronic postcard with no financial data. In this situation, you must ask the charity for their financial information.

If the charity has more than $50,000 in annual gross receipts, the charity should be filing a full Form 990 detailing receipts and expenses. While not perfect, this is a good place to start. Review the income, expenses, and assets. If a smaller charity, you should be able to see what the major players pay themselves, whether they have expense accounts, and where the money goes. If a large charity, you will need better financial disclosures directly from the charity. Keep in mind that nonprofit does not mean no financial benefit. Salaries can range from $0.00 into the millions of dollars. Expense accounts can be substantial and sometimes buried. In the case of NGOs funded by government dollars, figuring out who is benefiting can be a challenge.

Review the Articles of Incorporation and Bylaws. Some NGOs have members. In my experience, most do not and instead have a Board of Directors that controls every aspect of the organization. How those directors are chosen and removed gives you insight into who controls the organization and who financially benefits.

Good NGO or Bad NGO?

There is no standard test for what is or isn’t a “good” charity. Some 501(c)(3)s have no wages and minimal expenses. That doesn’t necessarily mean it is a well-run organization. Other 501(c)(3)s can have significant wages and expenses. That doesn’t mean the money is being wasted. You must know your charity and do your homework.