There is more than one successful whistleblower suit in recent years against my former employer, with 'settlements' in the millions of $. However, I was not directly involved in the minutia of transactions that would constitute such a suit. That said, Art's point is well taken; so-called 'charitable organizations' can be rife with abuse of their 'non-profit' status, especially the larger ones. These organizations are typically top heavy with management, who pay themselves more than comparable positions in the real world. Keep in mind, that these management people have no equity position in the company. It's not like a 'for-profit', either privately or publically held, where there is accountability to owners who are interested in the 'going concern' value of the business; ie profits.
Also, keep in mind that these entities are not only exempt from federal and state income taxes, but local property taxes as well. This can run into the millions of dollars, lost to counties and cities in revenues. The local governments have a rightful expectation of something in return for this waiver.
As far as I can tell, there is no real oversight as to how these organizations spend their money. As long as they don't get caught up in any direct fraud against government, and as long as they can produce 'evidence' that they fulfill their 'charitable purpose', there are no other limits. They typically have close associations with major accounting firms (used to be the 'Big 8', then it was down to 3, now it's back up to the 'Big 5', I think. But that's subject to change the next time one gets caught). I hate to say this, because accounting is my profession, but it's almost like paying protection money. The huge fees paid to these firms for regular audits provide credible cover. Having been involved in a number of audits over the years, I remain skeptical as to their efficacy in terms of third parties relying on financial data to give a clear picture. I've even seen 'going-concern' issues disappear in exchange for several hundred thousands of dollars in additional 'fees'!! Also, these firms present audit results prefaced by disclaimers that in fact say 'this may not be accurate nor correct and we're not responsible for any of it'.
It is true that the best and the brightest don't wind up in non-profit organizations. Instead, they get people to whom the challenges of outside competition, accountability for profit and stock values are too great. My boss (the Palestinian from Texas) was the CFO of a non-profit that went bankrupt, costing the local economy millions of $ in lost, but already earned revenue. They simply burned everybody and walked away!! Management didn't have a dime in it and emerged unscathed, only to go to work for another non profit.
Anyway, I'm done with non-profits. I'll find something else to do.
