Trump Foundation: Tip of the Rogue Charity Iceberg

For a moment there, Donald Trump and his Trump Foundation seemed like it would be the story of the campaign. Whether it was the potentially quid-pro-quo donation to Florida Attorney General Pam Bondi, the use of the foundation’s funds to resolve Trump’s legal disputes or the hilarious purchase of a six-foot-high portrait of Trump himself — never has something as bureaucratic and dull as nonprofit tax law been so central to the course of American democracy.

Of course, Trump would continue to outdo himself in self-sabotage with the whole “pussy-gate” fiasco, burying the Trump Foundation scandals beneath the mountain of misogyny and sexism that has typified the end of the 2016 presidential campaign. However, what angered me about the Trump Foundation story wasn’t that he used it as an illegal slush fund, but rather how easy it was for him to pull off this ruse for so long — and how meager are the mechanisms with which we can hold him accountable.

Other than being required to submit a Form 990 to the Internal Revenue Service or having to suffer a yearly audit, most foundations receive scant oversight from the IRS’s already limited capacity. While the IRS does occasionally strip a charity of its tax-deductible status, these occurrences are few and far between — and those organizations whose charity status are stripped are often financially distressed or have limited capacity themselves. For example, look at Cleveland’s Karamu House, the oldest African-American theater in the nation, which lost its 501(c)(3) tax-exempt status earlier this year after failing to submit their Form 990s to the IRS. (After coming back into compliance, Karamu House’s status was reinstated.)

The Urban Institute notes that the reported total assets of the nonprofit sector was $5.17 trillion in 2013. Compare this to the total benchmarked assets of the S&P 500 in 2016: $7.8 trillion. Consider the level of scrutiny, monitoring tools and law-enforcement resources devoted to preventing illegal use of funds in the for-profit sector. There are entire federal agencies devoted to securities fraud. While I’m sure questionable charities are occasionally swept up in the investigations of such agencies, it’s definitely not their primary focus. While the prospect of increased scrutiny and oversight of charitable dollars is unlikely to be a popular position in the nonprofit, tax-exempt field, we must come to the terms with the fact that there is still too often a lack of transparency and effective accountability — and enforcement measures. There is still a fertile breeding ground for more Trump Foundations to get away with who knows what.

And the reason for this is pretty simple: our system of philanthropy, as designed, is not optimized for accountability or truly ensuring public benefit. The Trump Foundation scandal further proves that our system prioritizes the will of the wealthy, especially the ultra-wealthy, over the needs and benefit of the public. The Trump Foundation got into trouble because Trump was uniquely terrible, perhaps intentionally, at keeping up the facade of philanthropic altruism. Why did it take a presidential campaign for the jaw-dropping revelations about the Trump Foundation to come to light?

Trump’s “playboy philanthropy,” as we might call it, is not particularly rare. While the largest and most visible American foundations often utilize self-imposed protocols, beyond laws and statutes, for greater public accountability or at least transparency, most money in the philanthropic sector is held in private, family-run foundations, which are apparently less disposed to meeting the highest ethical standards.

Even more worrisome is the exponential rise of money funneled into donor-advised funds. These are tax-deductible financial instruments usually run by large financial management firms, such as Fidelity Investments. While it may seem like a good thing to have philanthropic vehicles that make it easier for those with means to set aside money for public benefit, donor-advised funds are notoriously secretive in providing information and transparency around the donations that are awarded and the specific donors that directed specific gifts. If it weren’t for Trump’s compulsive vanity — his need to have his name appear everywhere possible — he might have been able to get away with his charity shenanigans via shady donor-advised funds.

Increased transparency and accountability, among foundations specifically and the nonprofit field more broadly, is a necessary hedge against the soft power wielded by the wealthy and their gatekeepers. If we are serious about trying to fix the equity problems in the arts and culture sector, we must have tools, at the very least, to easily track the spending of the funding community. We should remember that while Trump’s charity misdeeds are troubling to the point of hilarity, it is just the tip of the iceberg in terms of unaccountable dark money sullying American philanthropy.