It's the same in the US, but in both cases, "public benefit" is nebulous and unenforceable. If you just say "we're advancing public health!" that's a charitable purpose, even if the majority of what you're doing is profit-seeking and completely unrelated to that.
Much like how CEOs get wide discretion as to what "advancing shareholder interests" means - maybe it's in the long-term interest of public health to build a huge amount of real-estate holdings that you could (hypothetically) use to generate revenue and advance public health (uh huh) some time in the future. That's perfectly fine for a non-profit to do - they really are just a corporation that doesn't pay out profits to shareholders, they keep it all internally.
Examples: the Susan Komen foundation. College endowments. Hospitals. Etc.
In my time at a non-profit, we had what we called our "contribution margin" which was equivalent to profit in a for-profit company, and that was tens of millions of dollars a year. Like I said, we had big real-estate holdings etc which is where all the profit went year-over-year. And we actually did do important public health work, but we were also essentially a contractor for various state and federal agencies and definitely did turn a profit.
The only requirement in the US is that at least 5% of the activity must be charitable in nature - that's not a typo. So spend 5% on some studies and reports and the rest becomes your personal slush fund. It's a fantastic little arrangement.
> a UK charity, which has to spend all of its money on charitable purposes.
No.
> The most popular charities in the UK spend anything between 26.2% and 87.3% of their yearly income on charitable causes, according to the best available data.
Also that doesn't include accumulation of wealth in general - it's perfectly fine to sock away a billion dollars (or pounds) because in principle that money is going to go to charitable activities in the future. Sometime. But there's no legal requirement that "sometime" ever come, so it's just a slush fund.
Again, please don't think of charities as being charities in the traditional sense of feeding nuns and orphans. It may be better to think of them as "non-shareholder corporations". They are corporations, which make money, and accumulate wealth, which is controlled by the board. The difference is that the purpose of the accumulation of wealth isn't for the benefit of shareholders, but in principle it's for the public. In practice it is a slush fund for the board.
You've got tons of UK universities that build up huge endowments, right? Do you think they're the only ones who do that? And not everybody is using that money for scholarships, as it were...
I know how to think about UK charities, thanks mate, I am trying to offer perspective, experience and knowledge that's different to yours.
I'm a trustee of a small UK charity, I do their books, I'm in touch with lots of other trustees and in no way can these companies be run as a "slush fund for the board". The regulatory regime demands too much transparency for that to happen at any scale.
> The most popular charities in the UK spend anything between 26.2% and 87.3% of their yearly income on charitable causes, according to the best available data.
...
> Also that doesn't include accumulation of wealth in general - it's perfectly fine to sock away a billion dollars (or pounds) because in principle that money is going to go to charitable activities in the future. Sometime. But there's no legal requirement that "sometime" ever come, so it's just a slush fund.
Yes, UK charities are allowed to spend on fundraising, investment and may build up reserves. Some of those reserves might be restricted, for specific purposes even within the definition of their charitable purposes, and that needs particular accounting. But that money is absolutely locked up for their registered purposes, it can't go to personal benefits, and their boards of unpaid trustees are on the hook for mismanagement.
If they spent every pound they received on their purposes, lots of charities would cease to exist (or exist 100% on grants from other organisations). That would certainly suit a lot of simple-minded people's perspective on "what a charity should be" but it would shrink the sector to almost nothing.
(I once did data entry for Oxfam, entering direct debit donations posted to the organisation - a few angry people liked to use those appeal envelopes to protest about the fact that Oxfam advertised at all).
Part of the problem with the cynical view of charities that you're responding to is that if it goes unchallenged, it actually becomes practically impossible to help charities improve their charitable efficiency.
If people think all charities are BS, they stop donating, and it becomes meaningless to say charity X is doing a better job on a structural level than charity Y, which is for sure important information for donors.
I've worked on some stuff for a social organisation that is now a registered charity, and it is amazing how deep the tendrils of the regulations actually go -- the extent to which things have to be structured to avoid conveying benefits that aren't the objectives of the charity.
Much like how CEOs get wide discretion as to what "advancing shareholder interests" means - maybe it's in the long-term interest of public health to build a huge amount of real-estate holdings that you could (hypothetically) use to generate revenue and advance public health (uh huh) some time in the future. That's perfectly fine for a non-profit to do - they really are just a corporation that doesn't pay out profits to shareholders, they keep it all internally.
Examples: the Susan Komen foundation. College endowments. Hospitals. Etc.
In my time at a non-profit, we had what we called our "contribution margin" which was equivalent to profit in a for-profit company, and that was tens of millions of dollars a year. Like I said, we had big real-estate holdings etc which is where all the profit went year-over-year. And we actually did do important public health work, but we were also essentially a contractor for various state and federal agencies and definitely did turn a profit.
The only requirement in the US is that at least 5% of the activity must be charitable in nature - that's not a typo. So spend 5% on some studies and reports and the rest becomes your personal slush fund. It's a fantastic little arrangement.
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