April 28, 2005 | Read Time: 5 minutes
As lawmakers debate ways to regulate donor-advised funds — a giving technique that members of Congress say has been abused — officials at one fund that has experienced problems with its accounts have put in place new rules to try to prevent trouble and encourage greater charitable giving.
The Giving Back Fund, in Boston, which sets up donor-advised accounts for celebrity performers and athletes and has distributed about $12-million to charities since it was formed eight years ago, last year introduced more-stringent requirements for donors to follow if they want to set up funds at the organization.
The guidelines, which apply only to new funds and are part of a “donor commitment letter” individuals must sign, ask donors to give at least $250,000 to set up their funds, publicly disclose how much money they give annually to their accounts unless they do not put their names on the funds, and meet with Giving Back Fund officials four times a year to decide what charities they will support.
Donor-advised funds allow people to donate cash, stock, or other assets to special accounts, claim a tax deduction for the gifts, and recommend to which charities they want the money to go.
The Giving Back Fund established the new rules, charity officials say, in part because many of its celebrity clients were failing to put much money in their accounts but were trying to use their celebrity status to persuade members of the public to make donations to their funds. Many celebrities or their representatives also were asking Giving Back Fund officials to allow them to use money from their charitable accounts to pay for personal and other improper expenses, including travel costs for themselves and salaries for family members who had no philanthropy experience.
Questionable Payments
While the majority of donors end up heeding fund officials’ advice and paying for personal expenses themselves, some individuals are reluctant to do so.
Last year, an athlete with an account at the fund asked Giving Back Fund officials if he could use his donor-advised account to pay for college scholarships for his brother and four friends, according to Marc Pollick, the president and founder of the Giving Back Fund. After officials turned down the request, Mr. Pollick says, the athlete went to a bank and used the taxpayer identification number of the Giving Back Fund to establish a scholarship program without the fund’s knowledge or permission. After the problem came to light, the athlete agreed not to take a tax deduction for the payments and the Giving Back Fund froze his account.
Episodes like that occur, Mr. Pollick says, in part because it does not always make sense to donors — and particularly those accustomed to getting what they want — that they do not still have access to money they have given to charity.
“The celebrity world is born out of a sense of entitlement, and a lot of our donors feel the money in their foundations is their money to spend however they like,” Mr. Pollick says. “That’s a problem because once that money goes to charity it’s not theirs anymore.”
25 Funds Closed
To clamp down on such improper behavior, the Giving Back Fund has closed about 25 funds in the past year, which represented about half of its donor-advised accounts. Mr. Pollick would not disclose the names of celebrities whose funds were closed — or the names of people who have made inappropriate requests or acted improperly — because he fears other donors would refuse to work with his organization if he used their names.
He says that Giving Back Fund officials shut down the majority of the accounts not because of improper activities, but because donors were not doing much philanthropic work.
What troubles Mr. Pollick the most — and what led his organization to put in place the new rules, he says — is that wealthy people often deceive the public by creating funds to raise money but failing to contribute much money of their own to the accounts. Mr. Pollick says that the 25 donor-advised funds held by his organization — which include those of the actress Jamie-Lynn DiScala, of the The Sopranos television show, and Jalen Rose, a professional basketball player with the Toronto Raptors — have just $1.5-million to $2-million in assets.
“Many celebrities use donor-advised funds as a way to hide how little money they’re giving to charity,” Mr. Pollick says. “We want to change that.”
Lawsuit Settled
It hasn’t been an easy fight, as the Giving Back Fund has had controversial splits with several donors. About four years ago, the Giving Back Fund sued two former representatives for the musicians Britney Spears and Justin Timberlake. The lawsuit said that the representatives forced the Giving Back Fund to hire someone who had no nonprofit experience to oversee the stars’ donor-advised funds and refused to turn over money that was supposed to go to charity. The case settled out of court for an undisclosed sum, and the performers and everyone involved with it are prohibited from talking about the matter. The pop stars no longer have accounts at the Giving Back Fund.
Mr. Pollick says he is hopeful that members of Congress will soon pass regulations requiring donors to disclose more information about how much they give to their private accounts.
“If you’re raising money from the public,” he says, “the public has a right to know how much money you put into your fund.”
Cassie J. Moore contributed to this article.
