NYT Very Concerned About Fungibility of Money in Charity; Not So Much in Federal Gov't

This week, the New York Times ran an in-depth story critical of popular charity Kiva.org. The organization, lauded in a 2007 column by Nicholas Kristof, claimed until recently to let "you lend to a specific entrepreneur, empowering them to lift themselves out of poverty." Kiva connects Westerners to entrepreneurs in impoverished countries, giving them the means to make big changes in the entrepreneurs' lives with relatively small chunks of money, given as "micro-loans." Kiva purports to connect each Western lender to a specific entrepreneur-Constance, a Ghanan mother of four looking to expand her seamstress business, or Rem Sem, a Cambodian woman who wants to buy land for her farm, for instance.

After an online controversy arose about whether the money given by lenders went to specific entrepreneurs, as advertised, the New York Times went into investigation mode on this charity and one other.

Lenders like Mr. Kristof were not making direct loans. Borrowers like Ms. Cruz already have loans from microfinance institutions by the time their pictures are posted on Kiva's Web site.

Thus, the direct person-to-person connection Kiva offered was in fact an illusion...

Kiva is not the only site with transparency problems. GlobalGiving, whose Web site allows donors to choose among various projects to support, has raised money for philanthropic projects of three or four profit-making companies, according to Dennis Whittle, its co-founder and chief executive. It did not, however, tell donors that their money would support a company's philanthropic projects rather than one proposed by a nonprofit.

For instance, it raised $975 for SunNight Solar Enterprises, a small start-up that develops solar-powered consumer products, so it could distribute 500 free solar-powered lights to refugees in camps. After The New York Times raised questions about the issue, Mr. Whittle said in a blog post on The Huffington Post that GlobalGiving was considering whether to tell potential donors when it was raising money for a business rather than a nonprofit.

These are fair points. The transparency and accountability of non-profit organizations and charities is important both for the charities, to maintain confidence of potential donors, and for their missions, which are ill-served by opacity. Even though the money of lenders went to help poor entrepreneurs-there is no dispute about that-the Times thinks it's important for the charity to be honest about the fact that it didn't go to poor entrepreneurs in exactly the way advertised. The newspaper understands that money is fungible, and a promise that it will be spent in one way does not mean that those specific dollars will be spent on the specific promise.

That, as it happens, is the exact argument conservatives and pro-life activists have been making about money for abortions in the health-care bill. Despite legislative language that says federal money will not be used for abortions, it's almost impossible to ensure that without the stricter language of a Stupak amendment. As my colleague John McCormack wrote:

Congress isn't requiring the public option to cover abortion--merely allowing it. And through some nifty bookkeeping, abortions will supposedly be paid for out of private funds rather than tax dollars.

Because money is fungible, it's difficult to say that tax dollars wouldn't fund abortions through this plan. Douglas Johnson of the National Right to Life Committee says, "Federal subsidies would also flow to private plans that cover elective abortions, under meaningless bookkeeping schemes -- and the amendment actually creates a federal mandate that there must be at least one private abortion plan in each premium rating areas of the health insurance exchange." Say that an individual contributes $1,000 annually to purchase a health-care plan, and the government contributes $5,000. The federal subsidies are not supposed to pay directly for abortions services, but the taxpayer-subsidized plan would allow a person to purchase an abortion for, say, $50 rather than $500.

"The status quo is that nobody has federally subsidized health care that includes abortion," says Johnson. That is true not only for Medicaid recipients, but federal employees as well.