A massive surge in taxpayer-funded grants to nonprofit organizations over the past decade is fueling fresh concerns about waste, abuse and the quiet expansion of government influence through ostensibly private charities.
According to WND, an investigation by The Center Square found that government grants to nonprofits and the number of nonprofits tapping into public funds have roughly doubled in ten years, even as oversight remains thin and questions mount about where the money is actually going. In 2016, federal, state and local governments distributed $149.5 billion in grants to about 56,000 nonprofits registered with the IRS, based on an analysis of nonprofit tax filings.
By 2020, that figure had soared to nearly $310 billion, with more than 110,000 nonprofits receiving taxpayer support, and it peaked two years later at $319 billion, even as roughly 10,000 fewer organizations were on the receiving end of government cash.
David Williams, president of the Taxpayers Protection Alliance, argues that this explosion in public funding has not been matched by meaningful accountability. Nonprofits should survive based upon the goodwill of people, not the force of taking taxpayer dollars, he said after The Center Square detailed the findings in the data. Nonprofits are not accountable and government officials havent held them accountable.
After the pandemic-era spike, the flow of tax dollars began to recede, but remained extraordinarily high by historical standards. In 2021, government funding for nonprofits fell to $259 billion and then dropped again to nearly $222 billion two years later, though more current data are incomplete because many nonprofits file for extensions and delay their tax returns, leaving the 2023 picture still unclear.
The surge in nonprofit funding closely tracked the federal governments unprecedented spending binge during the COVID-19 pandemic and the subsequent recovery period. That emergency spending, justified as a response to a public health crisis, appears to have entrenched a new normal in which nonprofits function as quasi-governmental arms, funded by taxpayers but insulated from the direct accountability voters can exercise over elected officials.
Since Elon Musk led the Department of Government Efficiency, controversy has intensified over the use of tax dollars to underwrite nonprofit activities, with critics alleging that funds are being squandered on frivolous programs or diverted to support the lifestyles of politically connected nonprofit executives. These concerns cut to the heart of a conservative critique: that government is outsourcing its agenda to private entities that operate with less transparency, while still drawing on the public purse.
The Center Squares investigation relied on a database built from digitized IRS Form 990 filings, the annual tax returns that nonprofits must submit. Using Artificial Intelligence, researchers identified organizations that receive government grants and analyzed the scale and distribution of taxpayer funding, while deliberately excluding program-service revenue because the 990s do not distinguish between payments from government and private parties for those services.
The data set also omits nonprofits and nongovernmental organizations that are not registered with the IRS because they operate overseas, meaning the true global scope of taxpayer-supported nonprofit activity is likely even larger. Even within the limited universe of domestic, IRS-registered entities, however, the numbers reveal a system in which insiders are handsomely rewarded with public money.
The Center Squares analysis found that more than 11,000 nonprofits roughly 10% of those receiving government grants employ at least one executive earning $300,000 a year or more. Significant tax money is going to pay nonprofit insiders, raising the question of whether taxpayers are subsidizing charitable missions or simply underwriting elite salaries.
At least one-fifth of the nonprofits that receive government grants reported executive compensation that consumed 25% of the taxpayer funding they took in. In hundreds of cases, government money covered 90% of top employees pay packages, including dozens of Minnesota nonprofits, where service organizations have already faced allegations of fraud and diversions of funds to possible Somali terror groups.
What this shows is that taxpayers are funding salaries, not programs, Williams said. Its not going towards the mission of the nonprofits. For conservatives who have long warned that big government breeds cronyism, the picture is familiar: public money flowing into private hands with little to show in terms of measurable public benefit.
The Center Squares review of the 3.4 million-line database has already turned up specific examples that highlight how far some taxpayer-funded nonprofits have drifted from mainstream priorities and legal constraints. As part of the investigation, The Center Square identified a North Carolina nonprofit receiving government money while promoting gender transitions in infants, despite state law prohibiting the use of public funds for gender reassignment in children.
In another case, an Illinois nonprofit paid more than $2 million to businesses owned by its founder to promote an obscure PTSD treatment involving injections into patients necks. These examples underscore the risk that, absent rigorous oversight, taxpayer dollars can be channeled into controversial or unproven ventures that would struggle to attract voluntary donations in a free market.
The Center Square plans to continue mining the IRS data for questionable expenses and suspect organizations, suggesting that what has already been uncovered may be only the tip of the iceberg. For watchdogs like Williams, the pattern points to a broader political dynamic in which elected officials use the nonprofit sector to burnish their image as benefactors, while the actual benefactors are the organizations and executives on the receiving end of public largesse.
Williams, who runs a nonpartisan nonprofit dedicated to exposing how government uses tax money, argues that politicians are effectively engaging in image laundering with other peoples money. This is really a case of phony philanthropy, he told The Center Square. The politicians and bureaucrats are saying theyre philanthropic, but its really our money, our taxpayer money, and they shouldnt be doing it, they should not be taking credit for it.
To rein in the problem, Williams insists that every nonprofit receiving tax dollars should be subject to rigorous, recurring scrutiny. You should be required to do a full audit every year, he said. And when I talk about a full audit, Im talking about looking at receipts, exactly where the money was spent
Yet when The Center Square sought comment from major nonprofit trade groups, the response was silence or delay rather than engagement with the troubling data. Josh Rosenfeld, a director at Avoq, which handled public relations for the National Council of Nonprofits, said no one at the council was available to discuss the surge in government funding, writing, Unfortunately, I dont think it is going to work out timing wise, as our team is going to be tied up throughout the next week or two.
Other influential associations, including Independent Sector and The Center for Effective Philanthropy, either failed to respond or declined to arrange interviews despite repeated requests. As taxpayers confront a system in which billions in public funds flow through nonprofits with limited transparency, the reluctance of sector leaders to address basic questions only reinforces the conservative argument that robust audits, strict limits on government grants, and a renewed emphasis on private giving are essential to restoring integrity and accountability in American philanthropy.
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