I finally have a handle on why the non-profit sector keeps getting itself into trouble.

Although the public and government hold most charities in high regard, lately a series of scandals among the so-called do-gooders has drawn Congress' attention and resulted in new laws and proposals for more. Why is this so?

It's because the troublemakers lack the charitable impulse.

Think of it in terms of the profit motive. If you start a business with the goal of maximizing profit, you are well positioned to succeed. If you don't, you most likely will fail. The same logic applies to non-profits. If your motivating instinct is to help others, you will quickly organize your resources to accomplish that. If you lack that instinct–but nevertheless find yourself in charge of a charity–bad things will happen.

The Senate Finance Committee recently enumerated several such bad things, and the absence of the charitable impulse seems to be the obvious culprit.

For example, at a tax conference in Washington, D.C., late last year, a committee staffer criticized a non-profit that pays its board members' employers $500,000 to $2 million every year. The staffer said simply, “They're not there to make money.”

He could just as easily have said, “If those board members had a charitable impulse, this problem never would have occurred.”

He went on to list other uncharitable deeds that had piqued his bosses' interests. He said the senators were “stunned” when the IRS commissioner testified last summer that more than half of all corporate tax shelters involve non-profits as their accommodating partner. Then he offered his own stunner. He cited his personal experience with the corporate side of fraud–”Enron, things like that”–and said he had no reason to believe the problems in the tax-exempt sector were to any degree different from those in the for-profit area. He acknowledged the “few bad apples among us” view, but then lacerated it by saying, “It is not just a minor problem … it is a very significant problem.”

An example of such a significant problem arose in the D.C. area late last year when an independent watchdog group–the DC Appleseed Center for Law and Justice–claimed the federally chartered, non-profit health insurer CareFirst was failing to act as a “charitable and benevolent” institution.

The group produced an impressive analysis that in essence described the charitable impulse in legal terms. The analysis showed that the billion-dollar CareFirst spent less than one-tenth of 1 percent of its assets, and around only one-twentieth of 1 percent of its premiums, on charitable activities in 2004. The Appleseed Center concluded that CareFirst easily could increase its annual charitable expenditure from $1 million to at least $40 million–and probably to as much as $60 million–without risk to its policyholders.

I was most intrigued by the group's exhaustive legal analysis of what “charitable” means, and gratified to see the law is not wishy washy about the seemingly soft word. If the charter says a charity is to be operated for charitable purposes, it turns out the law will not let those in charge slip and slide around its obligations. The case law requires that a stated charitable mission must be a “primary purpose” of the organization; that it may not be treated as an “incidental” one; that expenditures for charity must be given “priority;” and that a charitable mission cannot be met by spending only “whatever is left over” after it achieves other corporate goals. Indeed, the law requires that an entity's assets must be used for the benefit of the community “to the maximum feasible extent.”

That sounds pretty clear to me. In the case of CareFirst, such painful parsing of the word”charitable” is the equivalent of being hit by a legal two-by-four. Although it shouldn't be necessary, apparently it is. But I have finally realized, it's only necessary if the people in charge lack the charitable impulse.

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Bruce D. Collins is the corporate vice

president and general counsel of c-span.