2) Scope creep and empire building.
"If you're not part of the solution, there's good money to be made in prolonging the problem."
Oh, and the problem of "hangers-on" -- people who really aren't in need of the service, but find their way through the bureaucracy or engage in fraud, because hey, free money.
You run into the "lawyer's uncertainty principle" -- if you define things closely enough to cut out most fraud, a lot of intended recipients fall afoul of the red tape; if you define things loosely enough
to allow even the unsophisticated among the needy to find their way in, you get a lot of fraud, waste, abuse, & hangers-on...
Not so much with private charity; particularly those which upheld and encouraged the self-respect of the recipients by requiring them to donate time & services in return for charitable donations.