Will Tuesday’s Election Change Government’s Relationship to the Nonprofit Sector?

Tuesday evening’s election results, if you believe the pundits, are a starting point for monumental change within our government.  As John Stewart highlighted on the Daily Show, words like “tsunami” and “earthquake” were frequently used to highlight the impact that is likely to be seen due to this electoral change.  While pundits are known to be wrong from time to time, one sector that will not see monumental change in regard to the change in government is the nonprofit sector.  The government will continue on with a deep tradition of misunderstanding, misusing and knee-jerk reacting to the nonprofit sector.  Recent stories regarding the government’s approach to the nonprofit sector outline a deep problem with the uneven relationship between the two.  Here are some of the areas that highlight this troubled relationship:

Knee-Jerk Reactions

One of the areas that should be deeply concerning to the sector is how easy it is for elected officials to circle the wagons around individual nonprofits based on either partisan angling or just general misinformation.  Just look to the recent case with National Public Radio and political pundit Juan Williams.  On October 20th, NPR terminated William’s contract after he publicly commented, “if I see people who are in Muslim garb and I think, you know, they are identifying themselves first and foremost as Muslims, I get worried. I get nervous.” NPR stated that the remarks were “inconsistent with our ethical standards and practices, and undermined his credibility as a news analyst with NPR” and decided to part ways with Williams. 

The response by many current and former public officials, including Sarah Palin, and Newt Gingrich, have called for NPR to lose the federal funding it currently receives, and Sen. Jim DeMint is introducing legislation to defund NPR.  While some in the sector may not see reason to worry as NPR is always being threatened with this action, there is recent precedent by the federal government in targeting nonprofit organizations based on politics and misguided information. 

In March, four senators got in a huff when they realized that Boys and Girls Club CEO Roxanne Spillett was compensated nearly $1 million in 2008 while at the same time closing local clubs for lack of funding, additionally questioning the organization’s $4.3 million travel budget, $1.6 million conference spending, and over $500,000 in lobbying fees.  Never mind that Spillett has increased the number of local sites by over 150%, that their budget is well over $100M and that the anger might be politically-motivated and related to the organization receiving $425 million in federal ARRA funds for mentoring services.

In late 2008, conservative activists visited and secretly videotaped ACORN offices and low-level ACORN employees providing advice on how to avoid taxes, engage in tax evasion and prostitution. After the videos were made public, the U.S. Congress voted to eliminate federal funding to ACORN and soon after ACORN announced it would be closing its offices and disbanding due to loss of funding from government and private donors.  Unfortunately, an independent internal investigation of ACORN found the videos that had been released appeared to have been edited, “substantially”, while also finding no evidence of criminal conduct by ACORN employees.  The California and Brooklyn District Attorney Offices also determined that the videos were “heavily edited”.  In 2009, the US Government Accountability Office (GAO) found that ACORN showed no sign that it mishandled any federal money they had received. While one report concluded that ACORN had displayed “poor management practices,” it was evidently enough for Congress to pass the Defund ACORN Act and sign into law in October of 2009.

There is a ton more history in this area.  Just read the last six years of testimony to the Senate Finance Committee’s work on the nonprofit sector, specifically the commentary by Senator Grassley, to get a fuller understanding of one position of government interacting with the sector.

Relating to the recent election the question I am led to is “Does a newly elected Republican majority in the House make the above or less more worrisome?” 

The Government “Sike”

One of the games I played as a kid in elementary school involved acting as if you were going to shake someone’s hand as a sign of friendship or partnership and then at the very last second yank your hand away and yell out, “Sike!”.  Immature of course, but it always got a few laughs from my friends.  If we think about one of the standard connects between government and nonprofits, most would say that the contracting process is one of the standard ways in which the two relate.  Unfortunately in the contracting world, government has repeatedly issued what I now deem the “Government Sike”.

According to a groundbreaking new report out by The National Council of Nonprofits with data by the Urban Institute, they cite a national epidemic of government not living up to its end of the contracting relationship.  The report highlights several areas; I will briefly outline two state government examples.  The first is the Illinois’ Comptroller’s fifty-page list of more than two thousand nonprofits that the state has failed to pay almost half a billion dollars in just the first six months of 2010.  The second example is the New York’s Comptroller’s findings that 92.5 percent of the state’s contracts with nonprofits were late and the state had delayed paying numerous nonprofits for multiple years.

As national and state unemployment numbers create terrible financial conditions for state governments, the nonprofit sector can count on this relationship issue to become worse before it gets better.  As the Nonprofit Finance Fund stated in their Passion and Purpose report, approximately 30 percent of nonprofits do not have enough operating cash in hand to cover more than one month of their expenses. 

The question I am led to: “Will the growing financial challenges of state government help or hurt government’s ability to keep their end of the contracting relationship with nonprofit organizations?” 

Dazed and Confused

When looking at the three major pieces of legislation passed in the last 18 months, with over 3000 pages of legislation written, the nonprofit sector is scarcely mentioned.  The sector was barely consulted when the legislation was drafted.  When Congresswoman Betty McCollum’s Legislative Director, Peter Frosch, approached the Congressional Research Service and asked for information regarding the nonprofit sector, the CRS told them that there was none and so Congresswoman McCollum’s office pushed for the first CRS study on the sector, which was completed in late 2009. Until that time, not one study has been conducted on a sector that is equal in size to the nation’s manufacturing industry. 

If you ask an elected official to talk to you about the nonprofit sector, more than likely you will get a response about the local charity that that he/she is likely to support.  Overall, their knowledge of the sector is limited to their experience supporting their respective causes.  As was discussed in the recent Policy Institute at the national Independent Sector conference in Atlanta, the sector has to better communicate challenges as the messages have been fragmented and related to the different issue areas.

There is potentially some light at the end of this tunnel. Recently, Congresswoman McCollum’s office introduced the Nonprofit Sector and Community Solutions Act.  The bill, entitled H.R. 5533, will do a variety of things, including creating a U.S. Council on the Nonprofit Sector that will advise the President and Congress about how the federal government can work more effectively with nonprofits and the creation of an Interagency Working Group on Nonprofits and the Federal Government which would coordinate administrative policies regarding contracting with, supporting, and managing federal relationships with nonprofits. 

It will be interesting to see how elected officials in Congress will respond to this bill and if the bill will gain the momentum necessary.  If it moves forward steadily, we can have the hope that there is a positive new foundation for future understanding and relations of government to the nonprofit sector. 
The question I am led to is, “If we see the bill slug and stall, how will the sector mobilize and crystallize itself around this bill”.

Read more stories by John Brothers.