• October 31, 2014

Charities Shouldn’t Strive to Speak in Only One Voice

Independent Sector’s new report, Beyond the Cause, thoroughly analyzes what it takes for charities and foundations to mount successful advocacy campaigns on issues that affect all nonprofits and offers useful case studies for nonprofits that want to get better at influencing public policy.

Unfortunately, Independent Sector’s plea for nonprofits to become more involved in advocacy is undermined by what appears to be a self-serving agenda and an implicit, if not intentional, suggestion that Independent Sector become the central hub of the sector’s advocacy efforts.

The report says that a single organization be given $20-million over the next four years to direct lobbying efforts to fend off unfavorable federal policies and legislative proposals.

Independent Sector spent two years preparing the report, using $1-million provided by the Bill & Melinda Gates Foundation. The organization says it interviewed over 100 people in the process, but it has refused to disclose who they were, saying that it promised to keep all the conversations confidential.

For an organization that has championed the notion of transparency, this stance is both surprising and disappointing, somewhat akin to a researcher unwilling to provide his sources of data.

A more disturbing judgment made by Independent Sector was in its approach to interviews and research. It identified six issues as most important and then commissioned special studies on each one and asked nonprofit leaders to rank their importance. This top-down approach led to a selection of key issues that aren’t necessarily the ones that matter—or should matter—most to nonprofits.

The issues Independent Sector picked as most important were:

  • Changes that could limit the organizations eligible for charity status.
  • Threats to charitable tax deductions for donors.
  • A need to clarify advocacy and lobbying rules for charities and private foundations.
  • Revisions to Internal Revenue Service disclosure forms that could hamper nonprofit operations.
  • Burdensome paperwork and red tape involving government contracts with nonprofits.
  • Lack of government-financed research on the nonprofit world.

Those topics are hardly the most important.  Presumably they were selected because they were the issues—with the possible exception of government contracting—that Independent Sector and its members had championed over the years. Had the organization cast its inquiries more broadly to organizations focused on social change, the environment, or activist watchdog groups, it might have come up with many other more pressing problems.

In the scheme of nonprofit priorities, the IRS disclosure forms and lack of government-financed research on nonprofits hardly merit serious consideration. And it is questionable whether the charitable deduction should receive such prominence. After all, Congress will probably never do away with the tax break entirely.

When President Obama recommended capping the charitable deduction at 28 percent for donors in the two highest tax brackets as way to pay for the Affordable Care Act and other safety-net programs, the large and elite nonprofit groups, including Independent Sector, erupted in a torrent of protests, proclaiming that such a measure would deprive nonprofits of about $6-billion in revenue and leave nonprofits in ruins. According to many researchers, the losses would probably be closer to $1-billion, a negligible figure compared with the nearly $2-trillion in revenue nonprofits receive every year.

Yet groups like Independent Sector and the National Council of Nonprofits spent almost all their time and resources battling the proposed measure, while ignoring the much greater good that could be achieved by President Obama’s plan to provide health care to the uninsured.

If Independent Sector wanted to deliver a real agenda for what needs to change, here is what it would do:

Seek money to improve today’s dysfunctional nonprofit regulatory system. The IRS and states’ attorneys general have failed to regulate and police nonprofits, resulting in an egregious number of financial scandals and other improprieties that have undermined the integrity of the nonprofit world. Although regulators need much more money to do a decent job, groups like Independent Sector have failed to push Congress for additional funds for both IRS and state regulators.

Bolster philanthropic support for nonprofits. As government funds are drying up, it’s more important than ever to increase the amount foundations give to charities. Instead of spending so much time on protecting the charitable deduction, nonprofits could have been pushing for a far more lucrative change in federal policy if they had asked Congress to increase the share of assets foundations must distribute annually. Raising today’s 5-percent requirement to 6 percent of assets, and requiring grant makers to count only grants, not other expenses in the figure as they are allowed to now, would add well over $10-billion annually to the coffers of nonprofit organizations.

Democratize the governance of nonprofits. Boards of both foundations and nonprofits increasingly reflect the growing class divide in our society. Foundation boards are the most elite institutions in the nation, composed almost entirely of very wealthy individuals and highly paid professionals. They do not include blue-collar workers, community leaders, teachers, ministers, or small businessmen. They are not the face of America, and their priorities often are the result of their lack of diversity.

But a growing number large nonprofit boards, and many small ones as well, also have begun to mirror this class divide. Without more diverse boards, nonprofits can’t do a good job of serving all the people who count on them.

Close the growing gap between large and small nonprofits. Throughout the nonprofit world, small institutions are shrinking (or closing their doors altogether) while big ones are thriving and growing fatter. As a result, poor people, minorities, and other disadvantaged people are getting hurt—because they are the ones who typically get services from small groups.

The reason for this discrepancy is the unwillingness of foundations and almost all wealthy donors to give to smaller, local, and grass-roots organizations. As Warren Buffett and Bill and Melinda Gates have pushed wealthy people to pledge to give at least half their wealth away, they have done nothing to encourage rich people to give to the organizations that need the most money. As a result, the Giving Pledge they are promoting will only widen the gap between rich and poor organizations.

Solving this problem is a challenge that may require assistance from the federal government and certainly a strong advocacy movement.

Other people will have different views of what matters most, and that is what gets to the heart of what’s disturbing with Independent Sector’s report. It makes no sense for one organization to become the coordinator of nonprofit advocacy efforts.

Nonprofits will never share a broad consensus about which issues are most important. The best that nonprofits can accomplish is to strengthen their individual advocacy and lobbying activities and join with other organizations in coalitions that fight for specific policy changes.

Given the fractured nature of the nonprofit world and the absence of an outstanding leader like John Gardner, who founded Independent Sector, it makes no sense to throw money into a single organization.

Right now that would just be a waste of philanthropic resources.

Pablo Eisenberg, a regular Chronicle contributor, is a senior fellow at the Georgetown Public Policy Institute. His e-mail address is pseisenberg@verizon.net.

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