Beggars AND Choosers

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I recently read a 2008 report from the John’s Hopkins Center for Civil Society Studies on the priorities non-profit organizations had for the Obama administration coming in.

I was struck by how needy the organizations seemed:

[the] poll finds the vast majority of nonprofit executives reporting little improvement in government policy toward their organizations over the recent past, and pinning high hopes on a new national administration to establish a more supportive policy environment for their work at this crucial juncture of our national life. Heading the list of priority measures identified by these executives were four specific measures:

  • Restoration and/or growth of funds for their field in the federal budget;
  • Reinstatement and expansion of tax incentives for individual charitable giving;
  • Federal grant support for nonprofit training and capacity building; and
  • Reform of reimbursements under Medicare, Medicaid and other federal programs to ensure that they cover the real cost of service.

So basically all of the top priorities involved a demand for greater funding.  This seemed pretty interesting to me considering that, according to the 2008 Non-Profit Almanac, total revenues and assets at non-profit organizations grew 54% from 1990 to 2005, a full 20% greater than GDP over the same period.  Granted, these figures are skewed by the large proportion of revenues coming from the high-inflation education and health sectors, but the message is clear: non-profits haven’t been starving.

So what gives?  I think its addiction.  Similar to the way some corporations get addicted to growing through acquisitions, non-profits have become addicted to growing by acquiring new funders.  Sure enough, it is the largest revenue organizations that placed priority on these funding supports, while smaller organizations at least placed some emphasis on training and capacity building for their employees and student loan forgiveness for public service careerists.

Of course, I understand the need for funding support for the critical services in society that private markets fail to pay for, but the dollar addiction is intriguing when considered alongside this:

Only 22 percent strongly favored strengthening the capabilities of government oversight agencies or introducing “community benefit standards” to clarify the basis for tax exemption.

Ok.  No one likes to be regulated, but it needs to be accepted that organizations that are fully tax-exempt and benefit from the tax deductibility of charitable contributions cannot just have their cake and eat it too.

This is something that private markets understand.  Becoming a publicly traded company promises a huge and ongoing source of capital, but any company that wishes to get even a taste of those dollars has to endure major hurdles and regulation.  There are enormous legal, accounting and underwriting fees, onerous accounting standards and quarterly reporting requirements, and constant oversight from the Securities and Exchange Commission.

But most non-profits want subsidized, hassle-free, blank checks.  At the very least, they should be willing to accept some “community benefit standards” in order to get that money.  But it should go deeper than just the money.  An organization should want that validation, to be able to point to a standard they have met that certifies they are indeed providing their stated benefit to the community.

The icing on the cake is that standardization would only help them raise more money by allowing organizations to avoid to the dazzling array of individual foundation requirements on a case-by-case basis.

Posted on February 22nd 2010 in news

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