Philanthropy’s Challenges

Accountability, the presidential race, and globalization are among topics at major nonprofit meeting

Concerns about nonprofit accountability colored many of the sessions at a conference here last week that drew more than 800 nonprofit leaders from around the country.

“The era of assumed virtue is over,” said Robert Ottenhoff, president of GuideStar Philanthropic Research, which posts information about thousands of nonprofit organizations on its Web site.

Speaking to participants at the annual meeting of Independent Sector, a national coalition of foundations and nonprofit groups, Mr. Ottenhoff said the demand for more accountability from schools, governments, corporations, and religious institutions is not a short-term fad, but an accelerating trend that nonprofit groups can ignore only at the risk of losing donors.

Concerns about abuses have prompted charity regulators to propose new rules for nonprofit organizations. New York Attorney General Eliot Spitzer in June called for a number of federal and state changes that would, among other things, limit some charitable tax deductions, outlaw the formation of small private foundations, and require many charities to seek multiple bids before signing contracts with professional fund raisers (The Chronicle, June 26).

California’s attorney general, Bill Lockyer, told conference participants that his office is also crafting legislation to beef up its oversight of tax-exempt organizations.

The measures are aimed at enhancing his department’s ability to pursue criminal sanctions for fraud, clarifying what information commercial fund raisers must disclose to donors, strengthening safeguards for charities that use commercial fund raisers, and providing more-accurate information to donors about the use of charitable funds.

As one example, his office may issue warnings to the public when fund raisers have not registered with his office, as an early-warning sign that there could be problems with their operations.

Mr. Lockyer said he also supported the creation of a Web site run by a reputable entity that would guarantee to people interested in donating their cars or other big-ticket items that a large percentage of their donation would go to charity. Currently, he noted, many such transactions yield as little as 10 or 15 percent for the intended beneficiary.

“Our job as attorneys general is to try to help create a supportive environment in which your extraordinary and absolutely necessary work can go on, to allow people’s generosity to flow to these good purposes, and not to be a hindrance and obstacle to having those generous impulses succeed,” said Mr. Lockyer, who is also president of the National Association of Attorneys General.

Yet some charity leaders worried that the push for accountability comes with a price tag that may be prohibitive, particularly for small organizations facing pressure to comply with several sets of possibly contradictory standards.

“Nonprofits will have to spend much more on compliance with accountability measures,” said Alfred P. Miller, chief executive of FEGS Health and Human Services System, in New York.

James E. Canales, president of the James Irvine Foundation, worried that, if the accountability discussion is pushed too far, nonprofit groups and foundations might take fewer risks and shy away from policy work and advocacy, while focusing on quantitative measures of their performance rather than on the qualitative intangibles.

Problems at the Irvine Foundation before Mr. Canales was hired are often cited as a trigger for much of the current scrutiny by state and federal nonprofit regulators. In April, the San Jose Mercury News published articles that raised questions about the compensation paid to the foundation’s former president and other spending decisions. Irvine’s former president and board chairman have denied any wrongdoing.

Mr. Canales said he agrees that nonprofit organizations must be accountable, but he added: “I hope foundations and nonprofits ensure that we don’t lose those qualities that have been hallmarks of the nonprofit sector.”

As part of its own efforts to promote accountability, Independent Sector is circulating a draft of a proposed code of ethics for the consideration of its members.

“Transparency, openness, and responsiveness to public concerns must be integral to our behavior,” the introduction to the four-page document declares. Among other things, the code says organizations must have a conflict-of-interest policy, must ensure that compensation of the staff and chief executive is reasonable and appropriate, must not accumulate excessive operating funds, and must spend a sufficient amount on administration to ensure effective management and accounting.

Independent Sector is proposing its code of ethics as a model for its members. Rather than making the code mandatory for members, the association plans to encourage organizations that choose not to adopt Independent Sector’s code to develop one of their own. The board is expected to vote on the code at its meeting in January.

Conference discussions also centered on the 2004 elections, even though they are still a year away.

“The stakes for our nation, and frankly for us, could not be greater, whether at the presidential level, in the Congress, or in the statehouses and cities,” said Diana Aviv, president of Independent Sector. “Ought we not be involved in seeing that our members, our boards, our employees, and those who volunteer with us are engaged — irrespective of their political outlook?”

Nonprofit groups can hold candidate forums, invite candidates to learn more about their organizations, talk with candidates about issues of concern, and seek candidates’ commitments to help support nonprofit activities if they are elected, she suggested, as well as encourage the broad spectrum of Americans to register and to vote. Indeed, several conference sessions focused on political activities nonprofit groups could engage in without running afoul of the law.

“Let us tell office seekers that we are millions in number and we represent the diverse people of America, and we are going to organize and vote around the issues we hold dear,” declared Ms. Aviv. “That’s a power they will understand.”

Nonprofit groups have been battered recently by cuts in state and federal support and by the weak economy, which has softened foundation support and led to a decline in individual giving. But rather than squabbling over which organizations deserve to survive in a time of austerity, said Ms. Aviv, “we should be fighting for substantial and sustainable support from the federal government and the states. That cannot be done simply by reallocating what is left of the pie. It is time for us to press for a larger pie, whether that includes rolling back the massive tax cuts of recent years or increasing public revenues in some other way.”

Efforts to influence public policy should not be confined to election years, said Robert Kuttner, co-editor of The American Prospect, in his address to the conference. “Advocacy is no longer a dirty word,” he said. “It’s a necessity — and it’s how you build social movements.”

A century ago, he noted, abolitionists and suffragettes organized successful movements without support from foundations, which did not then exist, by mobilizing people at the grass roots. “You have a duty to advocate and organize as well as to conduct your mission,” he said.

Americans cannot solve their problems in a vacuum, noted Benjamin R. Barber, a political theorist at the University of Maryland and author of the best-selling book Jihad vs. McWorld. In outlining a global perspective on problems facing nonprofit groups, Mr. Barber identified the principal challenges facing the world today: the centralization and concentration of power in a relatively few hands; the global dimensions of the economy and of crime, climate change, disease, and other social ills; the commercialization and privatization of many of those problems; and the transformation of American politics by war and the fight against terrorism.

“If globalization means that the problems of the world are now global, then the solutions have to become global too,” Mr. Barber said. “That means each of us in our own organizations — whether it’s a school, a church, a foundation, or a fraternal association — has to think about the ways in which we are part of a larger world and work with people elsewhere in the world. If the problems are interconnected, then the solutions have to be interconnected too.”

The most far-reaching effect of the September 11 terrorist attacks, Mr. Barber said, is that they created a climate of fear in the United States, as exemplified by the color-coded terrorist warning system and suburbanites’ purchases of plastic sheeting and duct tape. “Silence is the sound of tyranny,” he said, “noise the sound of democracy. We need our noise. The antidote to the politics of fear is engagement.”

Mr. Barber urged nonprofit leaders to view their own work in the context of the struggle to preserve the values of democracy, pluralism, and tolerance in the face of efforts to subordinate such values to security concerns.

“I know we all in our own organizations sometimes get a little burned out, and think it really doesn’t matter to fight a small fight in local places. But in fact the real fight of the independent sector is the fight for liberty, the fight for voice, the fight to recreate that open, free America” that predated the attacks.

“The alternative to the empire of fear is our republic of citizens,” Mr. Barber said, “and the republic of citizens starts in civil society, starts in the neighborhoods, starts in all the organizations that we work with and represent and care about.”

American baby boomers represent a huge potential pool of volunteers, according to a new report released at the conference, but volunteer programs and fund-raising efforts will need to be tailored to the needs of people over 50.

The number of people age 50 to 64 will grow by nearly 14 million in the next decade, according to the study, which was conducted jointly by Independent Sector and AARP. But nonprofit groups hoping to recruit older Americans as volunteers will need to offer flexible hours and facilitate service by people with disabilities or health concerns, says the report.

Copies of the report, “Experience at Work: Volunteering and Giving Among Americans 50 and Over,” are available free to Independent Sector on its Web site, http://www.independentsector.org. Print copies are available for $15.95 for Independent Sector members, or $19.95 for nonmembers, from Independent Sector, 1200 18th Street, N.W., Suite 200, Washington, D.C. 20036; (888) 860-8118.