Columnist Made Wrong-Headed Attack

To the Editor:

Pablo Eisenberg’s condemnation of the National Council of Nonprofit Associations’ position on self-dealing presents a clearly misinformed misrepresentation of our position (“Have Nonprofit Groups Lost Their Integrity?,” Opinion, November 11).

In his piece, Mr. Eisenberg stated that NCNA “didn’t believe it would be wise to impose stricter rules on nonprofit board members to prevent them from ‘self-dealing’ — or getting undue financial benefits from their association with a charity.”

We have argued for clearer governance guidelines and through our member state associations have been at the forefront of providing technical assistance and training to assure that nonprofits not only adhere to the legal requirements but also to those values that reflect the best character of our sector. Mr. Eisenberg takes a leap to state we “[do not] care that [our] view flouts the nonprofit world’s tradition of not paying board members.” We have never advocated for the payment of board members for their board service nor supported other “undue financial benefits” for board members.

Where we differ from Mr. Eisenberg’s position is in his restrictive definition and application of self-dealing. An example of a typical struggle faced by local nonprofit groups illustrates our point. Imagine an organization with an operating budget of $500,000 that wants to set up an after-school program in an urban area. The market rate for a conveniently located space is $39 per square foot. A board member of the organization has office space in the targeted area and offers the space well below market value. This is a huge administrative savings for the organization and allows it to put more money into program expenses that serve more children.

That is just one example reported by local charities to our member state associations that would be prohibited if more restrictive definitions are applied to “self-dealing.”

In Mr. Eisenberg’s worldview the board member in that scenario would be benefiting and receiving an “undue financial benefit.”

In conversations with Mr. Eisenberg about such examples, he suggested that the board member either resign or offer the space at no cost to the nonprofit, thus removing any perception of impropriety. We believe this extreme position will hurt small nonprofits because board members of grass-roots and community-based organizations are often not in a position to accept financial losses. In addition, Mr. Eisenberg’s position may not solve the underlying problems that have been raised by questionable self-dealing allegations.

The real issues in this scenario are disclosure and clearer guidelines. Nonprofit organizations, especially small nonprofits, need to have clear conflict-of-interest policies and disclose their practices. In order to be effective in the real world, nonprofits need to balance the donations of goods and services received from supportive board members with full disclosure. It is difficult enough to recruit and retain engaged and committed board members, and to further inhibit ways they can support their organization does not further the ability of countless small organizations that rely on the generosity and involvement of their board members to serve their communities and constituents.

In terms of stricter rules the sector needs clearer guidelines that are matched with appropriate resources to get the word out to the thousands of nonprofits about what is appropriate and what is questionable and crosses the line. In this vein we would agree with Mr. Eisenberg, but his solution is to strike out punitively and caustically. Let us not be penny-wise and pound-foolish. We need reasonable responses to reasonable issues, not all-or-nothing strategies that create even more challenges.

Audrey R. Alvarado
Executive Director
National Council of Nonprofit Associations
Washington

Melissa Flournoy
President and Chief Executive Officer
Louisiana Association of Nonprofit Organizations
Baton Rouge, La.

To the Editor:

Pablo Eisenberg is right to point out that the nonprofit sector could stand to benefit from a long hard look in the mirror to ensure that the public interest remains its number one priority. But I take issue with his analysis of the recent legislative loss over car-donation programs as just another case of nonprofits’ arrogant self-interest.

Mr. Eisenberg makes it sound as though the coalition of 200 national nonprofits that was opposed to the provision in the corporate tax bill restricting write-offs for car donations were against any type of reform, period. In fact, the coalition was simply against throwing the baby out with the bath water. That’s why they put forward an alternative, less-draconian reform proposal of their own that would have gotten rid of exaggerated deductions without putting car-donation programs at risk. Congress ignored them.

Why? Because when push comes to shove, nonprofits get pushed and shoved. They haven’t built the political power necessary to hold their own against competing interests that are infinitely better prepared to do what it takes to move policy in their favor. You may agree or disagree with car donations as a legitimate form of charitable giving. But we can all learn one lesson from the car-donation loss, which is that the sector must do a better job of promoting its own reform initiatives and of clarifying its raison d’être in both the policy and public arenas — or risk getting steamrolled again.

This means launching a strategic campaign that proactively positions nonprofits as indispensable champions for the public interest and responds to congressional attacks with a combination of smart alternatives, grass-roots mobilization, lobbying, and the cultivation of supporters in Congress who will go to bat for the sector.

Car donations are just the tip of the iceberg for the challenges nonprofits will face in the coming year, as Senator [Charles] Grassley has sworn to clean house in the nonprofit sector just as his colleagues did by drafting sweeping legislation on corporate governance and financing. Mr. Eisenberg’s right, the nonprofit sector must never lose sight of its overriding purpose: serving communities. But nonprofits will serve communities best by first protecting — yes, it’s okay to say it — their own interests against concerted attack.

Daniel Silverman
Senior Vice President
Fenton Communications
San Francisco

To the Editor:

As any nonprofit-sector observer can tell you, there is plenty of fodder for both criticism and praise of the sector these days without misrepresentation of the facts.

Contrary to Mr. Eisenberg’s assertion that the council says it “never involve(s) itself in tax issues,” we do — and have always said we do. Tax issues affecting philanthropy are our primary concern. In the case of the estate tax, an extensive survey of the membership showed there was no consensus for or against repeal. While we did not actively lobby on the issue, our board directed us to inform Congress that repeal could have unintended consequences on charitable giving.

As the most active advocate for foundations in Washington, the council has long been a leader in crafting federal policies that promote and sustain a responsible, effective, and independent philanthropic sector. In most cases we have been — in the eyes of our members, the sector, and the Congress — effective advocates for significant and constructive improvement of the sector.

We are pleased to have led the fight for the inclusion of reasonable administrative expenses in private-foundation qualifying distributions, which we view as a boon to good grant making and hence to grantees. We recently made reform recommendations on foundation management and oversight to the Senate Finance Committee, recommendations that have been widely commended by even our critics.

The council has led a two-year effort, still under way, to develop effective and efficient guidelines for international grant making. They would replace the impractical and inappropriate guidelines for international grant making recommended by the Treasury Department, guidelines that would require costly procedures for any foundation that makes grants abroad.

Certainly as a former reporter I appreciate the right of columnists to voice their own opinion, but there is no room in this important dialogue for opinions that are not informed by the facts.

Dorothy S. Ridings
President and CEO
Council on Foundations
Washington