July 9, 2013 | Read Time: 5 minutes
When confronted by nationwide headlines about some of charities’ worst practices, the overwhelming response of nonprofit leaders has been to bury their heads in the sand and try to pull the hole in after them. What these leaders fail to appreciate is that when the scandalous behavior of their colleagues is exposed, silence is neither golden nor in their own interest.
The Center for Investigative Reporting, along with the Tampa Bay Times and CNN, carefully researched and compiled a list of what they called “America’s 50 worst charities”—organizations that, as The Chronicle’s news article put it, “channel most of the money they raise to professional solicitors, mimic other charities’ names, deceive donors on telemarketing calls, divert money and contracts to people with ties to their organizations, and use accounting tricks to inflate the amount they report spending on their missions.”
Yet in spite of the overwhelming evidence of profiteering by these groups and their closely associated entities, Diana Aviv, chief executive of Independent Sector, the leading coalition of charities, declared to The Chronicle that she didn’t have enough information to make a judgment about the identified organizations and the profiled practices. Other nonprofit officials and commentators have defended outrageous fundraising percentages diverted to what the California Association of Nonprofit’s leader, Jan Masaoka, has called the “philanthropic-consultant industrial complex” instead of benefiting the charitable causes that donors thought they were supporting.
These and similar abuses are not new to the nonprofit world, nor is the contemptible timidity of its leaders. Journalists have been writing for years about the huge salaries paid to charity officials, of outlandish benefits, of self-dealing within boards, of tax dodges for special donors, and of malfeasance in program operations.
Paul Light, a New York University scholar, found several years ago that public confidence in charities hit a low in 2002 and has had not bounced back. Americans remain skeptical of charitable performance, and all of that negatively affects people’s willingness to give.
Today charitable giving accounts for a lower percentage of the gross domestic product than it did 10 years ago, and it has remained relatively flat since its great decline during the recession.
Current giving patterns indicate that it will be years and years until giving returns to 2007 levels, the highest on record, if indeed it ever does. In fact, giving by high-net-worth individuals, those who provide the lion’s share of charitable donations, is actually declining, although the circumstances of the wealthy continue to improve immensely with the growing economic inequality in the United States. And as their donations have dropped, so, too, has their confidence in charities: From 2010 to 2012, those who had “a great deal” of faith in charities dropped by about 20 percent and those who had “hardly any” grew by 67 percent.
Trust and confidence that donors and others have in charities will continue to decrease if national and local nonprofit leaders fail to join the public’s outrage over the despicable and shoddy practices of too many organizations. Trying to slickly sidestep the issue instead of seeking a platform from which to condemn such truly selfish and uncharitable behavior is an abdication of both public responsibility and private organizational stewardship.
It is critical that leaders find their voice, and not simply because the silence of good people allows evil to triumph. Government officials, be they tax authorities or attorneys general, seem to lack the resources or the legal authority to prosecute nonprofit miscreants. They need help from charity leaders to do their jobs.
It’s obvious that some charity administrative and solicitation costs are essential. However, instead of rallying around self-serving calls from everyone to desist from examining overhead and fundraising costs, such as those made the by Charity Defense Council founder Dan Pallotta—whose own Pallotta TeamWorks charitable-events business collapsed after journalists raised questions about the amount of donated dollars it pocketed—nonprofit leaders should be assisting legislatures and other officials to craft new laws and regulations to stop abuse.
Oregon just took a first step by passing a measure that denies tax deductions to donors who support groups that for three years spend 70 percent or more of their budgets on fundraising and overhead. Charities should help build support for appropriate public scrutiny and sanction instead of touting the possibilities of self-regulation, which can’t possibly work when leaders refuse even to speak, nevermind take action, when they see egregious abuses.
In the face of growing hardship from government cutbacks and the slow recovery, every nonprofit is finding it harder to raise money these days. But they need to do more than seek competitive advantage by searching desperately for new fundraising strategies and gimmicks that may well add to donors’ growing annoyance with the worst charitable practices. Without broadening America’s giving culture, that’s a zero-sum game in which one group wins and another loses.
What we need from nonprofit leaders is a stewardship that embraces all nonprofits, not just their own organizations.
We need to increase the numbers of people who make donations to charities and encourage them to give more—but we can do that only if more Americans have faith that nonprofits use their money to do a good job of serving the common good instead of enriching themselves and others.
Donors won’t have that kind of confidence if nonprofit leaders don’t galvanize themselves into action to counter horror stories about abominable organizations and conniving nonprofiteers.
We need leaders who understand that a fundamental role of their organizations is not just to carry out a mission. Their role is to work actively to help Americans realize that the quality of life for each of us ultimately depends on how well we serve the common good, that a principal function of charity is to better connect us in community, in society, so that each of us benefits. That can’t be done by simply trying to promote one organization in competition with similar groups.
Charities’ leaders need to stand up and speak for the common good even when that means denouncing some of their peers. Their own organizations’ interests and those of the public require it. The silence of an unspoken mutual defense pact may be convenient and comfortable in the moment, but it certainly won’t pay off in the long run.
Mark Rosenman is an emeritus professor at the Union Institute & University, and directs Caring to Change, in Washington, DC.
