Nonprofit News and Comment

The end of January marks our the first year of monitoring stories on philanthropy, nonprofits, voluntarism, and civil society in the world press.

Over that period of time, the Nonprofit News & Comment blog has grown and changed. Originally, we gleaned only the major U.S. papers and made weekly postings of headlines with links to the stories themselves. Gradually, we expanded the range of sources to include more than thirty news outlets all over the world. The increasing volume of material made it necessary to break the weekly postings down into industry and topical categories. At the same time, the often cryptic or localized character of headlines made it necessary to provide precises of stories.

As this changes were made, the limitations of the blog software we used became evident. With sometimes up to a hundred items in each weekly post, searching the blog for items on particular subjects became impractical. And, because Wordpress did not permit categorizing or tagging particular items in the weekly posts, it was not possible for readers visiting the blog to search it by subject. For this to be possible, it became necessary enter every news item separately — a process we began in November.

The year it has taken to learn how to glean, sort, and present news items, has produced a unique view of the unfolding global associational revolution. Sadly, the view remains fragmented and partial: some industries, like grantmaking, are grossly over-represented in news accounts; others, like human services, are under-represented (except for stories about funding and service cuts). Whole continents are barely represented: there’s no comprehensive African news service and few African papers support websites; Latin America is under-represented. Curiously, England aside, European news sources make little effort to report to the world.

1. The ACORN Scandal

Founded in Arkansas in 1970 as an off-shoot of the National Welfare Rights Organization, the Association of Community Organizations for Reform Now (ACORN) became one of the largest and most influential progressive advocacy organizations in the United States. Though a nonprofit, it is not a charitable tax-exempt 501(c)3 organization. It does, however, control a tax-exempt nonprofit subsidiary, the New Orleans-based ACORN Institute which, according to its 2006 Form 990, boasted more than $7 million in annual revenues. The institute is only one of many corporate entities associated with the national organization.

Over the years, ACORN’s priorities have included “better housing and wages for the poor, more community development investment from banks and governments, better public schools, and other social justice issues. ACORN pursues these goals through demonstration, negotiation, lobbying for legislation, and voter participation. ACORN comprises a number of legally distinct non-profit entities including a nationwide umbrella organization established as a 501(c)(4) that performs lobbying; local chapters established as 501(c)(3) nonpartisan charities; and the ACORN Housing Corporation. These entities support labor-oriented causes. (http://en.wikipedia.org/wiki/Association_of_Community_Organizations_for_Reform_Now).

In pursuit of its agenda, ACORN has played an active role in voter registration and in promoting the candidacies of progressive candidates (including Barak Obama), while seeking to influence their positions. The organization has received significant support from government agencies — though the exact amount of these revenues has yet to be determined.

Though long controversial, ACORN sprang into public consciousness in 2008, when it was revealed that the brother of the organization’s founder had embezzled nearly a million dollars from the group and affiliated charitable entities. In September of 2009, conservative activists released video tapes in which ACORN employees were shown counseling two individuals (who turned out to be right wingers acting under cover) on tax avoidance and a prostitution enterprise.

In the furor that followed, Congress and state authorities defunded the organization and its affiliates, while hundreds of news stories explored that nature and extent of its influence.

Interestingly, most of the coverage was sensationalistic, focusing on the alleged misdeeds of ACORN employees. Little serious attention was given to the nature of the organization — particularly its hybrid character — and what it tells us about the transformation of nonprofits in the twenty-first century.

In terms of sheer quantity, the ACORN story surely counts as the leading nonprofit news story of 2009.

2. Madoff Scandal Impact

In March 2009, Bernard Madoff, former chairman of the NASDAQ stock exchange and a well-known New York financial manager, pled guilty to 11 felonies and admitted to turning his wealth management business into a massive Ponzi scheme that defrauded thousands of investors of billions of dollars. Many of these investors were charitable institutions and wealthy individuals who supported them.

Madoff’s service on high-profile boards, including Yeshiva University, New York City Center, the New York City’s Cultural Institutions Group, Gift of Life Bone Marrow Foundation, and the Lymphoma Research Foundation, helped to give him access both to wealthy donors and to organizational assets — connections which he used to full advantage as he built his Ponzi scheme.

When the fraud came to light — with losses to investors running into the billions — the impact on both donors and organizations that had entrusted their assets to Madoff, the impact on Jewish philanthropy and nonprofits was enormous. Affected institutions included Yeshiva University, the Women’s Zionist Organization of America, and Steven Spielberg’s Wunderkinder Foundation, as well as Jewish federations and hospitals. Some orgfanizations were forced to close. The Picower Foundation, a major supporter of programs at MIT and Harvard, was forced to shut down, as was the Lappin Foundation, which had invested its entire $8 million endowment with Madoff. Because of the impact of Madoff’s predations on Brandeis donors, the university was forced to close and liquidate its art museum.

Affinity fraud, as schemes which pray upon particular ethnic and religious groups is called, are hardly unique to the Jewish community. In recent years such scams have victimized fundamentalist Protestants, Mennonites, and Catholics.

3. Astor Scandal

In July of 2004, Philip Cryan Marshall, grandson of leading New York philanthropist Brook Astor brought suit in New York courts seeking the removal of his father, Anthony Dryden Marshall, as her conservator and charging him with neglect of Mrs. Astor and illegally looting her estate. A variety of New York notables weighed in on the younger Marshall’s side, including David Rockefeller, Sr., Annette de la Renta, and Henry Kissinger.

Had the suit merely concerned a squabble over family assets, it would have had little relevance to philanthropy and nonprofits. But, as it happened, Mrs. Astor’s testamentary dispositions had significant implications for the major New York charities she had supported during her lifetime, including the New York Public Library, New York University, the New York Regional Association of Grantmakers, the New York Botanical Garden, NewYork-Presbyterian Hospital, WNET-TV, Historic Hudson Valley, The Juilliard School, the New York Landmarks Conservatory, the Wildlife Conservation Society, the Metropolitan Museum of Art, Carnegie Hall, the Morris-Juemel Mansion Museum, the Citizens’ Committee for New York City, the Rockefeller University, the Animal Medical Center, the Merchant’s House Museum, the Library of America, the Pierpont Morgan Library, the Lotos Club, Lenox Hill Neighborhood House and the Brooklyn Stained Glass Conservation Center. Tony Marshall, it was alleged, had diverted some $60 million intended for Ms. Astor’s favorite charities into his own pocket.

The trial was protracted and sensationalistically covered, featuring excruciatingly detailed glimpses of the private worlds of the very wealthy, including issues of charitable intent and estate planning. It concluded in October 2009 with Tony Marshall conviction for larceny and scheming to defraud. Despite his advanced age (85) Marshall was sentenced to a three year prison term.

4. Universities: Implosion of Endowments

It took months to become newsworthy, as the leaders of America’s leading private universities strove to conceal the extent of the losses their endowment had suffered in the economic implosion that began the current recession. But, as programs were terminated, employees laid off, hirings cancelled, construction projects put on hold, and, finally, as institutions like Harvard had to float bond issues to meet their current obligations, the full story came out and the media took notice of the extraordinary risks that endowment managers had taken over the past decade in order to maximize returns on their investments.

The impact of the “Great Recession” on university endowments was in marked contrast to the impact of the Great Depression of the 1930s. Prudent financial managers in the 1920s had foreseen the risks of the stock market boom of the period and had largely liquidated their equity holdings in anticipation of the crash. As a result, institutions like Harvard and Yale entered the Depression cash-rich — and used their reserves to expand physically and to create employment in the communities in which they were located.

But in the face of the current crunch, newspapers like the Boston Globe have had to remind Harvard that the victims of its high-risk investments were not only members of the university community, but Boston and Cambridge which “rely on Harvard as one of the region’s largest private employers, an economic engine, and, in the case of Allston, a prime developer.”

Interestingly, despite its aggressiveness in overseeing the nation’s nonprofits, the Senate Finance Committee has remained strangely silent about whether the Ivy League losses, which were strikingly larger than those of other endowed institutions, constituted actionable breaches of trust and constituted waste of charitable assets. But, as continuing reports of damage to their asset bases unfold, it seems clear that we haven’t yet heard the end of this story.

5. Global Catholic Child Abuse Scandal

Although the problem of child sexual abuse has plagued the Roman Catholic Church for centuries, it was only in the 1980s that the press — and the church itself — began to address the issue publicly. It first emerged in the form of scattered reports of abuses by particular priests — in Los Angeles (1981), Louisiana (1985). Because of the political power of the church and the timidity of the press, it took decades for the true extent of the problem to be revealed [on this, see Charles M. Sinnott, Broken Covenant: The Story of Father Bruce Ritter's Fall from Grace -- How Power, Politics, and Sex Rocked the Foundation of the Sprawling Covenant House Charity (1992). Only in 2002, when the Boston Globe assigned a team of reporters to a major investigation of child sex abuse in Massachusetts did the full extent of the scandal become evident [on this, see Boston Globe. Betrayal: The Crisis in the Catholic Church (2002). These exposées gave rise to widespread litigation which forced many U.S. dioceses into bankruptcy.

The issue was not merely the fact of sexual abuse, but the extent to which church leaders protected abusers and sought to conceal their crimes.

Since then, the scandal has become global. The past year featured major investigations of abuse of children in church-run orphanages in Australia, the Phillipines, and Ireland. In 2009, the Irish government's Commission to Inquire into Child Abuse concluded that: "the Dublin Archdiocese's pre-occupations in dealing with cases of child sexual abuse, at least until the mid 1990s, were the maintenance of secrecy, the avoidance of scandal, the protection of the reputation of the Church, and the preservation of its assets. All other considerations, including the welfare of children and justice for victims, were subordinated to these priorities. The Archdiocese did not implement its own canon law rules and did its best to avoid any application of the law of the State."

This is a story that is still very much in the process of being told, as systematic studies of the problem have only been undertaken in a handful of countries, including the United States, Ireland, Australia, New Zealand, and Canada.

6. UK: Education/Equality Debate

The 2006 Charities Act mandated that, in order to be considered charities, organizations would have to demonstrate that they operate for the public benefit. As enacted, the statute did not offer any new definition of public benefit, nor did it suggest how charities should demonstrate public benefit. Decisions on this were left to the Charities Commission.

In July of 2009, the Commission announced that it was requiring the country's elite private schools, many of which boast sizeable endowments, to demonstrate whether they operated as charities and could demonstrate public benefit. This not only set off a wide ranging discussion about whether making such demands was within the Commission's powers, but a far broader and more intense national discussion of education and equality in the United Kingdom.

It seems clear that concerns about the role of education in promoting equality of opportunity and in redistributing concentrated resources to serve the public was in the forefront of the Commission's think for, within days of the enunciation of its new public benefit standard, stories began to appear in the press about the extraordinary privileges enjoyed by private school graduates. Privately educated children, the press reported, are four times more likely than state pupils to get straight As at A-level, and more than three times as likely to go to university. Just under half of the pupils accepted at Oxford and Cambridge universities come from the 7% of the population educated at private school. Beyond academic, the impact of private schooling was also evident: according to the Guardian, nearly three quarters of judges, about a third of FTSE 100 chief executives, half of all senior journalists and a third of MPs - including the chancellor, Alistair Darling; the education secretary, Ed Balls; and Labour's deputy leader, Harriet Harman - were privately schooled.

Inevitably the debate shifted from policy to politics, as Tory politicians took up the cause of the private schools and Labour leaders attacked the Tories as defenders of entrenched class privilege.

While the idea of a public benefit standard has yet to be embodied into the U.S. tax codes, there are signs -- including the portions of the newly-revised Form 990 requiring statements of "program accomplishment" -- that the IRS is exploring the possibility of a public benefit standard. But regardless of whether there is a formal standard, there is growing concern -- both among law makers and the public -- about whether charitable tax exemptions are being given to organizations that genuinely serve public purposes (on this, see Stephanie Strom, "Grab Bag of Charities Grows, Along With U.S. Tax Breaks," New York Times, December 6, 2009.

Unfortunately, the U.S. has not addressed questions about charities -- particularly endowed charities -- and their role in the growing gap between rich and poor. According to some studies, the top .01% of American earners took home 6% of total U.S. wages, a figure that has nearly doubled since 2000; the top 10% of wealth holders are estimated to possess 80% of all financial assets [and] the bottom 90% holding only 20% of all financial wealth.”

Perhaps it’s time for U.S. journalists to take a look at the kinds of questions their British counterparts asking about the social role of charity.

7. Obama and the Expansion of Charter Schools

In his all-too-evident determination to perpetuate the policies of his predecessor, President Obama, assisted by a pliant Congress, has relentlessly pushed the charter school as the vehicle of choice for education reform.

As “Facts and Promises on Charter Schools,” an editorial in the New York Times on January 11, 2010 suggests, the evidence on the value of charter schools, at best, mixed. This has not stopped the administration from making embrace of the charter model the basic condition for states to receive stimulus funding.

What is evident about charter schools — as it was for the faith-based human services initiatives proposed by Bush and promoted by Obama — is that as mechanisms for privatizing hitherto government responsibilities — they are wonderful vehicles for the distribution of political patronage, especially to those inner city constituencies which were the bedrock of his support in the 2008 election.

The President picks and chooses which of his supporters to reward. The teachers’ unions which were among his earliest supporters, seeing themselves betrayed by a federal commitment to non-unionized schools which empower activist communities and disempower trained professionals, have given up opposing federal policy.

With the amount of stimulus money committed to education — estimated to be nearly $50 billion — there can be little doubt that the current initiative will constitute one of the most sweeping reforms in our history. But, given the mixed record of charters in improving education, whether the reform will really address the very real problems plaguing American schools remains to be seen.

8. Nonprofitization of Journalism? The dog that didn’t bark?

With a catastrophic decline in newspaper circulation and revenues that began early in the decade of the “naughties,” newspapers began shedding staff and special assignment “beats.” Investigative reporting was particularly hard-hit.

As the power of the press waned, talk began to circulate about nonprofitizing established papers and creating nonprofit alternative media.

As early as 2005, two-dozen leaders of nonprofit media began meeting to discuss “independent media and the future of democracy.” This led to the establishment of The Media Consortium, to build connections, create infrastructure, and amplify the voice of independent media.

In January of 2009, an op-ed essay by Yale financial manager David Swenson and university financial analyst Michael Schmidt proposing the creation of endowments to support the press.

The movement to nonprofitize the press seemed to gain momentum with the convening of “an unprecedented meeting of nonprofit news outlets” at the Rockefeller Brothers Fund’s conference center at Pocantico in July of 2009. This was followed by an executive session on new business models for the press hosted by the Harvard Kennedy School’s Shorenstein Center on the Press, Politics, and Public Policy.

At this point, the evolution of nonprofit media is still very much in the talking stage. Here and there, there are signs that it is taking root: there are a number of donor-supported local on-line papers, like the New Haven (CT) Independent, and specialized investigative news outlets like Politico.com and Pro Publica. But whether these are merely experiments or harbingers of things to come remains to be seen.

As Harvard legal scholar Marion Fremont-Smith’s important policy paper, “ Can Nonprofits Save Journalism? Legal Constraints and Opportunities,” there are no legal impediments to media operating as nonprofit organizations. In fact, periodicals like Harpers, Mother Jones, and (intermittantly) MS have operated as nonprofits for many years.

The real question is whether the nonprofit ownership form and donative and/or subscriber support would give these entities any greater freedom from dependence on special interests. The example of public radio gives reason for skepticism: the “enhanced underwriting” on which so many broadcasters have become dependent differs little from advertising; we know little about how much sway major underwriters have in shaping the content of programs and the slant of the news. Individual donors and subscribers are no less problematic, given the fact that the lion’s share of donations tend to come from a handful of large donors. The largesse of foundations is perhaps the most hazardous form of dependence: most big foundations are well-known to have political and policy agendas; their grantmaking is the instrumentality through which these agendas are fulfilled.

As things stand, a nonprofit media is a story waiting to happen. But the events of the past year suggest that it is likely to loom large in the coming months.

9. Vatican probe of Nuns

Since Vatican II, American orders of women religious — nuns — have been at the cutting edge of efforts to bring the Rona Catholic Church’s social justice teachings into the world, not only in the reform of society, but of the church itself.

Since the papacy of Pope John Paul VI, as the church has moved to the right, actively seeking alliances with other conservative groups and repudiating the liberal positions adopted by Vatican II, the likelihood of efforts to discipline American religious orders has seemed inevitable.

In July, with the announcement that the Vatican was undertaking two “sweeping investigations of American nuns,” this possibility became a reality.

According to the New York Times, “some sisters surmise that the Vatican and even some American bishops are trying to shift them back into living in convents, wearing habits or at least identifiable religious garb, ordering their schedules around daily prayers and working primarily in Roman Catholic institutions, like schools and hospitals.”

Some nuns, like Berkeley professor Sister Schneiders, have urged nuns to resist the probe. Other sisters have resigned from their orders.

There are 400 womens’ religious orders in the United States, counting approximately 59,000 women religious. Many parishes depend on these consecrated religious women to direct ministries as varied as religious education, liturgy, and social services.. In the U.S., the Catholic Church could not function without these religious women.

Already facing difficulties in recruiting new members, it is difficult to see how pushing the orders back into being an unpaid cloistered workforce with no voice in the church will strengthen religious orders. But perhaps the church is in the process of abandoning the secular and materialistic West for the more socially conservative mores of the Third World.

10. Gates Initiatives

The $35 billion Bill and Melinda Gates Foundation seems to be growing beyond merely supporting worthy organizations and programs in order to influence public opinion and public policy on a wide range of fronts. This summer and fall, Gates and his wife made high-profile appearances in Washington, DC to announce new initiatives and to cement ties with government that could increase the impact of the foundation’s efforts.

In October, they announced to an audience of include lawmakers, opinion leaders, ambassadors, global health officials and journalists that “foreign aid works.” “We’re doing a very unusual thing,” they declared, we’re telling a positive story about government spending on foreign aid.”

“Not content with shaping education directly through schools, the biggest player in the school reform movement has an eye on moving education policy” and in influencing the way the federal government distributes $5 billion in grants to overhaul public schools.”

In the meantime, the foundation is helping states to “prepare the kind of sparkling grant proposals that could help their states win hundreds of millions of dollars in federal money.”

This shift from a support focus to a policy focus is significant, not only because of its potential capacity to leverage public funds to increase the foundation’s impact, but also because it takes the foundation in a direction that grantmakers have generally avoided because of the controversy it has historically generated. In the 1950s and 1960s, much of the wrath displayed in congressional hearings was sparked by politician’s discomfort with wealth, subsidized by tax- exemption, being used for political purposes.

While this kind of activism may be an improvement on the conventionality and timidity too often displayed by foundations, it does carry with it very real political risks.

Given the virtual disappearance of funding for research on philanthropy and nonprofits, one has to wonder what thought the Gates’s have given to defending foundations if the public begins to express concerns about the foundation and its influence.

This entry was posted on Monday, January 18th, 2010 at 7:12 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.