Remarks by Susan V. Berresford at the Humphrey Institute’s Center for Leadership of Nonprofits, Philanthropy and the Public Sector
Minneapolis, Minnesota October 23, 2003
I am pleased to join you to help inaugurate the Humphrey Institute's new Center for Leadership of Nonprofits, Philanthropy and the Public Sector. I also want to join Nelson Colon in honoring the memory of Bill Diaz and the philanthropic work he did here and at the Ford Foundation. Bill was a friend, a colleague and a fine grant maker from whom I learned a great deal. It is also a pleasure to speak to an audience that is knowledgeable about philanthropy and the third sector, and to raise some of the complex issues that confront us today. As "insiders," we can and must examine some basic questions about our work and community.
The great potential of your center encourages me to focus on a question often heard these days: Is support for the nonprofit sector in the United States deteriorating? In the process, I hope to raise some issues that need thoughtful analysis, issues that may be fruitful areas for the center's research.
It is disturbing to hear suggestions that support for nonprofits is deteriorating. We know that the third sector's work and its institutional diversity are important in our lives and communities. Our government relies heavily on it to deliver services and goods. We praise the many ways the sector helps us each day, while acting as society's conscience, innovator and binder of its social fabric. So we must pay attention to this question.
But it cannot be answered with certainty. There is little systematic and nuanced research available. Opinion polls only capture the broadest and crudest trends. More to the point, the public barely recognizes the third sector as a conceptual or organizational category.
At the same time, organizations in what used to be an invisible sector are suddenly getting attention from government officials and the media. Much of this attention seems to be negative or critical. Our sector is increasingly subjected to "noise" or "static" in place of knowledge and comprehension. Along with the normal good news, we hear charges of mismanagement, even misdeeds, insider dealing and excessive pay and perks. We in the nonprofit arena must respond.
I see three main causes of the "static."
First, it is a natural consequence of our sector's growth. In recent years nonprofits have grown bigger and more influential, and that always attracts attention. The numbers of U.S. nonprofit groups have doubled over the past decades. Much of that growth came in the 1960's and 1970's, when social movements, often led by leaders of nonprofits, shaped public consciousness. And you and I know that some of their work is controversial. Local service organizations that help needy neighbors sometimes also represent the views of local residents that challenge the status quo. Many voluntary organizations focus on specific issues, such as the environment, human rights and a multitude of other concerns, some of which arouse advocates of opposing views. Developments like the proliferation of family foundations in the 1980's and 1990's have also attracted interest. We see a similar explosion in the number and visibility of nonprofits outside the U.S., where they are a new force influencing policies and attitudes about important issues.
Such growth in numbers, size and influence attracts both positive and negative scrutiny. Sometimes the media uncovers mistakes and even misdeeds that make good stories. That helps root out wrongdoers, but it can also generate public skepticism. In an atmosphere of suspicion, regulators pay closer attention to the third sector and lawmakers are tempted to gain political mileage from helping fix what is or looks broken. So a good deal of the "noise" around us is the inevitable result of the third sector's new status as a major player. Sadly, the sector's growth comes at a time of declining public confidence in major institutions such as business, the church and government. So it is no surprise that nonprofit institutions are sometimes suspect too.
A second contributor to "static" is the eroding social safety net. As governments at all levels cut programs, many people and communities suffer. Some believe our sector must become more efficient so we can do more to make up for the cuts. Others say wealthy nonprofit institutions should give a greater proportion of what they have. Hence the focus on foundation payout requirements and on the relatively low payout rates of university and college endowments. Ironically, sometimes the loudest voices calling for higher payout to address social concerns are those who advocate or make those cuts in public safety net programs.
Fairly or unfairly and for a variety of reasons, the public expects a great deal from nonprofits in times of community need. Thus, we may see renewed demands for spending by college and university endowments and new demands on community foundations that currently have no payout requirement. We may see more stories about alleged excessive pay, perks and wasteful spending in our sector. And donors who want to create foundations in perpetuity may find new barriers, even accusations that they are on ego trips that ignore current suffering. So let us remember that public policies cutting into people's sense of well-being directly affect perceptions of our sector's proper role.
The third factor creating concern is terrorism—domestic and international. This may seem an obscure issue here in Minneapolis tonight, but there is a good chance that it will grow and it is now an element in some regulators' views of our field. That is because a few U.S.-based nonprofits have been accused of raising and channeling money to overseas terrorist organizations. Some authorities believe nonprofits' funding practices must be carefully reviewed, and so the Treasury Department has developed guidelines intended to prevent charitable donations from reaching terrorists. We are likely to see more of this kind of scrutiny and rule making aimed at terrorist networks. Sad to say, we also have nasty and violent hate groups among us, some organized in volunteer associations. So we remind ourselves that being a nonprofit does not guarantee goodness.
These three contributors to static around our sector: growth, along with some misdeeds, public program cuts, and terrorism, are likely to remain in the spotlight for some time.
What can we do about these challenges? We cannot simply sit by as they generate skepticism about our field. I want to suggest five positive steps we can take. I hope they at least suggest some ideas for future work in this exciting new center.
First, nonprofit organizations must take a hard look at how they operate and address practices that can be perceived negatively in today's environment. Our behavior must meet reasonable public expectations of the charitable sector, and it must reflect the fact that the bar has been raised. To ensure proper practices, we should adapt to our own sector relevant recent corporate governance reforms. We should be vigilant in complying with legal requirements related to preventing funding for terrorism. Auditing ourselves in these respects may well reveal pay, professional conduct and operational practices that we should modify, change or make more transparent.
Second, we should work with our regulators rather than seeing them as the "feared other." Most agencies overseeing the nonprofit sector are under equipped, understaffed and underfunded. Even if those conditions change, regulators cannot do the job alone. Broad sectoral legal compliance requires organizations in the field to adopt and promote high standards among its members and police itself. This means rethinking the way the complex infrastructure of philanthropy functions and developing strategies that focus more energy and capacity on compliance issues. There is much to do here. This is the time to make cooperation with our regulators a top priority.
Third, our sector needs political champions. We have sometimes mobilized people to contact decisionmakers in state capitals and Washington, D.C., to prevent bad legislation. But we need champions to go to bat for our sector in a positive way. That means familiarizing people in state capitals and Washington with our issues and engaging them in continuing dialogue. Organizations like the Council on Foundations and the Independent Sector can play a key role in this area. But so can regional and local associations of nonprofits, university study centers and other organizations like grant maker affinity groups that represent important parts of our field.
Fourth, we must enhance public and media knowledge about our sector. Unless people know more about how we function and what we do, they are unlikely to support us in bad times. That is a tough challenge since the public knows very little and since we have yet to agree on the messages we want to project and how to deliver them. Priorities and strategies must be set. That means making choices. Do we want people to understand why the nonprofit legal status was invented and how it has evolved? Do we want them to understand the importance of the sector's diversity? Do we stress the link between our sector and our nation's democratic aspirations? Do we explain the difference between giving for current need and creating an institution in perpetuity? There are dozens of similar issues that we will have to sort out before developing focused messages.
Further, we need a reliable data base, developed and assembled in cooperation with reputable third parties. Believe it or not, we don't have enough data and analysis about the composition of organizations in our sector, what they cost, what various models offer and what nonprofit boards do. This was obvious during deliberations in the House of Representatives on the Charities Act, HR7. For example, the IRS data were skimpy and therefore not a strong factor in ultimate policy decisions. Most of the data brought into the debate were produced by advocates and shaped to make points rather than reflecting an evenhanded reality. We must decide what data should be collected regularly and reliably, and who should be encouraged to do that.
The issues I have raised are important because of our sector's vast potential for good and for creativity. We must not lose that potential either to negative public opinion or to misdeeds or misunderstanding. Our society draws much of its strength and future potential from the third sector, so we must protect and strengthen it. I particularly value the sector for its capacity to strengthen democratic principles. Through their participation in nonprofit groups, individuals are able to act in their community's interest, to be heard as they speak their minds, and to make important decisions in the public interest beyond the simple formality of voting. These are social benefits available through our sector for people at various age levels, all income and ethnic groups, all geographic areas. This means that the third sector is at the core of our freedoms and treasured values.
Let me close with two of the many examples of how innovative nonprofits fulfill that potential and foster democracy and development.
Last month I visited Oakland, California where the Unity Council, a local community development corporation, cut the ribbon on its latest project. You probably know that BART is the Bay Area's subway and rapid transit system. The project stemmed from BART's plan to encourage drivers to use rapid transit by creating a large parking facility near a BART station in Oakland. People from farther out could park in Oakland and take the BART to San Francisco. The Unity Council, rooted in Oakland's Hispanic community, saw the proposal as an opportunity to revitalize the area around the BART station. They ultimately arranged for the parking facility to be located elsewhere, but nearby. In its place, next to the station, they proposed and have now built a complex for commercial, residential and community use. Now, instead of an ugly parking lot, the community has new housing, a public library, a senior service center, a child-care center, a bank branch, doctors' offices and more. This very ambitious project, costing millions, involved all three sectors, but was coordinated and driven by a nonprofit, the Unity Council. No one else had the ambition or determination to attempt it, much less to pull it off on time and on budget.
A second, very different example: Many people toss pennies in a jar rather than carry them around, and wind up with piles of pennies they don't know what to do with. So an ingenious New York nonprofit called Common Cents, working with public and private schools, organized a project called Penny Harvest. Around Thanksgiving, children all over New York City collect pennies from their neighbors. They bring them to school and then they are taken to a central location where they are carted to the bank. Last year more than $600,000 was collected. Each school is credited with its collected amount and then the kids in each school decide on the philanthropic purposes they will use it for. After going out to see what might be made better with modest funds, students allocate money to things like park cleanups where playgrounds are littered with broken glass, clothing for needy families in the neighborhood, and entertainment for elderly shut-ins. These small grants express the students' perceptions of the needs existing around them. The project, organized by a nonprofit, nurtures children's moral and activist development. It takes discarded money, untapped youthful energy and altruism, and school systems' capacities to organize, and turns them into a community asset.
I could give many more examples. These come from the Ford Foundation's grantee list and I am sure each of you could offer others from your experience. I like these two because they are so different: One nonprofit redirects a government department's decision in order to revitalize a neighborhood; the other captures undervalued currency and the undervalued moral force of children and redirects them to family and neighborhood well being.
This is some of what our sector can do. This is why we are so proud of its capacity and reach. And that is why we must be sure that we win and hold the public's confidence.