Forecast For 2008: Heightened Congressional and Media Scrutiny of Nonprofit Sector to Continue

Forecast For 2008: Heightened Congressional and Media Scrutiny of Nonprofit Sector to Continue

Anyone who thought Congressional scrutiny of the nonprofit sector would end once Sen. Charles Grassley (R-IA) was no longer chairman of the Senate Finance Committee needs to think again. Not only have Senator Grassley and his staff continued to devote considerable energy toward investigating actual and perceived abuses in the sector, but the House Oversight and Government Reform Committee joined their efforts by holding hearings on sector abuses. During a December hearing, according to an article in the Chronicle of Philanthropy, committee members "blasted veterans charities that funnel tiny portions of the money they raise to veterans and their families and vowed to seek legislation to rein them in." According to the article, committee members used terms like "immoral," "fraud," and "sickening betrayal" to describe the conduct of certain veterans organizations and indicated that they planned to hold additional hearings.

Heightened congressional scrutiny of the charitable sector in recent years has been triggered in part by a steady stream of stories in the media about actual and alleged abuses at nonprofits and foundations. In fact, when I directed the Pennsylvania Bureau of Charitable Organizations, the state agency charged with overseeing and regulating organizations that solicit charitable contributions from Pennsylvanians, it seemed as if we came across an article in the mainstream press almost every day detailing an actual or alleged abuse by a tax-exempt organization.

As a result of all the negative coverage, a large and growing segment of the donating public has become ever more skeptical of even legitimate mainstream charities. Numerous studies have documented this decrease in donor confidence.

The steady stream of negative publicity also has revealed that the charitable sector has its share of board members, executives, and/or volunteers who are unable or unwilling to stop abuses at the organizations they lead or work for before they become news stories. It's ironic “ and sad “ that virtually every case prosecuted by my former bureau could ultimately be traced to board members, executives, and/or volunteers who failed to fulfill their fiduciary responsibilities with respect to the organizations they served. Had the individuals in question been more vigilant, most of the wrongdoings could have been detected and addressed long before they became fodder for the press, and the accompanying negative publicity at least minimized, if not avoided altogether.

With the new year under way, one thing is certain, however: If abuses in the sector continue to be exposed and questions about the integrity, credibility, and effectiveness of charitable organizations continue to be raised, good as well as bad organizations will be damaged by the fallout. Just as one's most important asset is his or her personal integrity, the most important asset of any charity indeed, of the charitable sector as whole is its credibility. Once that is called into question, a charity's ability to raise funds, function effectively, and accomplish its mission is severely, if not fatally, compromised.

Thus, whether you serve on a charity board, are a nonprofit executive, or simply volunteer for an organization whose mission you admire, take a moment to renew your commitment in 2008 to seeing that your organization is accountable, transparent, and operates with integrity. In so doing, you'll not only be helping to protect your organization's viability, but that of the entire charitable sector as well.

After a 25-year career with the Commonwealth of Pennsylvania, Karl Emerson retired in June of 2007 from his position as director of the Pennsylvania Bureau of Charitable Organizations to join Montgomery, McCracken, Walker & Rhoads, LLP, a Philadelphia-based law firm.