The trouble with nonprofits

By Scott Mooneyham | Jan 16, 2013

RALEIGH -- Elected officials who create or associate with nonprofit organizations play a dangerous game.

Recent political history is rife with examples proving the point.

Former U.S. House Speaker Newt Gingrich saw his congressional career undermined by transgressions that included using charitable organizations ostensibly created for educational purposes to instead train political activists.

That kind of thing was deemed to be a no-no because tax-deductible donations aren't supposed to support political activity. It ultimately cost Gingrich a $300,000 fine from the House Ethics Committee.

Gingrich's troubles didn't prevent U.S. House Majority Leader Tom DeLay from finding his own patch of quicksand with nonprofits just a few years later

DeLay liked taking overseas trips, sometimes costing tens of thousands of dollars, allegedly paid for by nonprofits. The money in fact was funneled through the nonprofits at the direction of lobbyist Jack Abramoff, and came from Abramoff clients who had legislation before Congress.

According to the Washington Post, DeLay seemed to have a surprising penchant for supporting the positions of Abramoff clients.

Abramoff and two former DeLay aides, who either ran or were associated with the nonprofits, ended up in prison. DeLay is still appealing an unrelated money laundering conviction in Texas, and is celebrated on TV shows that involve ballroom dancing.

Closer to home, the North Carolina Legislative Black Caucus found itself answering questions in 2007 about the scholarship foundation that it runs. Scholarship recipients included the relatives of several members — sons, daughters and grandchildren of legislators.

The donations that funded the scholarships came from interest groups with business before the legislature.

Those involved said at the time that there was nothing illegal about the arrangement. Who cared if it undermined public confidence and the legitimacy of officeholders representing the interests of their constituents?

That history is worth contemplating as political activists supporting the policies of new Gov. Pat McCrory form their own nonprofit and state House Republican leaders set up their own donor-supported organization.

In the case of the McCrory-supporting group, organizers say that they will conduct policy research and educate citizens about policy choices. While pointing out that they won't be coordinating with McCrory, they say they want to help the new governor's ideas keep any political momentum.

A spokesman for House Speaker Thom Tillis told WRAL-TV in Raleigh that House leaders want a vehicle to "get our story beyond Raleigh."

There is nothing wrong with those stated goals. It is a free country, and advocacy groups exist in many shapes and forms. If they stick to those aims, they may be fine.

But the problem with nonprofits — or, if you are Jack Abramoff, the great thing about them — is their lack of transparency.

They can hide who is giving what. They can hide what they are spending their money on. They can hide who is pushing what agenda.

Often, though, the stuff stays hidden only so long.

Just go ask Casino Jack.



Comments (1)
Posted by: Penny R Wallace | Jan 21, 2013 20:02

If an organization is qualified by the IRS as a nonprofit, there are transparency and reporting requirements that are sufficient for donors to obtain good information about what the nonprofit does, its income, expenses and major donors and make informed decisions. There are several categories of nonprofits and each one has its own set of requirements and prohibitions. It is the nonprofit's responsibility to follow the rules and make the proper reports.

It is the donor’s who have the responsibility to be sure their money is/will be spent in furtherance of the nonprofit's stated goals and mission. Giving your money is an investment in your future just as socking away funds in your 501K is for your retirement.  Donations to nonprofits are self-imposed taxes to support organizations working toward ideals or meeting needs you feel are important and not being met by other means.

It is easy to establish a non-profit and get started raising funds for the stated mission but it may take up to five years for the nonprofit to show a pattern of income/expense and program success to make a valid judgment about its efficacy.  There are always crooks out there and they will be caught, including those who use their donated funds illegally, eventually.   But we should be caring for our self-imposed taxes as carefully as we do our other financial investments not letting emotion lead when common sense measures can be applied.

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