-Caveat Lector- >From http://www.cagw.org/Reports/Phony-Philanthropy/phony.htm <Picture: colorlogo.gif (16534 bytes)>THROUGH THE LOOKING GLASS INVESTIGATIVE REPORTS Phony Philathropy: How Government Grants are Subverting the Missions of Nonprofit Organizations ----------------------------------------------------------------- Introduction Nonprofit groups represent the best of American society. Alexis de Tocqueville wrote, "Better use has been made of association and this powerful instrument of action has been applied to more varied aims in America than anywhere else in the world. Apart from permanent associations such as townships, cities and counties created by law, there are a quantity of others whose existence and growth are solely due to the ini tiative of individuals."1 Citizens donating time and money to help solve a particular problem is truly an American tradition. Billions of dollars are donated each year to help nonprofit organizations fight everything from illiteracy, hunger, alcohol disease abuse � even government waste. The strength of these organizations is the voluntary public support they receive. In 1997 alone, voluntary giving to nonprofits amounted to more than $143.5 billion.2 In recent years, however, the efforts and missions of many nonprofits have been compromised by the increased in flux of tax dollars. According to the Independent Sector, an association which represents charities , religious groups and social welfare organizations, total nonprofit revenues from federal sources were approximately $130 billion in FY 1996.3 Unfortunately, many groups use these tax dollars to conduct a particular program or to fund their day-to-day operations such as paying rent and payroll or purchasing supplies, while at the same time advocating, lobbying or promoting policies that many Americans would find untenable. ----------------------------------------------------------------- Uncovering the Truth Many taxpayers don�t know how to look objectively at the effectiveness of nonprofits and who is pulling their financial strings. There are several ways to determine the efficacy of nonprofit organizations. For example, the Council of Better Business Bureaus and similar organizations issue criteria and provide ratings on nonprofits. Another method is to review the organization�s tax returns, which can differentiate between those that truly receive voluntary public support, and those that are subsidized by tax dollars, or involuntary contributions. If the "initiative of individuals" of which deTocqueville spoke is the historic and tru e basis of associations, are those that accomplish their mission without government support more worthy than those that take money from taxpayers indirectly through government grants? When trying to discover an organization�s funding sources, the best place to start is the Internal Revenue Service (IRS) Form 990. This form is a financial snapshot of an organization. The IRS requires most nonprofits to submit a Form 990, which is equivalent to an individual�s Form 1040 tax return. The 990 includes useful information such as total revenue within a one- year period, government funding, investments in securities, salaries of the highest paid officials, and net assets (or fund balance), which represent the "wealth" of an organization. Organizations are required to allow anyone from the public to view their 990 during regular working hours either at their principal office or any regional office that has more than three employees. In 1996, President Clinton signed into law the Taxpayers Bill of Rights II. This new law requires organizations to also provide a copy of their 990 to anyone who asks for it in person or in writing. Another valuable source of information is the organization�s annual report, which will usually provide details on the organization�s mission, activities, balance sheets, sources of funding, and donors. In addition, more organizations are starting to use the Internet as a vehicle to provide information on their financials and activities. ----------------------------------------------------------------- Nonprofits � An American Tradition Compromised? John Filer, head of the Commission on Private Philanthropy and Public Needs, recognized the importa nt role nonprofits play in our society, but also saw the problems that develop when the government gets involved in fundin g nonprofits. When the commission released its report in 1975, it found that the government contrib uted about $23 billion to nonprofit organizations; private sources contributed $25 billion. As government contributions gr ew, nonprofits increasingly became hybrids � part private, part public institutions, ever more dependent on government funding and the strings attached thereto. Nonprofit organizations that accept f ederal funding subject themselves to political processes, pressures and priorities.4 Federal grants to nonprofits result in significant trade-offs, including the six detailed here: �Federal grants are accompanied by pages of regulations that are supposed to assure accountability, but instead usually guarantee waste. The more money the nonprofit spends complying with the govern ment regulations, the less the organization has to fulfill its mission. �Nonprofits that provide social services may be fo rced to standardize their activities and use one-size-fits-all solutions that hamper local decision -making and ignore local needs. �The regulations may require strict qualification standards for the grants or may insist t hat "credentialed" staff provide certain services. Often, these requirements are not needed and bec ome an added expense. M any times, they are the result of labor unions and other special interests forcing their will on Co ngress and government agencies. �When conducting an audit, the government is often more interested in the number of people served and on what the money is spent, rather than actual results. �The nonprofit may chase government dollars just to get more money, diverting itself into peripheral activities and ultimately los ing sight of its origin al mission. In addition, shifting moods of public policy, or that year�s particular "political corr ectness" hot button can force grantees to address only certain policy concerns. �Organizations that have strong religious or founding philosophies may find their beliefs are compromised as soon as they accept a government grant.5 In addition, nonprofits may be using government grants for rather dubious schemes. When an organiza tion receives government funding, it frees up funding obtained through membership or other nongover nment sources to be used for more controversial activities, such as lobbying or promoting a particular philosophy. Some or ganizations even use government money directly to promote their political and lobbying activities. ----------------------------------------------------------------- EPA and Its Mission This Looking Glass Report is the first in a series of expos�s on federal grants to nonprofit organi zations. It examines grants awarded between January 1, 1995, and January 1, 1997, by the Environmen tal Protection Agency ( EPA). The EPA was established in December 1970 by bringing together 15 different divisions of five depart ments and independent agencies.6 Although President Nixon explained that he normally opposed creati ng new agencies, he fel t the country needed to know more about stopping and controlling environmental pollution. Nixon bel ieved the piecemeal structure that existed at the time for implementing environmental policy was not conducive to effectiv e action, which was the primary reason why the country needed a single agency to oversee implementa tion of environmental policy. Furthermore, since every part of the government was concerned with th e environment in some w ay, a separate agency would be valuable in coordinating and standardizing decisions.7 Nixon stated that EPA�s role would be to establish and enforce environmental protection standards; to conduct research on the adverse effects of pollution and on the methods and equipment for contro lling it; to gather inf ormation on pollution and use this information to strengthen environmental programs; to assist othe rs, through grants and other means, to stop pollution of the environment; and to assist the Council on Environmental Quality in developing and recommending new policies to protect the environment.8 Since then, major new environmental laws and amendments to older laws have expanded EPA�s authority and responsibility. Like other government agencies, its budget has grown exponentially from $384 million in FY 1970 to $7.3 billion in FY 1998. ----------------------------------------------------------------- Grants at the EPA The EPA distributed more than $4 billion in grants from January 1, 1995, to January 1, 1997. Of tha t amount, $236,089,446 was used for 839 grants to nonprofit organizations.9 Many of these organizat ions � some of which ar e government contractors � are promoting agendas that many Americans might not agree with. Some tra de associations that represent EPA-regulated industries have received funding from the agency, whic h raises conflict of interest questions. Other grants simply appear to be a form of corporate welfare. CAGW found nonprofit organizations with sizable fund balances that were still milking the governmen t like a cash cow. Some organizations lobby Congress for more appropriations for the EPA or other g overnment agencies from which they receive grants. Of course, if the coffers grow at the EPA or another agency, the more likely a nonprofit organization will receive a grant so they can lobby for more. . .well, you get th e picture. In such circumstances, fraud, waste and abuse are bound to occur. In March 1998, the EPA Inspector General (IG) released a report on the National Rural Water Association (NRWA). It found that the NR WA improperly used fede ral assistance to support a very aggressive lobbying agenda. Between 1991 and 1996, the NWRA received $2.3 million from the federal government, which was used d irectly or indirectly to lobby government officials at the federal and state levels on behalf of pr ograms and legislative issues important to the association. Some of this money was used to influence other government offi cials to approve more federal assistance agreements. There was even a full-time EPA employee detailed to the NRWA through the Intergovernmental Personnel Act (IPA) who inappropriately assisted the organization with its lo bbying activities. Because the NRWA improperly commingled unallowable lobbying expenses with allowa ble program expenses, i t was impossible for the IG to determine the actual amount of federal dollars used in NRWA�s lobbyi ng activities.10 The National Council of Senior Citizens (NCSC), which receives millions of dollars from the governm ent for its "educational" arm, the National Senior Citizens Education and Resource Center, is anoth er illustration of the abuse of taxpayer dollars. The NCSC advocates for such policies as national health insurance, and t his so-called "nonpartisan" organization has given thousands of dollars to Democratic candidates. T he NCSC was fined by th e Federal Election Commission for violating campaign laws in 1996 and has been implicated in money laundering in the recent Teamsters election scandal.11 Your tax dollars are also wasted when EPA uses its muscle in unorthodox ways to promote extremist e nvironmental policies driven by the self-interest and personal goals of its leadership without regard to science. For exam ple, according to a recent report by the National Wilderness Institute, EPA has tried to silence wh istleblowers within the agency, has coerced its scientists into lobbying members of Congress � a violation of federal law � and has leaned on nonprofit groups to convince them to ask Congress to increase EPA�s budget and promote its policies.12 These examples should serve as a warning to other nonprofit organizations that receive funding from taxpayers. They should also serve as a "heads up" to Congress and taxpayers, alerting them that go vernment grants and contracts are not always being used in an appropriate manner. While not all of the organizations liste d in this report are using federal dollars in nefarious ways, they certainly deserve greater scruti ny by Congress and fede ral agency investigators. There is value for advocacy from both liberal and conservative groups, the young and the old, pro-b usiness and pro-consumer concerns, godly and secular perspectives. Individuals can come together an d promote their beliefs on a wide variety of issues, including the environment. After all, the Constitution guarantees all Americans the right to petition or "lobby" the government with their grievances. However, Americans should not be forced to support agendas they may disagree with through their tax dollars, and organizations which are en trusted with that money should be held to the highest standards of accountability. In an attempt to protect taxpayers from such abuses, Representative Joe Knollenberg (R-Mich.) intro duced legislation and fought hard in 1998 to prevent the EPA from using taxpayer funds to lobby on behalf of the Kyoto Protocol and implement the treaty by backdoor means. Through rules, regulations and "advocacy outreach ," EPA has attempted to ignore the will of Congress and force taxpayers to pay for the agendas of e nvironmental groups. In 1995, Representative Ernest Istook, Jr. (R-Okla.) took a broader view of the issue when he said in testimony before Congress, "It is time to end taxpayer funded political advocacy! Over 40,000 or ganizations receive over $39 billion in federal grant funds directly. Preliminary examination of the problem makes it appa rent that grant abuse is rampant and needs to be addressed with systemic reform."13 Representative Istook introduced the "Istook Grants Reform Amendment" that would have imposed greater limitations on lobbying and politic al advocacy by nonprofit organizations that receive federal grant money. Even though the measure pa ssed the House three ti mes, it failed in the Senate. ----------------------------------------------------------------- "A Billion Here, A Couple of Billion There � First Thing You Know It Adds Up To Be Real Money" � Senator Everett McKinley Dirksen There are 105 organizations listed herein that received funding from the 839 EPA grants that were a warded between January 1, 1995, and January 1, 1997. The sizes of these EPA grants range from $1,00 0 to the African American Development Association in Oakland to $21 million for the American Association of Retired Person s to fund their Senior Environmental Employment (SEE) program. The sheer volume of grants awarded b y the EPA is staggering by itself. But what is more disturbing is that the process is being repeated every year in other federal agencies, costing taxpayers billions of dollars, with little accountability for how the mone y is being spent. EPA�s Grants Information Query Form website located at <http://www.epa.gov/envirofw/html/gics/gics_ query.html > enabled researchers to ascertain the dollar amount of the grants awarded to individual organizations. In addition, CAGW researchers gleaned a great deal of information by reviewing Form 990s and annual reports. In many instances, despite clear laws requiring nonprofits to produce their tax forms, many of the organizations contacted resisted requests to review their 990s � or refused outright. Using the data collected, researchers developed a good sense of each organization�s sources of reve nue, wealth and activities. CAGW established five main criteria to separate the EPA grants. They are: D I. Taxpayer Funded Advocacy: During the period reviewed, the nonprofit organization received fund ing from the government, either in the form of grants or government contracts, and advocated for sp ecific public policy is sues. CAGW believes Congress and the EPA need to take a closer look at how and if these organizatio ns are using tax dollars to fund, either directly or indirectly, lobbying and advocacy activities. D II. Corporate Welfare: The nonprofit organization represents a certain segment of business intere sts and the government funds benefited that industry sector. D III. Government Codependents: The nonprofit organization received 50 percent or more of its fundi ng from government sources. If an organization is unable to get sufficient direct, voluntary suppor t for its activities fr om average citizens who are interested in its cause and mission, CAGW questions whether its activit ies deserve forced support from taxpayers. D IV. Other: The nonprofit organization represents professions, local or state governments, or anot her type of group and did not fit into the first three categories. In many cases, these groups rece ived substantial fundin g from the government. D V. Who, What, When, Where, Why?: The nonprofit organization did not provide a 990, annual report and/or any information requested by CAGW. If organizations receive any money from the government, t hey should supply minim al information on their activities, especially given the law requiring them to provide access to th eir 990s. If nonprofits can�t do this simple task, can taxpayers trust them to be accountable for t heir money? Information about organizations that fit into the first four groups was placed into the following f ormat. Information that was not available is reported as "unknown." Name of Organization Location:The city in which the office of the organization that received the gra nt is located. Status:Organizations that are exempt from taxation are classified under Section 501 o f the Internal Revenue Code. For example, a 501(c)3 organization cannot use any substantial part of its funding for propag anda or to attempt to influence legislation, except in special circumstances, or to participate in a political campaign. A 501(c)4 is a civic organization or league whose earnings can be used to promote a charitable, educational or recreational purpose. It can lobby legislative or other government bodies. A 501(c)5 is a labor, agricultural o r horticultural organization and a 501( c )6 is a business league, chamber of commerce, or board of trade. These classifications represent the bulk of the organizations that were reviewed. There are several other classifications under Section 501, and they are numbered up to 501(c)25.Source of Financials:In most cases, the 1996 Form 990 was used. However, the organization�s annual report was also used in many instances. Net Assets:This is also called the fund balance. This number represents the organization�s net worth or "wealth" and can include cash savings, property and investments in stocks and bonds. Total Revenue:This figure re presents the total reve nue within a one-year time period and was obtained from the source of the financial information. Government Funding:This figure represents the total amount of government funding the organization reported in a one-year time period and the percentage of total revenue such funding represents. The information was obtained from the financial information source.Cumulative EPA Grant(s):This figure represents the total amoun t of grant money receiv ed between the period of January 1, 1995, to January 1, 1997, according to the EPA Internet query s ite. The shaded section contains information that CAGW was able to glean from an organization�s literatu re, articles or website. Example: Citizens Against Government Waste (CAGW) Location:Washington, D.C.Status:501(c)3 Source of Financials :1997 Form 990 NetAssets:$2,235,816 Total Revenue:$4,754,492 Government Funding:0 (0 percent) Cumulati ve EPA Grant(s):0 CAGW is a private, nonprofit, nonpartisan organization dedicated to educating the American people a bout waste, mismanagement, and inefficiency in the federal government. It was founded in 1984 by J. Peter Grace and nationally syndicated columnist Jack Anderson to build support for implementation of the Grace Commission recommendations and other waste-cutting proposals. The organization has more than 600,000 members and has helped save tax payers more than $596 billion since 1984. The group also has a 501(c)4 affiliate, which carries out its lobbying activities. Click here to view the list of organizations. ----------------------------------------------------------------- Endnotes 1. Alexis de Tocqueville, Democracy in America, J.P. Mayer, ed., New York, 1969, p. 189 2. Source: "Giving USA 1998," AAFRC Trust for Philanthropy, Washington, D.C. 3. Alan Abramson and Lester Salamon, "The Nonprofit Sector and the Federal Budget: Update as of Sep tember 1997," The Independent Sector, Washington, D.C., Table 2. 4. John Filer, "The Filer Commission Report," The Nonprofit Organization, ed. Gies, Ott, Shafritz, Belmont, California, 1990, pp. 73-74. 5. See: Joe Laconte, "The Seven Deadly Sins of Government Funding for Private Charities," Policy Re view: The Journal of American Citizenship, The Heritage Foundation, Washington, D.C., March-April 1 997, No. 82, pp. 28-36. 6. United States Environmental Protection Agency ("EPA"), Access EPA, Chapter 1- History of Agency, EPA Office of Information Resources Management, Washington, D.C., 1995-1996 edition, p. 3. 7. President Richard Nixon, Special Message to Congress About Reorganization Plans to Establish the EPA and the National Oceanic and Atmospheric Administration, Washington, D.C., July 9, 1970, pp. 1-2. 8. Ibid., p. 2. 9. Query run on EPA Web Site in Sept. 1997, http://www.epa.gov/envirofw/html/gics/gics_query.html 10. See: Office of the Inspector General Audit Report, (E6DWG6- 04-0048-8400017), Environemental Pro tection Agency, Washington, D.C., March 31, 1998. 11.James Martin, Donald Senese, "Taxpayers Fund Lobby for �Senior Friendly� Government Pork, Progr ams and Perks," Organization Trends, The Capital Research Center, Washington, D.C., January 1998, p p. 1-7; Kenneth Conboy, "Election Officer for the International Brotherhood of Teamsters," Latham and Watkins, Washington, D.C., November 17, 1997, p. 4., (www.lw.com/Latham%26Watkins/teamsters/decision.htm.) 12. See: National Wilderness Institute, "The People v. Carol Browner: EPA on Trial," Washington, D. C., 1998. 13. Representative Ernest Istook, Jr. (R-Ok.), "Political Advocacy with Taxpayer Dollars Violates t he Rights of All Taxpayers," Testimony Before the House National Economic Growth, Natural Resources and Regulatory Affairs Subcommittee, Washington, D.C., June 29, 1995, p.1. ----------------------------------------------------------------- ------- Home | About CAGW | Join Us | Media | WasteWatcher Index | Search | Privacy Policy For More Information Contact: Citizens Against Government Waste 1301 Connecticut Ave., NW Washington, DC 20036 Tel: 1-800-BE-ANGRY FAX: 202-467-4253 Copyright � 1998 Citizens Against Government Waste A<>E<>R ~~~~~~~~~~~~~~~ The only real voyage of discovery consists not in seeking new landscapes but in having new eyes. -Marcel Proust + + + + + + + + + + + + + + + + + + + + + + + + + + + + A merely fallen enemy may rise again, but the reconciled one is truly vanquished. -Johann Christoph Schiller, German Writer (1759-1805) + + + + + + + + + + + + + + + + + + + + + + + + + + + + Forwarded as information only; no endorsement to be presumed + + + + + + + + + + + + + + + + + + + + + + + + + + + + In accordance with Title 17 U.S.C. section 107, this material is distributed without charge or profit to those who have expressed a prior interest in receiving this type of information for non-profit research and educational purposes only. 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