Wednesday, April 1, 2009

In Nonprofit We Trust

I thought an interesting read this week was the paper by the Center on Philanthropy at Indiana University and School of Public and Environmental Affairs entitled, "Are Nonprofits Trustworthy". Find here: ( The study basically states that between the three levels of government, business and the non-profit sector, non-profits are the most trusted of the sectors. Nothing new to my colleagues and would have loved to see if the field work for the data would of been done during the AIG mess.

I know my fellow practitioners are so tired of confronting the question of nonprofit trust, as they spend hours and money completing the endless grant reports and organizational performance evaluations needed to show how well they are spending a dollar. The answer from them on whether nonprofits are trustworthy, after the eye-rolling, is almost always a "Yes".

I would say that in regard to trust, nonprofit organizations are the safest bet in the trust realm. Sure, you have heard of stories of ministries gone awry or a nonprofit executive mishandling resources. I once saw an nonprofit leader try to justify to me the need to have his dry cleaning paid as part of a homeless services grant. He stated, "I must project an image that the homeless will aspire to". I told him the homeless did not crave heavily starched, cuff linked shirts.

But this is nothing in comparison to the highlighted stories we have seen from the business and government sector in recent months. With that, here are four reasons why the nonprofit sector is a more trustworthy partner than the other sectors:

  1. Try following your money through each of the sector's financial systems. For government and business, it literally cannot be done. Pay your taxes on April 15th and then call the IRS on the 30th and ask where your money went, they will have no idea. Paying for a Sponge-Bob night light, try following the purchase all the way to the hands of the Sponge Bob headquarters. Might be fun to do, but won't happen. In the nonprofit world, this is much easier. Donate to the community garden, in many cases you can follow your check all the way to the balance sheet.
  2. When a nonprofit has a financial impropriety, the sum is almost always lower than the monthly scandal on the government or business side. This is not because the sector is not big, it is because the control systems, like governance, put in place may prevent. There would be no way for an AIG mess in the nonprofit world, mainly due to size. The Aramony scandal in DC, notably one of the largest scandals in the nonprofit world was about $1.2 million dollars, a fraction of a penny compared to the scandals we see today.
  3. The impetus for belonging to the sector is driven by a different creed. A major factor in business, outside of innovation or belief in the product, is to make money. In government, there is a feeling of altruism that is attached, but can often quickly lost when the individual cannot find there way back to their cubicle due to the size of the agency or government effort. In a non-profit, even big ones, you did not arrive with the notion of making a fortune and you can often feel the vibration of subtle change as it happens.
  4. There is competition attached to the reporting structure of nonprofits. While there could be an argument that this happens in business, no business really loses that much if there are overhead irregularities in their annual report. I placed the purchase of a pencil in the travel line, oh well. And tell me the last time you read the federal budget. (I did, it is a bear!). If misreporting happens in the nonprofit world, a grant or contract would probably be in serious jeopardy. This is why the nonprofit practitioner spends so much time on reports, because they mean something.
The above outlines the position that nonprofits are in and why they must and do act in a different way than the government and business sector. The recent exposed looseness in the government and business sector has a direct relation to the trust statistics seen in the above report and it is nice to see the nonprofit sector coming out on top for once, its rightful place.

No comments: