Nonprofits’ attraction to stimulus funds could prove fatal

By Todd Cohen

Smitten with their new best friends in government, nonprofits need to be careful not to betray what makes them essential to a healthy democracy and civic marketplace.

The job of nonprofits is to take on social and global problems and make our communities better places to live and work.

To do that, nonprofits need to deliver effective services, find innovative ways to address both the symptoms and causes of problems, and ride herd on government lawmakers and policymakers.

But with Democrats controlling the White House and Congress, and spending billions of dollars to build the capacity of the giving sector and stimulate social innovation, nonprofits face a big temptation and a run a huge risk.

Seeing a chance after years as outsiders to get a piece of the action, both in federal spending and influence with policymakers, nonprofits risk losing the independence and incentive that have been essential to their work as civil society’s conscience and research-and-development arm.

On the political left and right alike, experts on the giving sector warn that nonprofits should not to abandon or abdicate their role as social innovators and government watchdogs.

Rick Cohen, a left-leaning watchdog who is national correspondent for The Nonprofit Quarterly and former executive director of the National Committee for Responsive Philanthropy, says keeping quiet about the Obama administration and Congress is the worst thing nonprofits can do.

“No, there’s something worse,” he writes in The Cohen Report, a publication of the quarterly.

“We can transform into an uncritical handmaiden of the handful of insiders who have grabbed the ‘nonprofit expert’ roles in the new administration, rather than doing what the nonprofit sector should always do, which is to stand apart, critique, mobilize the communities we represent, and demand social justice.”

Howard Husock, vice president for policy research at the right-leaning Manhattan Institute and head of its social entrepreneurship initiative, wrote recently in The Wall Street Journal that the Edward M. Kennedy Service America Act that President Obama signed into law threatens to stifle the social-entrepreneurship movement that has flourished in recent decades.

Standing in “notable contrast to established, large organizations – from Catholic Charities to the Salvation Army – which, in many cases, have come to rely on government contracts,” the social-enterprise movement has been fueled by “new, inventive nonprofits established and operated with little or no government support, says Husock, former director of case studies in public policy and management at the Kennedy School of Government at Harvard University.

But the Kennedy Act “will throw so much money at nascent programs that these otherwise independent efforts will lurch after federal dollars and bend toward government directives,” he says.

Nonprofits are known as the “independent sector” because their effectiveness in serving people and solving problems is rooted in their separation from government.

Nonprofits indeed stand to gain from a closer partnership with government that would generate more investment in the giving sector and give nonprofits a greater voice in shaping public policy.

But nonprofits should be careful that in chasing government money and access to power they do not devolve from entrepreneurial watchdogs into lazy and dependent lapdogs.