Where Most Needed

Bank is Biggest Beneficiary of Army Charity

Army Emergency Relief, recently subject of an AP investigative report, pays a bank over a million dollars a year to churn investment funds, while army officers continue to shake down the troops for more donations.

A few weeks ago the Associated Press published an investigative report (still available on the MSNBC website) that uncovered the huge investment reserves of Army Emergency Relief (EIN 53-0196552 Form 990). AER is structured as a private charity, but its operations are closely integrated into the US Army command. As the AP story explains, only 20 staffers are paid directly by AER. The rest of the staff about 300 are civilian employees of the Army, who work in 90 Army facilities worldwide.

The primary programs of AER are interest-free loans (and some grants) made to Army personnel in need, direct grants to widows and orphans of deceased soldiers, and scholarships for spouses and dependents of military personnel. There are also write offs of some loans that become uncollectible.

There's no question that AER does a lot of good, but the AP report questions the charity's accumulation of hundreds of millions in reserve funds which are invested rather than paid out in grants. The Form 990 of the organization shows that in 2007 the organization paid Northern Trust of Connecticut compensation of $1,269,217 for investment counsel and custodian services. And of course that didn't keep the portfolio from tanking. The treasurer estimated that the investments dropped $82 million in 2008, greater than the total expenses of the past three years.

The AP also questioned the fundraising and granting practices of AER, both of which are closely tied to the Army chain of command. Fundraising is conducted by Army personnel and is primarly targeted to active troops and veterans. The AP found the usual hard-sell practices of workplace giving, plus some violations of Army policy where fundraising officers granted various incentives like base passes and exemption from guard duty and calisthenics in exchange for contributions.

On the grant side, Army officers are responsible for recommending personnel for grants, which means that a soldier has to go to his or her boss with details of financial difficulties. This seems like a pretty fundamental flaw that keeps the money flowing to the banks rather than to the beneficiaries. If the Army is going to run a charity, the determination of need has to be taken out of the direct control of Army officers.

But wait. There is an even larger issue here that involves the accountability of the growing number of ad hoc charities that claim to provide benefits for active soldiers and veterans, perhaps due to the inability of the Army and the VA to adequately provide the needed help. The AP article includes a quote from the head of one of these charities, the American Freedom Foundation (EIN 05-0605633 Form 990). This charity, which received its IRS charity ruling in 2004, reported income of $457,675 in 2007—and fundraising expenses of $456,175.

My take on this is that big charities may have their problems, but the answer isn't small charities—they tend to be even less accountable and less transparent. The answer is closer oversight of large charities and structural reforms when needed.

Sexual Healing vs the Hollywood Hype

A number of different twelve-step programs with a focus on sex addiction have been around for over twenty five years, but remain marginal compared to Alcoholics Anonymous—like most of the other spin-off groups other than NA and Al-Anon.

A few months back, Wall Street Journal health editor Melinda Beck wrote a column about sex addiction. She mentioned that there were twelve-step programs (plural) for sex addicts. But she was quick to add that they did not generally deserve the bad rap they have been given in television and films, specifically mentioning "Nip/Tuck," "Blades of Glory" and "Choke" as implying that the programs are good places for hook ups. (Sex addiction: a Sickness or Just an Excuse? Melinda Beck, Wall Street Journal, September 30, 2008, with alternate site here.)

It was noteworthy to me that there were multiple programs, but none were named specifically. After some digging, I found that there are indeed a number of programs, but from reviewing their IRS filings, none of them have achieved anything close to the impact of Alcoholics Anonymous or the programs that follow its model, like Narcotics Anonymous and similar programs for Gamblers, Debtors, and Overeaters.

Of course, the big daddy of all twelve step programs is Alcoholics Anonymous. Every AA group is a separate organization, but there are three main service organizations that maintain a central office in New York, provides support for groups, and publish the AA literature and a monthly magazie. The main US office has three organizations, the General Service Board (EIN 23-7282071 Form 990), Alcoholics Anonymous World Services (EIN 13-1679617 Form 990), and Alcoholics Anonymous Grapevine (EIN 13-1871991 Form 990). The World Services organization has eighty-four employees and the Grapevine fifteen. Total income of the three organizations is $20.8 million, including the proceeds of $16.7 million in sales and $2 million in income from magazine subscriptions.

In addition, Guidestar lists 122 other organizations with the words Alcoholics Anonymous in their name. These are mostly local organizations (usually called intergroup associations or intergroups for short) that provide local directories of meetings, operate a local phone hot line, sponsor some outreach to treatment centers and correctional institutions, and coordinate social activities. In the larger cities, these organizations have paid staff and office space. In smaller areas they may be entirely volunteer and have nothing but a phone number and a post office box. I haven't added it all up, but it is entirely possible that the Intergroups taken together might have more income and staff than the three coordinating organizations.

NA is roughly a third as large as AA. Narcotics Anonymous World Services (EIN 95-3090596 Form 990) reports income of $6,798,622 including $5,720,369 from sales of $8,422,771. The central organization has a staff of forty-three. It's notable that the NA central service organization relies almost entirely on sales for its income, while AA relies about half on sales, half on contributions (which mostly come from the groups, not individuals). In addition, there are 30 or so other groups with Narcotics Anonymous in their names, which appear to be a mix of regional service organizations, some groups, and convention committees.

Next in size are the Al Anon Family Groups (EIN 13-5636290 Form 990), which are for the families and others who have an alcoholic in their lives. The central service organization has income of $4,533, 696, including $2,760,325 from sales of $3,685,372. There is a staff of fifty-five. There are about 72 other organizations with the Al Anon name, which mostly appear to be local information services.

To my surprise, the next group in income is Overeaters Anonymous (EIN 23-7016806 Form 990). This service organization reports income of $1.5 million, including $869,834 from $1,143,701 in sales. There is a staff of fourteen. But there are fifty-five other organizations, mostly local intergroups.

After this, the groups get really small. For Gamblers Anonymous (EIN 95-2273317 Form 990), the report from June, 2005 is the most current available. It shows income of $314,199, including $105,646 from $294,403 in sales. There's no staff count on line 90 (a common omission, especially in smaller organizations), but staff expenses of about $147,000 suggests a staff of four or so. There's only one local service group on Guidestar, in upstate New York. But the GA web site shows meetings in most states (though you're out of luck in Wyoming).

Debtors Anonymous (EIN 13-3527412 Form 990) shows income of $136,331, including $52,383 from $82,877 in sales. Staff is listed as five, but staff expense is only about $50,000. Again, only one local group listed using the DA name, in Southern California. Again, though, the DA web site can find a meeting in most states (nothing turns up in Wyoming, or even Alabama or Arkansas).

The big contrast with sex groups is that there is serious fragmentation, with a number of groups vying for attention with slightly different approaches to recovery. (They even refer to themselves as the S programs, since all the big ones start with an S.) And yet the amount of participation is not very great. One source reports that in 1998 there were just 35,990 members of various S programs worldwide.

A big factor in the fragmentation seems to be how the programs approach the issues of homosexuality. There is a fascinating summary of the differences here, but it is difficult to assess how authoritative it is. The most of the organizations have Wikipedia articles, but again it's hard to judge how accurate they are.

Just judging by the size of the central service organization, the largest group appears to be Sex Addicts Anonymous (EIN 41-1675029 Form 990). Total income $330,487, including proceeds of $83,874 from sales of $190,000. Number of staff not provided on line 90 as required, but two paid staff are listed as key employees. Compensation of other staff is $91,888, suggesting that there are three to five other staff. But from the meeting list on the web site, coverage is spotty. There are no meetings in Boston, for instance, but there are eight in Chicago. There appear to be dozens of meeting in the greater Los Angeles area, which may account for the popularity of sex addiction groups in television and movies. SAA seems to be a relatively welcoming group for gays and has a flexible definition of sobriety.

Sexaholics Anonymous (EIN 31-1599955 Form 990) reports total income of just under $200,000 in 2007, with just $48,500 in sales of literature. There is a staff of two. SA appears to be the only one of these twelve step groups that does not produce its own literature as a significant source of income. The organization's web site directs literature requests to another web site. SA is said to be the strictest of the groups, promoting total abstinence from all sex except with a spouse, specifically the spouse in the marriage of a man and a woman. As with SAA, the meeting coverage is extensive in Southern California, hit or miss elsewhere. It is especially difficult to find meetings, because the central meeting directory often just links to an email address.

Sex and Love Addicts Anonymous (goes by the legal name of Augustine Fellowship) (EIN 04-2768261, Form 990). The most recent form is from 2003 (somebody has dropped the ball here, both at the organization and the IRS, it appears). Total income is reported at $284,295, including proceeds of $119,574 on $163,074 sales. There are five on staff . With its specific inclusion of relationship addiction, this is the organization with the most female members. There appear to be active intergroups in some areas but not others (no intergroup in Minneapolis, for instance), but California, again, is extremely well-supported (and in this case there is a meeting in Wyoming).

Sexual Compulsives Anonymous (EIN 13-3590669, no Form 990 because the group reports income under $25,000). This groups appears to be mostly for gay men. Not surprisingly, the meeting list is very spotty, with many links to email addresses rather than meeting locations.

And for Sexual Recovery Anonymous there is no EIN or Form 990 found. Even the web site lists just a handful of meetings.

It seems possible to me that there are two things holding back the sexual recovery groups: one is the difficulty raised in determining exactly what recovery means (and the consequent fragmentation of the groups) and the other is in the extreme secrecy that some of the groups still find it necessary to practice.

One intriguing observation in the Wall Street Journal article was that in sex addiction programs the ratio of men to women is generally five to one, while in food addiction programs the ratio is reversed. I wonder whether the relatively high percentage of women has anything to do with the relatively robust organization and higher level of participation in Overeaters Anonymous compared with the sex addiction programs.

And it's also quite interesting that the relative success of these programs in Southern California has not, it appears, spawned similar success in the rest of the country. It could be that Hollywood itself (that is, the relative openness about sex in the entertainment industry) makes a community-based approach to sex addiction recovery possible there and nowhere else.

Virginia Pastor Ministers with an Iron Hand—and Hot Cars

Leading the same congregation for over 30 years, Pastor Star R. Scott left the Assemblies of God, dismissed the church board, and brooks no dissent among his shrunken but still substantial fellowship.

The Washington Post offered an in-depth report on the Calvary Temple congregation in suburban Sterling, Virginia ("In Va., a Powerful and Polarizing Pastor," Michelle Boorstein, November 16, 2008, p.A01). The report described a number of instances where Pastor Star R. Scott had called for the shunning of recalcitrant members, including teenagers and spouses.

What caught my interest, though, was the description of the church's governance. Originally a congregation of the Assemblies of God, which claims to be the largest Pentecostal denomination in the world, Pastor Scott took the church out of the denomination in 1986 to become an independent ministry. Then in 1996 he eliminated all church boards, making himself sole trustee in a church constitution that also specified that he would control all church property were the church to close.

I have on several occasions noted that long tenure of charity leadership is often problematic, most recently in discussing the executive leadership crisis at Acorn. In this case, one of the main symptoms of executive overreaching was the church's automotive outreach, called Finish the Race, which was a fleet of high-performance cars, trucks, and motorcycles that the pastor toured with using church funds. Pastor Scott told the reporter that he has no set salary and that his possessions belong to the congregation.

On a more personal level, the pastor married a member of the congregation just a month after his first wife died in 2002—a 20-year old. Pastor Scott was 55 at the time.

Worth noting is that the church once enjoyed a membership of 2,000 but in recent years it has dwindled to 400 or so. What is noteworthy is not so much that the membership has declined by 80%, but that 400 willing congregants remain. By enforcing a strict tithing requirement, the church is still able to thrive. The dynamics of congregations are such that a pastor can continue to go on even after alienating a large share of the congregation. So a governance structure is needed—is it not enough to rely on people voting with their feet to keep a leader on the right path.

The article points out that US tax law for charities does not put any requirements on church governance, and churches are exempt from financial disclosure requirements applied to other charities. There are broad guidelines that limit compensation to key employees, but it is not clear that the pastor could be successfully challenged for receiving excess compensation. The IRS is severely limited in its audit powers where churches are concerned.

It seems to me that the primary need is for more scrutiny of charity governance structures for all charities, religious or otherwise. There should be a requirement that any charity organization have a governance structure that precludes a single individual from making decisions without review or oversight. One aspect of such a structure, I think, is a reasonable balance in tenure between board members and management. Anytime the top dog is in charge for decades, there is high risk that organizational resources will be diverted to serve personal ends.

Getting Back at Backstabbers (Yes, Charities Have Them, Too)

I ran across a nonprofit reference in the November 11 Wall Street Journal in an article about protecting yourself from bosses and colleagues trying to undermine your reputation.

Readers of this blog will not be surprised to learn that this sort of behavior goes on even in the charity industry. The example comes from higher education. ("Defending against career saboteurs," Sarah E. Needleman, possibly available without subscription here or here.)

Denise Moorehead says she once scored justice by chance. She was working in public relations at a college when a colleague told Ms. Moorehead's boss she'd refused to help out on an assignment and it later went afoul because of her lack of participation. In reality, Ms. Moorehead says the colleague didn't approach her for support until after the problem occurred. At that point, she says, there was nothing she could do. Ms. Moorehead says she explained this to her boss, who nonetheless questioned her ability to be a team player.

A few weeks later, the finger-pointing colleague invited a close friend of Ms. Moorehead to lunch in hopes of recruiting her to head the school's endowment committee. The friend, who was aware of Ms. Moorehead's troubles with the colleague, invited Ms. Moorehead along. When Ms. Moorehead showed up at the lunch, the saboteur "looked like she was going to swallow her tongue," she says.

The personal connection with someone her colleague was looking to win over immediately raised Ms. Moorehead's clout. After that, their working relationship changed dramatically. "It was amazing," says Ms. Moorehead, now a communications director at Third Sector New England, a nonprofit in Boston. "Suddenly I could do no wrong."

But, we note, Ms. Moorehead no longer works at that college, having moved on to Third Sector New England (EIN 04-2261109 Form 990), the organization that publishes The Nonprofit Quarterly and provides other management support and advice to nonprofit organizations.

I wonder whether this isn't the real solution when one finds that colleagues are undermining them: find a different gig where people actually work together and managers work at maintaining a cooperative environment. It may be difficult to find organizations like this in the charity industry, for the reasons given by Jim Britell in his classic essay on management problems in nonprofit organizations.

Charity Bake Sale Proponents Reject Nutritional Guidelines

A New York Times article about the impact of California regulation of food sales during school hours draws widespread scorn.

"Don't mess with the bake sale fund raiser" was the most common response to a recent article in the New York Times about the decline of school bake sales after California enacted nutrition standards regulating what food can be sold to students during school hours. ("Bake Sales Fall Victim to Push for Healthier Foods," Patricia Leigh Brown, November 9, 2008)

The article picked up on one that appeared last month in the San Francisco Chronicle ("School bake sales victims of nutrition rules," Carolyn Jones, October 27, 2008).

But the two articles present contrasting perspectives. The New York Times article emphasized the regulation of consumption and gave considerable ink to those complaining about the guidelines. There was some of this in the San Francisco Chronicle piece, but there were also quotes from people claiming success for the new standards.

Most notable was a quote in the New York Times piece from Stephanie Bruce, identified as president of the California School Nutrition Association (a 501(c)(6) organization, EIN 95-2626680 Form 990), who expressed concern that the guidelines didn't "teach moderation." A number of commenters to the article picked up on this "moderation" theme.

But it seems to me that moderation is exactly what the guidelines implement, and exactly what the opponents reject. California Education Code Section 49431.2 simply requires that snacks sold in school should not have more than 35 percent of its calories from fat (no more than 10 percent from saturated fat) and no more than 35 percent of its total weight from sugar. It also sets a limit of no more than 250 calories per food item. Trouble is, the standard bake sale items like brownies and muffins far exceed these reasonable standards.

Closer to the truth is the Great American Bake Sale, a fund raiser for Share Our Strength (EIN 52-1367538 Form 990), which has as its chief corporate sponsors Domino and C&H Sugar. I've already written about the decline in food-related fund raising due to health concerns ("Girl Scouts Fib about Trans Fats (Legally)," January 27, 2007). It's declining, but it still has many advocates.

Yet charity fund raising often seems to get mixed up with mild forms of potentially unhealthy behavior, like gambling and drinking (bars are great places to hold charity fund raising events). So I suspect that bake sales will continue, and we'll continue to hear variations on the justification, "what's the harm, and anyway, it's for a good cause."

St. Louis Bishop Reins in Catholic Charities

A takeover of the charity's development office by the archdiocese leads to resignation of the board chair and at least three other board members.

The St. Louis Post Dispatch reports that acting St. Louis bishop Robert Herman has taken over the fund raising for the local Catholic Charities organization ("Bishop Robert Hermann locks horns with Catholic Charities officials," Tim Townsend, November 4, 2008). As a result, development director Dan Shasserre, board chair Kelley O'Malley and three other board members have resigned.

The paper reported that the memo outlining the change referred to an impasse between the charity board and the two previous bishops, Justin Rigali (now archbishop of Philadelphia) and Raymond Burke (now prefect of the Supreme Tribunal of the Apostolic Signatura in Rome). The memo suggested that board members who were not comfortable with the reorganization should resign.

James Gunn, one of the former board members was blunt about his reaction to the change, saying that the archdiocese officials "want to be able to solicit people for their own purposes," adding, "The social ministry of the church is not nearly as important to them as their far-right conservative Catholic agenda."

It is not surprising that the article discussing the reorganization in the local Catholic newspaper, the St. Louis Review, didn't mention the board resignations ("Efforts with Catholic Charities aimed at improving stewardship," Joseph Kenny, November 8, 2008.) .

We have previously reported that Archbishop Burke sought to implement a highly centralized accounting system for Catholic parishes ("St. Louis Archdiocese to Centralize Parish Accounting," January 13, 2007). The reorganization of Catholic Charities fund raising appears to be consistent with an overall policy of greater centralization and concern that everyone presenting themselves as Catholics present a single view.

But what puzzles me is whether this is something that is happening only in St. Louis, or whether it is just that the St. Louis Post Dispatch has been more willing to give prominence to stories relating to the local archdiocese.

St. Louis has been a frequent location of Catholic controversy over the past few years:

The ongoing excommunication of member of the lay board of St. Stanislaus Kostka church who have refused a demand from the archdiocese to turn over control of the church property ("Two more St. Stan's members excommunicated," Tim Townsend, October 11, 2008).
Criticism by former Archbishop Burke of an appearance by Sheryl Crowe at a 2007 fund raising event for the Cardinal Glennon Children's Medical Center. Ms. Crowe is an outspoken advocate of choice and campaigned for a Missouri constitutional amendment to promote stem-cell research. (YouTube video of Archbishop Burke's statement).
Criticism by former Archbishop Burke of statements by St. Louis University basketball coach Rick Majerus in favor of choice and of stem cell research (Archbishop Burke addresses Catholic identity, St. Louis Review, February 8, 2008).

So much so that Archbishop Burke made a point of countering claims that he was kicked upstairs with his Vatican appointment in an interview with the Italian Catholic newspaper Avvenire (the same interview in which he described the Democratic party as the "party of death" for its positions on—you guessed it—choice and stem cell research.)

Acorn and Wall Street Have the Same Problem

The Wall Street Journal accidentally connects the dots between two current scandals making it plain that compensation issues are at the heart of management problems with US organizations: non-profit and for-profit, small and large.

The October 16 Wall Street Journal (online) juxtaposed two stories, seemingly unrelated, one covering voting registration irregularities at Acorn and the other about new restrictions on executive compensation at the financial institutions that just received injections of capital from the US government. I found the two stories practically right next to each other at noon on Thursday, though by later in the day they had moved (they remained together in the Asia edition, which is the screen shot you can click to see full size).

The Acorn story ("Probes Focus on Advocacy Group's Voter Registration", Evan Perez) was a straightforward report, explaining how the problem arose due to lapses in interal controls at Acorn:

Last year, Acorn canvassers in Washington state and Missouri admitted to falsifying voter registrations. In response, Acorn switched its canvassers to an hourly wage with goals for number of registrations by each canvasser. Previously it paid workers by the number of registration forms turned in.

The group also started its own antifraud program, requiring all voter applications be reviewed by supervisors and then verified by call-center employees who make as many as three attempts to reach each voter signed up by a canvasser. Acorn's internal program flags potentially fraudulent registrations. Then, as many but not all states require, it turns them over to election officials.

The article is so reasonable and even-handed in its approach that I'm surprised it hasn't received more attention. It doesn't show up in web searches or in a version outside the WSJ subscription walls. So I've made a copy of the article available here.

The other story ("Lower Salaries Could Cost Wall Street" by Joann S. Lublin & Aaron Lucchetti) mostly reported reactions from various compensation consultants, voicing various concerns about driving away "top performers" and turning away from the pay-for-performance concept.

The contrast in noteworthy: Acorn, the nonprofit organization, pretty quickly acknowledged that incentive compensation was a mistake and produced unintended consequences that were not desirable.

But the large corporation compensation consultants completely skated past the notion that incentive compensation for CEOs had produced unintended consequences leading to the meltdown on Wall Street. It didn't even occur to them, or so it appears.

The flaws in executive compensation setting are not limited to for-profit companies. The IRS (under the direction of Congress, of course) has spread the poison of excessive CEO compensation to the nonprofit world by establishing the principle that executives can get away with unlimited salaries, so long as other organizations are making the same mistake. And there are nonprofit advisers who seemingly refuse to question the judgment of any nonprofit board who caves to salary demands based on what others make (an issue I have with Jack Siegel of Charity Governance, for instance).

I've written before about the need for better standards for nonprofit CEO compensation ("Independent Sector Releases Watered Down Principles for Nonprofits," October 28, 2007). Acorn's resolution suggests three conclusions that could be carried over into the compensation discussion:

It calls into question the use of simplistic performance measures as a basis for incentive compensation.
It supports the establishment of strong cross checks and internal controls regarding any measurement of performance outcomes. And
It serves as a warning that any consideration of incentive compensation should include a thorough reflection on how the measures could be gamed by the unscrupulous.

Acorn: Where's the Oak?

Pulled down by an embezzlement scandal and a lightning rod for right-wing attacks, the deeper tragedy at Acorn is how Wade Rathke turned community organizing into a personality cult that prevented the emergence of a new generation of leadership.

You may have heard about the embezzlement and cover-up scandal at the community organizing group known as Acorn.

As was common for nonprofit groups in the late sixties and early seventies, Acorn started out as an acronym for the Association of Community Organizations for Reform Now. But at this point, the whole acronym thing seems dated and, yes, corny, as in "Oh Grandpa! That joke is soooo corny."

Stephanie Strom in the New York Times covered the story through the summer:

The revelation that a whistle-blower in the organization had forced the disclosure of a nearly $1 million embezzlement in 1999 and 2000 by Dale Rathke, brother of Acorn founder and leader Wade Rathke. The embezzlement was kept a secret from the organization's board, revealed only to a select group of senior organizers. During this time the Rathke family was paying restitution at the rate of $30,000 a year while Dale stayed on the payroll with a salary of $38,000. ("Funds Misappropriated at 2 Nonprofit Groups," July 9, 2008, possibly still available here.) Mr. Wade Rathke resigned from some of his posts, but retains the role of chief organizer for Acorn International.*
The follow-up revelation that the rest of the restitution was subsequently paid by Drummond Pike, founder and CEO of the Tides Foundation (EIN 51-0198509 Form 990) and the whole tribe of Tides organizations. Wade Rathke sits on the Tides board. Mr. Pike started Tides in 1976, while Mr. Rathke started Acorn in 1970. The two are close friends. Mr. Pike made the payment personally, not using Tides funds (his Tides salary is $200,000 a year). ("Head of Foundation Bailed Out Nonprofit Group After Its Funds Were Embezzled," August 16, 2008, possibly still here.)
Then two Acorn board members filed suit to gain access to financial records and to further limit the continuing involvement of Wade Rathke in the management of Acorn. ("Lawsuit Adds Turmoil for Community Group," September 9, 2008, try here.)

The picture that emerges here is of a couple of organizations (Acorn and Tides) whose long-tenured leaders have created complicated structures that they control with no checks and balances and no transparency, because the structures are so complicated only they understand them.

Even worse, evidence emerged that Mr. Rathke has made sure that the Acorn organization remains personally answerable to him. Writing in the Chronicle of Philanthropy (~~secure behind subscriber wall~~s available here), Pablo Eisenberg provided this disturbing insight:

But every nonprofit group, especially as it grows, needs checks and balances. Trust alone is not good enough, and the management council at Acorn, which was not set up to be a decision-making body, had too little influence in overseeing the chief executive.

Some of its members say they kept pushing for more authority, and for the ability to meet with the organization's board members, but they say Wade Rathke made sure that he was the only staff member with access to Acorn's board.

Questions about who should set the organization's agenda were not limited just to the role of organizers and the board. Wade Rathke sought to put the national organization in control of operations of the group's affiliates. For example, the organization's bylaws gave him the power to appoint the head organizers of both local and state affiliates.

While local boards technically had the authority to overrule his appointments, they rarely did, according to senior staff members. They say Mr. Rathke refused to accept the decision of the board of Acorn's Los Angeles affiliate to appoint Amy Schur, widely considered by Acorn insiders as one of the organization's most capable organizers, as its head organizer. As a result, Ms. Schur left the network. Her departure prompted another highly respected organizer, Madeline Talbott, director of Illinois Acorn, to pull her organization out of the network.

Mr. Rathke says he did not try to block the appointment of Ms. Schur, but she and her colleagues say that he played a key role in denying her the job.

The decision to keep so much control over the affiliates seems at odds with Acorn's mission — its goal is to empower local people to fight their own battles — but some organizers agree with Mr. Rathke that it is important to centralize operations. They say only a unified network led by headquarters has the power and speed needed to wage successful national advocacy efforts.

Other major organizing networks disagree with this view and set up their affiliates to operate as independent charities, unlike Acorn whose affiliates do not have charity status under the Internal Revenue Code. They believe that this structure provides much greater local accountability, an approach Acorn may have to consider as it seeks to regain the trust of donors and other supporters who have been dismayed by the cover-up of the embezzlement.

Since Acorn does not provide a consolidated financial statement, it is difficult to assess how big the organization is. Peter Drier and John Atlas in the Huffington Post ("Acorn under the Microscope," July 14, 2008, perhaps here) provided this synposis:

ACORN and its affiliates have an annual budget of over $100 million, over 1,000 employees, and nearly 500,000 dues-paying families. In addition to chapters in 103 cities in 38 states, ACORN's family of organizations include two union locals, two non-profit southern-based radio stations (KNON and KABF), several publications (including the magazine Social Policy), a nonprofit group that builds affordable housing and provides homeownership counseling (ACORN Housing), a nonprofit law office, and a variety of other vehicles that supported its direct organizing and issue campaigns, such as the Financial Justice Center and the Living Wage Resource Center.

Now this sounds impressive, and the article goes on to list numerous activities over the years, but for an organization in the business of providing housing, $100 million is extremely small potatoes. To me there are all the signs here of an organization spread far too thin to be effective at anything. It's telling that Mr. Rathke's ongoing activities with Acorn involve the international division, which means lots of travel and even less accountability for results.

Acorn clearly hasn't come close to meeting any measurable objectives in political organization, unionization (their main target seems to be Wal-Mart, which remains 100% non-union), or housing. Nevertheless, the group has succeeded in becoming a whipping post for right wing bloggers, to which they have provided no effective response.

The most fundamental control for nonprofit organizations is regular, systematic turnover of executive leadership. Organizations need to have a process for recruiting or grooming leadership and transitioning them along after a reasonable period. Executive tenure over a decade is always going to be problematic, especially since board tenure is typically much shorter. Some people would like to call it founder's syndrome, but the issue isn't about being a founder as much as it is about being in power long enough to be the only one remaining who really understands how everything works. The result is often a crash-and-burn scandal, confirming the adage that absolute power corrupts absolutely.

The issue here is more serious, though. For Mr. Rathke and Mr. Pike, staying in charge too long has meant that a whole generation of progressive organizers have been deprived of a chance to develop real leadership at a national level. It seems possible to me that these two selfish leaders have effectively kept progressive politics stuck in a nostalgia groove for the last two decades.

* The IRS filing of Acorn International (EIN 52-2416966 Form 990) in 2006 shows that Wade Rathke receives compensation of $94,487 from a related, non-tax-exempt organization called Chief Organizing Fund (EIN 11-3698880). Not coincidentally, I think, this Mr. Rathke's preferred title at ACORN is chief organizer (for instance, his blog is chieforganizer.org). Being a non-exempt organization means that the financial reports of the COF are not available to the public. Also not coincidentally, the Tides Foundation tax filing shows that it supports the Chief Organizing Fund.

New York's Largest Soup Kitchen Still Dishing It Out

A New Yorker writer offers an affectionate profile that manages to reveal some of the paradoxes of serving free food in church.

During my hiatus from posting, New Yorker regular Ian Frazier wrote about his work teaching a writer's seminar at the Holy Apostle Soup Kitchen, the largest in New York. ("Hungry Minds," The New Yorker, May 26, 2008 and perhaps still available here.) It's technically a program of the Episcopal Church of the Holy Apostles (EIN 13-2892297, no Form 990 because it's a church), but the congregation is small and the soup kitchen uses the nave of the church five days a week—the church removed the pews after a fire in 1990 to give the soup kitchen more space.

There's a lot of interest in the article about the practical realities of operating a social service charity. Pardon me for the long quotes here, but think this was as good a review of a nonprofit organization as I've seen in quite awhile.

I like the review of the history:

By 1980, the church is one of the oldest buildings on Ninth Avenue. Its membership has dwindled to about a hundred and twenty-five. Basically, it’s dying. Its roof, still the original slate, needs replacing. Leaks have damaged the ceiling, now in danger of falling in. Repairs to the roof would cost half a million dollars. The Right Reverend Paul Moore, Episcopal Bishop of New York, wants to close the church and consolidate its congregation with St. Peter’s. Ronald Reagan is elected President. Government money to help the poor is cut, fewer people have public housing, Chelsea’s single-room-occupancy hotels close. Homelessness becomes a visible New York City problem. Often, people knock on the church’s doors asking for help.

Father Rand Frew, the church’s new, young minister, suggests to the congregation that the church should start a soup kitchen. Father Frew thinks big and has a gift for starting programs. His previous church was in Las Vegas; perhaps a bit of gambling instinct is involved in this idea. The congregation wonders where it will come up with the huge amount of money a daily soup kitchen requires, but it gives the O.K. The consensus is that if Holy Apostles is going out of business anyway it might as well do some good before it does.

Father Frew finds fifty thousand dollars and donors of surplus food. He rounds up a head chef, cooking supplies, volunteers. On the soup kitchen’s first day, October 22, 1982, it serves about thirty-five meals. Starting then, it establishes its policy of being open every weekday. Its numbers of guests—from the beginning, the people it serves are referred to as guests—increase. Now the problem of repairing the church’s roof and ceiling has been simplified: donors who would never contribute to save a dilapidated church with a shrinking congregation are more willing to give to a historic church with a well-run and rapidly growing soup kitchen. More money comes in and the church borrows half a million for the roof repair.

By the mid-eighties, nine hundred or more guests are having lunch at the church’s Mission House every day. By 1990, the repairs to the roof are almost done. On April 9th, workmen up in the roof beams accidentally start a small fire with an acetylene torch. They put the fire out, they think. In the afternoon at quitting time, the workmen leave. A few hours later, the church is holding evening services in the narthex when someone sticks his head in the door and says, “Your church is on fire.” In minutes, the roof goes up in flames. The Fire Department comes and puts out the fire. Inside and out, the destruction is immense. Many of the irreplaceable stained-glass windows had to be broken to vent the gases from the fire. That night, the church is blackened, dripping, open to the sky. Nonetheless, the soup kitchen serves lunch in the undamaged Mission House the next day: a cold meal, owing to circumstances—macaroni-and-tuna salad, fruit, and juice. It feeds about nine hundred and fifty.

The church has fire insurance. Repairs of the damage, including installing another new slate roof, fixing the ceiling, and assembling the fragments of the stained-glass windows, will cost about eight million dollars. By now, Father Frew has left, and the rector of the church and executive director of the soup kitchen is William Greenlaw, a manager whose skill with money has acquired him the nickname Father Greenbacks. He consults with Elizabeth Maxwell and the vestry, and they decide to plan the reconstruction so that the soup kitchen can expand into the church itself. What to do about the pews? Take them out—the church stopped renting them a century ago, no money will be lost—and keep the space open for dining. During services, the congregation can just as easily use folding chairs. Everybody agrees about this immediately.

Reconstruction takes four years. When all is finished and the first meal is served in the main church, the guests come in quietly with their trays, unsure about the protocol for eating in a church. Wendy Shepherd, the church’s long-time administrative supervisor, watches them and worries that people won’t be comfortable eating here, but in a few days the strangeness goes away. The Times reports that mid-nineteenth-century pews saved from the fire at Holy Apostles are for sale for four hundred and fifty dollars apiece at a public architectural salvage yard in Brooklyn. Somewhere, the shade of Foster Thayer smiles.

There's also this about the volunteers:

Volunteers are asked to show up by 10 A.M. The soup kitchen needs at least forty volunteers to serve every meal. All kinds of people help out, but Manhattan retirees are usually the bulk of the volunteers. Some have been doing this almost since the soup kitchen began; Ilona Seltzer, a Chelsea resident, has been volunteering since 1985. School groups volunteer, and Sunday-school classes and Scout troops and the rabbis and members of Congregation Beth Simchat Torah (which holds its own services in the church on Friday evenings). Kim, a software designer from Orange County, California, volunteers when she’s in the city visiting her aunt and uncle. Susan Sarandon and Tim Robbins, longtime Chelsea-ites, have volunteered. Senator Jeff Sessions (Republican of Alabama) and others of the Alabama delegation spent a morning working at the soup kitchen during the Republican National Convention in 2004. Senator Sessions used the photo opportunity that resulted to praise the soup kitchen as the sort of private initiative that naturally takes up the tasks our government should not do and should not have to do—an opinion with which everybody at the soup kitchen disagreed.

There's this about funding:

To keep going, the soup kitchen needs two million seven hundred thousand dollars a year. It spends more than ten thousand dollars every operating day. For this church, whose congregation still has fewer than two hundred members, that’s a lot. About thirty-five per cent of the money needed comes from individual donors who send checks in response to direct-mail solicitations. That income rises and falls, but is generally dependable. Most of the rest comes from foundations and from the city, state, and federal governments, which tend to be less predictable.

Which is just about as informative as the church's own financial report, although the web site claims that the full audited statement is available on request.

And some fascinating notes about fundraising—especially with respect to who does and doesn't contribute:

Government money for the hungry is a small and ever-shifting stream, moved by political change. City funding disappears under sudden budget pressure, federal poverty funds administered by FEMA are cut nineteen per cent, and a farm bill gets stuck in Congress, with the result that government surplus food suddenly becomes less available. Keeping up with the veerings of government support is a scramble. As for foundations, they are well intentioned and generous, but subject to moods. “Donor burnout” is one of those. Fashions in charitable giving also come and go. Recently, foundation charity has been more focussed on “making a difference,” an idea that works against the soup kitchen, which changes people from hungry to not, but invisibly. Also, foundation donors now like to talk about “measurable outcomes”—they expect recipients like the soup kitchen to single out the people who are helped, and measure the improvement in those people’s situations over time. Again, that’s not something the soup kitchen, with the off-the-street population it serves, can easily do. In the past eighteen months, several major foundation donors have dropped out, and no replacements have been found. There’s enough money for now, and for a while, but the future is unclear. The soup kitchen has been in this spot before.

Father Greenlaw, who has overseen the raising of all this money for twenty-five years, will retire at the end of July. ... In his quiet office on the third floor of the Mission House, he explains how much the soup kitchen depends on New York’s Jewish community (“If the Jews of New York City stopped giving, we’d go out of business”), and how he’s had no success raising money among red-state evangelical Christians, and how urban secular mailing lists like the list of subscribers to The New York Review of Books or of Channel Thirteen supporters or of members of the North Shore Animal League are much better places to find donors.

Now, I'm not a big fan of soup kitchens, myself, largely because of their lack of accountability and because they can appear to be a solution when in reality they are a symptom. Still, this organization seems to be something else entirely; a place where New Yorkers can meet and talk with a homeless person over lunch.

Animal Philanthropy: Dollars Chasing Dogs

The millions that Leona Helmsley left to her dog Trouble are a puddle compared to the pile earmarked for dog care in the Helmsley's charitable foundation. But it could be that the foundation's goals are far from frivolous.

In the New Yorker, Jeffrey Toobin spotlights the increasing legal acceptance—and perplexities—of trusts set up to benefit pets. ("Rich Bitch," September 29, 2008, available here.)

For those not following the ongoing shaggy dog story, the New York Post reported in June ("Screw the Pooch," by Dareh Gregorian) that New York Surrogate's Court Judge Renee Roth reduced the trust fund left by Mrs. Hemley for her dog Trouble from $12 million to $2 million, giving the balance to the Helmslsey's foundation.

While the papers trumpeted the reduction in the bequest, Mr. Toobin points out that it was actually a victory for animal rights advocates that the judge supported the $2 million. The basis for the balance was an affidavit from the dog's caretaker, Carl Lekic, detailing the dog's expenses as $190,200 a year, including $60,000 a year for Mr. Lekic, $100,000 a year for full-time private security, with the balance being grooming ($8,000) veterinary costs (currently $2,500, expected to rise to $18,000 as the dog ages), food ($1,200), and miscellaneous expenses ($3,000). The dog's veterinarian estimated her remaining lifespan as three to five years. (I think the real winners here were Mr. Lekic and whoever is providing the security.)

The big money story belongs to the Leona M. and Harry B. Helmsley Charitable Trust (EIN 13-7184401 Form 990). It's not big yet, but when the estate is wound up it will have assets of between three and eight billion dollars. Mr. Toobin found that Mrs. Helmsley changed the mission statement of the trust. The September, 2003 version has three goals: care for dogs, care for indigent people especially children, and such other charitable activities as the Trustee shall determine. In March, 2004, she redrafted the mission statement to drop the provision for care of indigent people. So the only specific direction for the trustees is to provide for the care of dogs.

This would make the Helmsley's Charitable Trust by far the largest private foundation dedicated to the care of animals. Currently the largest is Maddie's Fund, officially the Duffield Family Foundation d/b/a Maddie's Fund (EIN 68-0339626 Form 990, careful: huge file), founded in 1999 by the founder of PeopleSoft and his wife. With about $300 million in assets, Maddie's fund paid out about $10 million in grants. The Helmsley's Charitable Trust will be at least ten times as large. For comparison, the Humane Society of the United States (EIN 53-0225390 Form 990) has annual expenses in the $70 million range.

Yet a group in New York, the Mayor's Alliance for NYC's Animals (EIN 73-1653635 Form 990) has a plan that could require spending at that level. The group currently operates with $3 million or so annual funding from Maddie's Fund and has succeeded in reducing the percentage of stray animals euthenized in New York from 74% to 23% from 2002 to 2007. They would expand their efforts with more spay/neuter vans ($200,000 each) and windowed adoption vans ($170,000 each).

There was some talk about the supposedly frivolous nature of Mrs. Helmsley's bequest. The Chronicle of Philanthropy and the Hudson Institute (EIN 13-1945157 Form 990) sponsored a forum early in September titled "Is Philanthropy Going to the Dogs?" (transcript here) featuring Robert Bork (by phone), Pablo Eisenberg, Ray Madoff (Boston College) and Leslie Lenkowsky (Indiana University). The participants aired a lot of the usual ideas about ways to make foundations more responsible and some unusual perspectives on Mrs. Helmsley.

But what strikes me is that the Helmsley's Charitable Trust is likely to provide private funding for one of the most prosaic government services of all: animal control. And unlike most of the grandiose human services programs that come out of private foundations, it looks like the Helmsley's Charitable Trust could make a measurable difference by significantly reducing the number and percentage of stray animals killed each year in the US. Leona Helmsley has accomplished what few foundations have been able to do: establish a foundation with a mission that is reasonably related to the resources it has available to it.

It seems we have here a foundation with some humility, and that's a good thing. Mazal tov, Mrs. Helmsley.