How Much of a Not-For-Profit’s Revenues Should Serve Its Mission?

Although to some people ‘not-for-profit’ is synonymous with ethics, not-for-profit organizations can be vehicles for fraud, embezzlement, and other forms of wrongdoing. What’s more, they are sometimes better vehicles for wrongdoing precisely because people are less likely to scrutinize the actions of an organization devoted to a philanthropic mission. The reign of William Aramony as head of the United Way of America stands as a case in point.

The linked article raises questions about the New York State Association of Black and Puerto Rican Legislators, a not-for-profit organization that ostensibly raises money to fund scholarships for needy minority students, but whose financial disclosures suggest that the money it raises is spent overwhelmingly on its “‘Caucus Weekend’ – a series of workshops, concerts and parties – in Albany every February for minority members of the Assembly and the Senate,” according to the New York Post.

As with the case of profits earned by private, for-profit firms, the public is often delusional about how much of a not-for-profit organization’s revenues can be devoted directly to serving its mission. Like any organization, a not-for-profit has organizational overheads that have to be met in order to keep the doors open, the lights on, and its staff paid. That said, the linked article makes damning reading, not least because of the New York State Association of Black and Puerto Rican Legislators’ refusal to supply its most recent tax returns to the Post reporter (as required by law). >>>

LINK: Legislators spent big on lavish fundraisers — but gave no grants to students (by Isabel Vincent for New York Post)

A nonprofit run by state lawmakers to raise scholarship money for needy minority students spends most of the cash on its lavish annual soiree — including $6,000 on limos — and gave out no grants the last two years, The Post has learned.
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The group charges sponsors up to $50,000 for a chance to party with lawmakers at events that have ­included Grammy Award-winning rappers and high-profile speakers such as Hillary Clinton and Jesse Jackson.
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But in the last two years there has been no cash for scholarships, according to two sources — a former lawmaker, and a community organizer who has relied on the money for needy students since just after the group was founded in 1985.

Federal tax filings confirm that in the 2015-16 fiscal year, which ended Sept. 30, 2016, the group gave out no educational grants — despite raking in contributions totaling more than $500,000.
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When asked why the group had not given out any money to students in either year — even though scholarships are the heart of its stated mission — the lawmakers who manage the nonprofit refused to answer. The group is chaired by a president who serves a two-year term.
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In the 2014-15 fiscal year ending Sept. 30, 2015, the group spent $157,926 on “food service,” $6,332 on limousines and $30,657 on “event decor,” according to tax filings. It also spent $3,000 on the Sunday preacher.

Of the $564,677 the group received in contributions that year, only $35,745 went to scholarships, a little more than 6.3 percent of total revenue.

Charity watchdog groups such as Charity Navigator recommend that at least a third of a nonprofit’s revenues go to its stated purpose. . . .

What do you think?

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