The President's stimulus legislation, together with the recently enacted omnibus supplemental spending bill (H.R. 1105), undeniably represent for the immediate future the federal government's expanded role in public welfare provision. In the short term there will be hundreds of millions of dollars in new direct spending, and more as States redistribute what they receive to local organizations. But the long-term effect of these actions on American civil society (until now the core of charitable and cultural support in this country) is uncertain and may depend on how wisely both funding agencies and recipients use this infusion of cash.
If nonprofits become fully dependent on federal grants, they will gradually become a de facto arm of the government, and a vibrant, independent civil sector will begin to wither away as government "crowds out" private giving, and co-opts the organizations that remain. The pressure will also be strong to indefinitely continue government funding at new high levels, worsening the nation's deteriorating fiscal situation and centralization of power. Even if budgetary pressures cause funding to fall back, communities that come to rely on the levels of service provided in the next few years will find their needs left unmet. Both alternatives are bad, but perhaps avoidable, outcomes of the Administration's new commitments.
If recipients are encouraged and empowered to use federal funds - or other money freed up by new government cash - to build up their own capacity and long-term viability as an organization, over time they will be able to support themselves through alternative means, possibly even sustaining expanded levels of service. As a result, a participating nonprofit, and civil society generally, will be left stronger rather than weaker as a result of its participation in federal grants programs. Strengthening organizations is a component of the $50 million dollars provided in the omnibus for the Department of Health and Human Services' (HHS) Compassion Capital Fund "to provide grants to charitable organizations to emulate model social service programs and to encourage research on the best practices of social service organizations." And what, one may ask is a "model" social service organization? Among other things, it is one whose good work can occur with minimal direct support from the taxpayer. The Compassion Capital money is a bright spot in recent legislation, but the goal of organizational improvement can and should be administratively incorporated into all grants to organizations providing services at government behest.
A comprehensive plan designed to encourage the post-grant viability of fund recipients - "sustainability" in the language nonprofits - will have at least three components. First, agencies should preferentially select grant applicants from those that can survive (eventually) unaided by awarding points in merit-based grant competitions for the inclusion of a long-term sustainability program in an applicant's proposal, and should specify the need for such plans in their grant announcements and requests for proposals. Second, where allowable by statute, agencies should require grantees to provide an escalating percentage of non-federal matching funds each year of their grant, or alternatively, the agencies should, every year, gradually decrease the size of the federal grant provided to the organization (requiring an applicant's sustainability plan to show how the organization will compensate for these declining amounts). Finally, and critical to success, all government-funded technical assistance should be explicitly designed and directed to help organizations free themselves long-term from federal assistance, by implementing the various techniques to can help them stand on their own. These techniques include introducing management structures that can handle increased capacity and service delivery, technological innovation, and most crucially, developing the nonprofit's roots and partnerships within their local communities, to leverage paid staff into volunteers now, and create a network of donors and supporters for future years. In addition, government should actively encourage its grantees to diversify their funding base, strengthen their board governance, and focus their organizational culture on measurable performance.
In particular, the government's imposition of objective and quantitative measures of performance, and its independent evaluation of how successfully the grant is being used, should be a top priority for program agencies and actively embraced by all recipients. Evaluation inculcates the message - too often forgotten - that grants are not gifts, nor are they eternal; in principle, grants represent public dollars distributed for a specific purpose to be achieved within a limited period of time. If the purpose is not achieved, the funds need to go somewhere else. And apart from the practical improvements made to meet these measures, positive results found after serious evaluations become an important asset of any nonprofit. Hard numbers are crucial to "selling" the organization to donors down the road, who want the assurance that their donation will actually generate a social return, and this, in turn, creates an independent future for the nonprofit.
The question of whether the new Administration is acting from necessity, as it claims, or because of its desire to effectively replace the functions of civil society with central government control, as its critics contend, may ultimately come down to this: will the Executive Branch use the tools at its disposal to help recipients become stronger organizations that can become independent of the funds it provides, or will it allow this dependence to become permanent? Dependence is a fact of life already for hundreds if not thousands of federal grantees, some of which have been primarily funded by federal dollars for decades, but it will be revealing to see if this moment of opportunity is used to enlarge this number, or as I think possible, to finally start reducing it.
Charles Keckler is a former Deputy Assistant Secretary for Policy at the Department of Health and Human Services