Nonprofits: ‘Sometimes the Paperwork Overshadows the Program’

Last month, county and state officials temporarily shut down the 16 alternative schools run by the nonprofit group Soledad Enrichment Action, saying the schools violated state regulations by, among other things, hiring private-school teachers who were not county employees. Brother Modesto Leon, a longtime community activist who heads Soledad, said he was unaware that the requirements were part of his contract for government funding. Around the same time, city and county funding for the 15-year-old Community Youth Gang Services was eliminated after that nonprofit did not complete evaluation forms required under the funding agreement. Both instances have drawn attention to the funding burdens of nonprofit organizations, even as these organizations grow in importance with the cuts in direct government programs for the poor. LUCILLE RENWICK talked with the heads of other small-to-medium nonprofit organizations about their frustrations in dealing with regulatory red tape and about how they cope with the political winds of change.

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ALICE CALLAGHAN

Director of Las Familias del Pueblo, downtown Los Angeles nonprofit that assists sweatshop workers and their children

We don’t get government money and we wouldn’t take it. Usually the government has a special way they like their books kept; there’s a lot of “accounting for dollars.” You have to make a decision when you go the government route because they have requirements. I think that if you’re going to take government money you know there are certain rules that you play by and you do it.

Brother Modesto’s thing is a complicated issue. He knowingly did something else than what the government wanted him to do which was to use unionized workers. And if you’re going to take government money, you have to go the official route. If you do housing, for instance, you can’t hire men off the street.

There’s always restrictions with government money. It’s the people’s money so how that money gets spent is important. And it isn’t necessarily because someone sat down and wanted to make it difficult for the organizations that receive that funding. Foundations have restrictions, but far less than government restrictions. Even foundations want you to do with the money what you’ve promised to do, and that seems a reasonable request.

Foundations are fairly good at identifying programs that are good. Government has a different set of criteria. Someone can dot all their Is and cross all their Ts and still provide terrible services. But if they know the right people or have all their paperwork in order they’ll get the funds. It’s just far more political.

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REGINALD CHAPPLE

Director, Youth Empowerment Project, a leadership training program in Southwest Los Angeles

So many times there are so many funding sources that require different types of reporting, it’s hard to maintain everything. And the rules are constantly changing. We just got new rules from the Justice Department on the [government] funding that we’ve had for the last three years.

We’re moving into a whole new era for funding for nonprofit groups. It’s no longer about having such a great service. It’s about are you running your nonprofit like a business. It’s not so much that the impassioned visionary has to have all the skills. They’ve just got to surround themselves with the right people.

But I think the ultimate key for nonprofits in the future is to diversify one’s funding base, so that you’re not totally dependent on government funds.

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KAREN BASS

Executive director, Community Coalition for Substance Abuse Prevention & Treatment, South Los Angeles, which focuses on reducing alcohol and tobacco sales in low-income neighborhoods

I think the main problem is that when you receive federal funds you are funded by whichever way the wind is blowing that particular year. This year, because [Bob] Dole made it a political issue, drugs are a big problem. Next year, the fad could be something else. If what you’re working on is not the latest fad then your money is pulled.

Rep. Jim Istook [R-Okla.], who sits on the House Committee on Appropriations, tried last year to restrict nonprofits completely from having any voice at all in the political process [with a bill that would have banned lobbying by nonprofit groups that accept any government money]. But “for profit” organizations--like the defense industry--that receive government funds are some of the biggst lobbyists on the Hill. We lost our funding last year because the alcohol industry did a lot of lobbying. Our category was eliminated. I think Istook will most likely reintroduce the bill if he gets the chance.

If you are totally dependent on federal money, then you’re leaving yourself subject to the whims of what the government wants. And unfortunately lots of nonprofits do that. For us, in the Community Coalition, we have a vision for our coalition so we go after money that ties into that vision. You must develop a way to generate your own money that does not include writing grants, any grants.

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GWEN BOLDEN

Executive director, the Gwen Bolden Youth Foundation for at-risk youth in Leimert Park.

When I read the story about Brother Modesto I felt that could be me or anybody, because we’re all vulnerable. Nonprofits have to be business savvy and we’re not all as savvy as we need to be. So my heart just goes out to him.

There are many restrictions with government funds and it’s very difficult. We are retired teachers, and we’re not particularly schooled in business and finance and we have to employ people who charge tremendous fees for accounting services. It’s difficult in that sense.

In 1993, we received a $95,000 federal grant through the “weed and seed” funds to open the first safe haven in Los Angeles for students. But that funding has dried up and now we receive funding from other sources. We’ve also applied to the [U.S.] Department of Education since we’re an education nonprofit.

We started our foundation in 1979 with our own funds. We were first funded from the city in 1990. That was our first government funding. I would say that I consider the funding from the goverment a blessing, but it’s also made us realize that we have to be self-sufficient. We’re now beating doors down so we don’t have to stop the program and leave these kids adrift.

We even used my 70th birthday in September as a fund-raiser. We invited 150 people and asked them in lieu of birthday gifts to donate money to the foundation. We received $1,600.

JONATHON NEWSOM

Funding officer for Liaison Citizens youth

group in Pico-Union and a consultant to

other nonprofits on funding and strategic planning.

I have been involved with nonprofits for seven years so I’m keenly aware of the positives and negatives that come with government funding. If you receive funds it helps you to pay staff and other programs. The problem with government funding is that it’s kind of the same thing that people say about City Hall: There’s a lot of red tape and a lot of paper work. And sometimes the paperwork overshadows the work of the program. So that if you as a nonprofit aren’t able to file the proper paperwork--even if you are providing the goals you are funded for--you could be shut down for violating a regulation.

The government should focus more on results and outcomes. Many private foundations are moving more towards the outcome and the goal and why to fund a project. Often times federal, state and city programs fail to focus on the result and intended goal and instead focus on whether the paperwork has been completed.

The criticism from private sources about government funding is that we need to focus on outcomes.

In the case of Brother Modesto, I think the gentleman had set up a very good program. But he ran into regulations and questions of “Did you cross the Ts and dot the Is?” rather than asking “Is he setting up something to help people?” They should have set up a monitor to assure that he was complying with things properly.

A lot of nonprofits will definitely moan about federal regulations. According to people who’ve been in it a long time it was supposed to have been a lot worse in the past than it is today. But many programs still have a lot of paperwork and a lot of regulations. If you’re a large agency you literally have to build an apparatus to deal with that. It’s pretty much a rat race for community-based nonprofit organizations.