The Nonprofit Agenda: Recommendations to President George W. Bush to Strengthen the Nonprofit Sector

BASED ON A SURVEY OF 1,000 NONPROFITS ACROSS THE COUNTRY AND DEVELOPED BY STATE AND LOCAL NONPROFIT LEADERS Click Here to Download the Entire Report in Adobe Acrobat Format Presented by: Advocacy Institute National Committee for Responsive Philanthropy OMB Watch The Union Institute Introduction In the fall of 2000 four national nonprofit organizations pooled resources to create a vehicle for nonprofits at the state and local level to suggest actions the new President can take to strengthen the nonprofit sector. The sponsors, the Advocacy Institute, National Committee for Responsive Philanthropy, OMB Watch, and The Union Institute's Office of Social Responsibility, felt this effort was necessary for the following reasons:
  • Nonprofits at the state and local level lack the resources and opportunities enjoyed by large, national organizations, to make their needs and ideas known to the new President;
  • State and local nonprofits are the primary vehicles of civic engagement in the United States, representing a vast store of knowledge on community needs and conditions. They are the best direct source of input on what can be done to make the sector more effective; and
  • The President has enormous opportunity and authority to influence the relationship between government and the nonprofit community.
The recommendations in this report are based on results of a first-ever Internet-based survey that asked nonprofits to rank ideas that the next President should undertake to strengthen nonprofit service initiatives. A group of 25 nonprofit sector leaders from across the country was convened to present the survey results as specific recommendations for action. (See Appendix for list of Advisory Committee members.) After a two-week posting on the OMB Watch web site, there were roughly 1,000 responses to the survey, representing nonprofits from every state except Nebraska. (See for a summary of the results.) The survey respondents represent a large cross-section of the nonprofit community. Three major themes run throughout the recommendations. First, nonprofits believe that more can be done to improve the relationship between the government and the segment of the nonprofit sector working with people and families in need. These recommendations, if implemented, will strengthen the historical partnership between nonprofits and government. While this partnership has traditionally focused on service delivery, these recommendations will build a greater voice for the grassroots organizations that deliver services and speak on behalf of their constituents in public policy debates. Second, nonprofits believe that the President can play a significant role in addressing inequalities - from social and economic disparities to inequities in the public policy and electoral arena. Curtailing the role of money in politics was far and away the most highly ranked need identified in the survey. Money's role in politics detracts from the services nonprofits' provide and undermines the impact of advocacy for the people they serve. Third, nonprofits believe that the Federal government can do more to support the causes, constituents and issues nonprofits work for. The second highest ranked recommendation was that the Federal government should invest in the people served by charities. This means using resources, perhaps from the Federal surplus, to invest wisely in those who have not fully benefited from the economic prosperity of the past few years. It also means government actively working to bolster philanthropy, nonprofit careers, volunteering, and accountability within the nonprofit sector. The President can use these recommendations as a starting point to help strengthen communities and promote civic engagement. In addition, the President can use the power and influence of the office to advocate for policies and practices that do not require legislative action. The President can and should seek to shape public opinion and institutional behavior as well as seek changes in official policies and regulations. It is essential that the President take early affirmative action to help nonprofits better serve vulnerable and needy populations. The President should publicly endorse the roles nonprofits play in our society-roles that seek to address inequities and improve quality of life for all. The President's leadership is vital to this sector of our society. These recommendations incorporate input from a large cross section of nonprofits, based on the results of the survey. However, no participating group or individual necessarily endorses every recommendation. Findings should rather be interpreted as approximate, or consensus, recommendations. Nor are the recommendations intended to address all issues of concern to the nonprofit sector. Rather, the focus was on obtaining the perspective of state and local groups on broad nonprofit issues. The sponsors and Advisory Committee members look forward to working with the Bush administration and the 107th Congress to achieve the vision these recommendations reflect. Where follow up on recommendations ultimately requires more specific suggestions for implementation, we will be happy to assist in developing more detailed proposals. PART 1: OVERVIEW OF THE RECOMMENDATIONS There are seven areas in which we recommend action:
    I. Money and Politics: Reduce the corrosive influence of money on Federal campaigns by embracing the principles of public financing and other possible models for reform. II. Invest in People Served by Nonprofits: Invest in programs that address community needs and help the many people who have not benefited enough from sustained economic growth. In a time of great economic prosperity and large Federal surpluses, these social needs can and should be met. III. Strengthen Nonprofit Participation in Public Policy Matters: Simplify rules governing nonprofit policy participation and improve the relationship between Federal agencies and nonprofits of all sizes and types. Improve access to government information. IV. Giving, Nonprofit Careers, and Volunteering: Allow non-itemizers to deduct charitable contributions on Federal returns. Permit individuals to transfer funds in certain retirement accounts to charities without tax penalties. Maintain the estate tax. Create a new student loan forgiveness program for graduates who work in charities. Initiate efforts to increase volunteering in smaller charities. V. Simplify the Federal Grantmaking Process: Speed up grant payments. Simplify application and reporting requirements. Provide technical assistance to help small nonprofits apply for Federal funds. Federal grantmaking should also conform fully to the constitutional principle of separation of church and state. VI. Strengthen Capacity of Community-Based Organizations: Create a new national grant program to provide community-based organizations with operating support. Other initiatives to address digital divide concerns, such as through Community Technology Centers, should be undertaken as well. Encourage all donors to give more to community-based groups. VII. Strengthen Nonprofit Accountability: Require greater disclosure from nonprofits and philanthropies, and improve access to nonprofit disclosure information. Improve IRS enforcement of current laws. Develop Internet-based directories of local services provided by nonprofits.
PART 2: RECOMMENDATIONS IN SUMMARY Click Each Topic for the Detailed Recommendation I. REDUCE THE CORROSIVE INFLUENCE OF MONEY ON POLITICS Nonprofits ranked this by far the most important issue for the President to address. Respondents noted two ways in which the current campaign finance system hurts nonprofits and the people they serve. First, the disproportionate influence of money negates the democratic principle of one-person-one vote. Second, and more practically, it creates imbalance in public policy debates, since wealthy campaign donors influence campaign outcomes and therefore have a greater influence over public policy. We encourage the new President to consider the following approaches to restoring principled democracy and leveling the playing field in public policy:
    A. Discourage purchase of access to representatives of government through campaign spending Promote public financing of all Federal elections; Provide free or reduced cost air time for Federal candidates on all broadcast media; Limit soft money contributions; Involve community based organizations in debates around campaign finance reform, so that new laws are not written by self-interested stakeholders. B. Encourage citizens and citizen groups to participate in elections and public policy debates Support and under no circumstances limit the First Amendment rights of citizens and nonprofit organizations to speak freely on public policy issues.
II. INVEST IN THE PEOPLE SERVED BY NONPROFITS This ranked as the second most important issue for the President to address. Leaders commented on how important it is for the Federal government to invest in programs and policies that can build sustainable communities and broad, long-term economic prosperity. It is time to think big. In a time of economic prosperity and budget surplus, the country should put resources into program areas that have been neglected and under-funded. The nation should also begin to address gaps in the service delivery infrastructure-even if this means creating new national programs. Priority areas should include universal pre-school, universal health care, low- and moderate-income housing, livable wages, and income supports for those that cannot obtain jobs. Specifically, the President should undertake the following:
    A. Use a significant portion of the surplus to invest in people If estimates of the surplus decline, other resources should be devoted to public investments. B. Target Tax Relief to Those Most in Need Across-the-board tax cuts that primarily benefit the wealthy are the wrong approach to investing in our future. Precise tax cuts-such as expanding the Earned Income Tax Credit or a new universal unified refundable child tax credit-are more efficient, and a better approach to any tax reduction program. C. Consult With Community Leaders Community-based nonprofits have unparalleled insight into community needs and can help the President and administration develop investment priorities.
III. STRENGTHEN NONPROFIT PARTICIPATION IN PUBLIC POLICY An essential role of nonprofit organizations is to advocate for the people and causes they serve. The Federal government can play a critical role in strengthening nonprofit public policy participation:
    A. Protect and Appreciate Advocacy Participation The President should take steps that acknowledge the crucial role nonprofits play in formation of public policy and enhance their ability to provide a vehicle for citizen input into the actions of government. Rules and regulations that govern the ability of nonprofits to speak on behalf of those they serve should be simplified and, where not justified, eliminated. For example, the tax code should be modified to eliminate the confusing distinction between direct and indirect (grassroots) lobbying, including all charity lobbying under one expenditure ceiling, which should be indexed to the rate of inflation. Additionally, the IRS should provide guidance to private foundations that they can fund charitable activities that involve public policy participation. B. Promote Participation in Federal Agency Policy and Program Activities Federal departments and agencies should be encouraged to consult with nonprofit organizations to expand public engagement in policy decisions by commenting on rules, regulations and programs. This improved relationship needs to exist at the national, regional and local office level of all Federal agencies and departments, so that nonprofits can have meaningful input to the process. The President should strengthen the Nonprofit Liaison program and charge them with leading the efforts described herein. The President should also strengthen the use of technology to promote nonprofit interaction and disseminate information.
IV. PROMOTE INCREASED GIVING, VOLUNTEERING, AND NONPROFIT CAREERS There are a number of ways the President can expand resources - money, staff, and volunteers - to help nonprofits, particularly charities, carry out their missions:
    A. Permit Non-itemizer Tax Deductions Allow taxpayers who do not itemize on tax returns to fully deduct charitable contributions. The non-itemizer deduction should take affect immediately upon passage instead of being gradually phased in. The deduction threshold should be high enough to encourage giving but low enough to allow broad participation and benefit the 49% of households with taxable incomes of less than $30,000 a year. B. Permit Selected Retirement Account Rollovers to Charities Allow taxpayers to donate money tax-free from Individual Retirement Accounts. Current legislative proposals would permit IRA rollovers for donors age 70½ or older. The President should encourage broader giving by lowering the eligible age to 65 and by allowing the rollover of Social Security benefits as well. C. Maintain the Estate Tax Repealing the Estate Tax would increase concentrations of wealth inconsistent with a democratic society. Repeal would impact the nonprofit sector, abrogating current tax incentives and substantially decreasing charitable gifts. Revisions that protect family farms, small businesses and environmental conservation are possible without eliminating the tax. D. Create a Student Loan Forgiveness Program for Those In Nonprofit Careers Support careers in public service by helping public agencies and nonprofits recruit and retain top-notch talent. Nonprofit and government agency employees with outstanding student loans should be eligible for loan-forgiveness programs based on length of service if their salaries are below the private sector level. This program can follow the model the Public Health Service uses to recruit health care professionals for low income and rural areas. E. Strengthen Volunteering-Particularly for Advocacy Promote increased civic participation by helping nonprofits recruit volunteers and making procedures for AmeriCorps simpler to help small grassroots nonprofits participate in the program. Eliminate advocacy restrictions in AmeriCorps and under the Points of Light program and provide information on volunteer opportunities. F. Targeted Charitable Tax Credits Should be Nondiscriminatory Do not limit tax credits for charities to any particular types of nonprofit or any particular types of service or exclude charities that engage in advocacy from the benefit of tax credits. Ensure that tax credits for charities supplements, rather than decreases, overall government funding for programs and services.
V. SIMPLIFY THE FEDERAL GRANTMAKING PROCESS Roughly one-third of charities' revenue comes from government grants and contracts, underscoring the close partnership nonprofits have with government. Yet these financial interactions are often burdensome, particularly for smaller groups. The President can make the following six improvements:
    A. Adjust Payment Reimbursement Procedures for Small Nonprofits Institute simpler and faster payment technology and procedures for Federal grantees. This would help thousands of small nonprofits that cannot advance funds or wait long periods of time before they are reimbursed. B. Involve Charities in Streamlining Grant Application and Reporting Requirements Insist on full and timely implementation of the Federal Financial Assistance Management Improvement Act (P.L. 106-107), which mandates uniform application forms and reporting systems and calls for a streamlined Federal grants process. OMB should work with a team of nonprofit representatives, including small grant recipients and grants management experts, to develop its implementation plan. C. Simplify and Unify Nonprofit Financial Reporting Requirements Stop redundant and burdensome reporting requirements among Federal, state and local governments. These levels of government often require nonprofits to report the same financial information but in different formats and timeframes. The President should implement the recommendations in Unified Financial Reporting for Not-For-Profit Organizations (Jossey-Bass, 2000) to improve accuracy of information, simplify the multitude of reporting formats, and strengthen nonprofit accountability. D. Initiate Outreach to Make Nonprofits More Aware of Federal Grant Programs Federal agencies should conduct outreach programs to make more nonprofits aware of Federal grant opportunities. Develop the Federal Commons as a one-stop web resource and incorporate it into the U.S. Nonprofit Gateway and FirstGov. E. Expand Technical Assistance on Grant Application Process All Federal agencies should provide training and technical assistance for nonprofits that wish to apply for Federal grants. F. Protect Freedom of Religion Conform Federal grantmaking to the constitutional principles of separation of church and state. Religious congregations should be eligible for government grants to administer programs only when they can show that program services are kept separate from religious worship activities. No government funds should be used to operate programs where religious activity and proselytizing are indistinguishable from program services or incorporated into them. Federal funds should not be used to discriminate in hiring practices based on religious belief or affiliation. Given the controversy surrounding Charitable Choice, the President should wait for a Court review of its constitutionality before expanding it.
VI. Increase Support for Strengthening the Capacity of Community-Based Organizations Many of the above recommendations will strengthen the capacity of smaller nonprofit organizations. Three additional recommendations include:
    A. Support Community Technology Centers and Nonprofit Technology Support Provide grant support to create or enhance Community Technology Centers (CTCs) so that there is at least one CTC in every congressional district. CTCs help residents with technology issues, from job training, to computer literacy training, to community service. In large districts-particularly in rural, low-income, and minority areas-there should be more than one CTC. Overall, resources should be targeted to rural, low-income and minority communities. Government should also help small nonprofits select and use information technologies. B. Provide Federal Funding for Community Based Organizations Create a continuing national grant program based on the National Endowment programs to help them with general support needs and to improve quality of life in our communities. C. Increase Philanthropic Support of Grassroots Initiatives The President should use his "bully pulpit" to promote increased philanthropic support for community-based organizations. He should also consult with charities, foundations, corporations and other donors to build support for grassroots activities-particularly those dealing with social justice.
VII. STRENGTHEN NONPROFIT ACCOUNTABILITY Support efforts to improve the public's understanding of nonprofits' work, and strengthen tools to hold organizations accountable for their actions:
    A. Require Greater Disclosure of Nonprofit Activities Improve the quality of information requested in IRS Form 990 so that data collected is more meaningful for accountability purposes. Make this information more accessible to the public through use of the Internet. B. Improve Access to Information about Nonprofit Services The Federal web portal, FirstGov, should be linked with state and local governments and with nonprofits providing government contracted services. The public can learn about services provided by government and nonprofit partners no matter where they live or where they travel. C. Improve IRS Enforcement of Tax Laws and Regulations Strengthen enforcement of tax-exempt rules to help build public trust in the nonprofit sector. Ensure that enforcement does not threaten, limit or chill nonprofit advocacy and robust public debate.
Acknowledgements Survey Results and Text List of Advisors Methodology
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