Nonprofit groups hurt by bad press for one

A small neighborhood nonprofit squanders more than $1 million on political polls, power tools, vacuum cleaners and a bulldozer, all on behalf of a powerful political sponsor.

Federal prosecutors see a crime. Tish Mogan, sadly, sees slander.

"I read the blogs, and it is all out there, how nonprofits are all corrupt," said Mogan, of the Pennsylvania Association of Nonprofit Organizations. "It is such a horrible picture of the sector."

Horrible and, she and others are quick to point out, terribly skewed.

Of all the potential victims of whatever crimes may have been committed by State Sen. Vincent J. Fumo, now on federal trial, the nonprofit world may have suffered the broadest affront.

Almost daily, there have been new and unseemly revelations of how Citizens' Alliance for Better Neighborhoods, a small South Philadelphia nonprofit group, used its funds to benefit Fumo. And with those revelations have come the inevitable raised eyebrows and smirks from the skeptics.

"There is absolutely a spillover effect," said Laura Otten, executive director of the Nonprofit Center at LaSalle University's School of Business. "One bad apple can mean, for some people, we are all bad. Whenever there is a nonprofit in the headlines this way, there are going to be some people who read it and say, 'Why should I give you any money? You are just like all the rest.' "

The irony, according to those who know the sector, is that there is far more oversight for nonprofit organizations than there is for private for-profit companies.

Nonprofit groups, for instance, are required to make public their filings to the Internal Revenue Service.

"If you want to make businesses more tax-compliant, make their tax returns public like nonprofits'," said Don Kramer, a Philadelphia lawyer specializing in nonprofit law.

Kramer pointed out that much of the Citizens' Alliance alleged misdeeds were extensively reported by The Inquirer largely on the basis of public financial records the nonprofit group was required to file with the IRS.

In the last year, the IRS has raised the ante by now requiring nonprofit groups to expose more of their inner workings. For instance, they must report, among other things, whether the organization:

Has a whistle-blower policy.

Has become aware of "a material diversion of the organization's assets."

Has a process to determine compensation for key employees.

As a result, many nonprofit organizations have taken actions to assure they can answer the new questions in the most positive fashion; no one in the business of asking for money wants to appear anything but above board.

Which goes to the heart of the advice Otten and others give when it comes to how a nonprofit group should operate if it wants to maintain its reputation.

"Transparency and accountability" are the two watchwords repeated like a mantra.

"Smart nonprofits are aware it can be an uphill battle convincing people out there that they are very good, credible organizations," Otten said.

To help nonprofit organizations avoid pitfalls and maintain the best practices, the Pennsylvania Association of Nonprofit Organizations (PANO) has adopted an ethics and accountability code - Standards for Excellence - patterned on a similar code established by the Maryland Association of Nonprofit Organizations.

One reason cited by PANO for the code is that "public scandals" involving nonprofit organizations "threaten the reputation of the entire nonprofit sector."

PANO provides a training and support program that enables participating nonprofit groups to earn a certification that they meet all of PANO's 55 standards.

The program is run by Mogan, which explains her personal response to scandals involving nonprofit groups.

"There are so many regulations and management practices that are unique to nonprofits, and there are a lot of people who get into nonprofit work who don't understand them," Mogan said. "The Standards for Excellence is a succinct program that lays them all out in an understandable, orderly fashion."

Gregory L. Lindemuth, vice president of finance of the Williamson Free School of Mechanical Trades in Media, went through the program and found that even a well-run, long-established nonprofit organization such as Williamson can benefit.

"We felt we were employing the best practices," he said. "But it was just us looking in the mirror and saying, 'Gee, we're doing pretty well.' You know where that gets you."

A big believer in the program is State Sen. Shirley Kitchens, of the Third District, in North Philadelphia, who is sponsoring an introductory session for nonprofit groups Jan. 29.

She said her interest was pragmatic: She has discovered there are a great number of nonprofit organizations in her district whose practices, often simply out of ignorance, are not up to the standards.

"The bottom line is, they are not going to get funding, and the community is going to suffer," she said.

"That is what every nonprofit needs to know: If they are not operating in a professional manner, it is going to affect their funding. If they are not up to par, they are not going to get money."