A Volunteer-Run Organization, Missteps, and Whistleblowing
(Part 2)
Like HomeFirst, the St. Vincent de Paul group in East Palo
Alto had potential issues in its relationships with donors and volunteers.
Few nonprofits report the results of their activities[1]. HomeFirst and its competitors told stories
about what they did, but they left out any systematic descriptions of
impacts. HomeFirst had staff who could
have reported its program results, but it chose not to do so. On the other hand, the company made available
on its website several years of audited financial statements and income tax
filings. Those financial reports did not
clarify how money was spent in its various programs, but the mandated reports
were present.
In contrast, SVdP made no public reports at all of its
activities. No stories, no results. It did not broadcast the number of clients it
served; most volunteers were unsure even of how often deliveries were
made. As a program of the regional SVdP
organization, whose tax identification number granted its donors tax
deductibility for their contributions, the group did not provide financial
reports. SVdP in East Palo Alto had no
paid staff, who might have the time for such reports. It was up to the volunteers to decide based
on what they saw whether the organization was still worth their time and
whatever monetary contributions they made to it.
Like HomeFirst, SVdP relied on its reputation and its
donors’ faith that it was doing good work with the resources they
contributed. One method for projecting
that nonprofit reputation is the for-profit marketing technique of branding[2]. HomeFirst changed its name from Emergency
Housing Consortium and EHC LifeBuilders in hopes of achieving a successful rebranding. The SVdP brand,
though, is well-established and needed no revision; it was good enough to draw donations from local Catholics.
I had joined and contributed money to both HomeFirst and
SVdP based on my faith in the good I supposed they did. I lost my faith in HomeFirst over a number of
years as it resisted examining its results, it failed to address the compliance
issues I raised, it avoided facing its financial situation, and it fired me for
disclosing what I believed were legal violations. My disillusionment with HomeFirst bled into a
cynicism about all charities, now including SVdP.
HomeFirst employees, SVdP volunteers, and those of us who gave
money to either organization offered our resources despite the absence of
information and the signs of something amiss.
At HomeFirst, I jumped off the team when I perceived mounting problems,
but most others stayed the course. At
SVdP, I finally cut my contributions, but I remain a volunteer who gently
suggests to George, our leader, that maybe we should rethink some things. The group does enough good, I figure, and my
cost in retirement is not so great.
The SVdP case raises a third question: when should a charity
go out of business? Charities sometimes
shut down because their violations of the public trust are especially egregious. They
may fail because they run out of money
or volunteer energy. And they may, if rarely,
go out of business because their services are no longer needed. SVdP holds so much money that it seeks new
ways to use it responsibly, and its errors are not egregious.
The group has volunteers willing to deliver, but its energy
to resolve the problem of decreased activities seems to be missing. The falling number of deliveries and the
ample supply of other nonprofits who can do what SVdP has done for years argue
that the group should consider going out of business at some point.
One charity can effectively shut down by merging into
another charity. HomeFirst’s competitor
Innvision escaped financial distress with its 2012 merger into a San Mateo
County homeless services provider, Shelter Network. In mid-2013 while we were having trouble
getting to a balanced budget, HomeFirst CEO Jenny suggested that we consider a
merger. I argued that the idea seemed
like admitting failure, but by the end of the year I also recommended merger. HomeFirst has, though, survived so far
without folding into another company.
The East Palo Alto conference of SVdP might let another
charity take over its activities, but merger is impossible because the group is
not a separate legal entity. All of its
assets legally belong to the $12 million San Mateo County SVdP, which is likely
to find little reason to surrender cash and other assets to a more successful
East Palo Alto nonprofit and report a loss from doing so. Closing the East Palo Alto SVdP would,
consequently, mean the loss of resources in its community, regardless of
whether those resources are well used.
There appears to be no easy exit from this charitable mediocrity.
HomeFirst’s merger or dissolution – in response to
insolvency or failure to perform effectively, for example – could be achieved
through the transfer of assets, contracts, and employees more easily that our
little SVdP operation could do. But
HomeFirst’s management, directors, major donors, and supporters in the City of
San Jose and Santa Clara County would be embarrassed by its surrender and some
might suffer political consequences.
HomeFirst’s situation proves as sticky as that of our little SVdP
operation.
[2]
Kylander, Nathalie and Christopher Stone.
“The
Role of Brand in the Nonprofit Sector.” Stanford Social Innovation
Review. Spring 2012.
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