March 16, 2011

NPR Debacle Raises Questions for All Nonprofits

The Veritas Project

The embarrassing secret tapes showing high-level fund raisers at NPR making inappropriate comments didn’t just break the trust of radio listeners across the United States. They also risked breaking Americans’ confidence in all of the nation’s nonprofits and in the process charitable organizations use to solicit big gifts.

They also raise tough questions about nonprofit governance and management—and about how the government decides whether nonprofit organizations serve the public enough to deserve tax-exempt status. Project Veritas, the organization that conducted the covert taping, is now applying to the Internal Revenue Service for charitable status.

The NPR debacle began when Project Veritas released a video showing Ronald Schiller, NPR’s chief fund raiser, telling two potential donors that the Republican Party had been “hijacked” by the Tea Party, which he said was filled with “seriously racist, racist people.”

It turned out that the men Mr. Schiller talked to were not from a Muslim charity, as they said they were, but from Project Veritas, which wants to end federal support for public broadcasting. It also turns out that the tapes were selectively edited, but even NPR has called the comments “egregious.” The appearance of the video prompted Mr. Schiller to resign immediately. It also prompted the resignation the next morning of his boss, NPR’s chief executive Vivian Schiller (no relation).

The following day, NPR, as well as fund raisers across the United States, got another black eye when a second tape was made public.

That tape showed Betsy Liley, NPR’s senior director of institutional giving, answering a question about whether a donation could be concealed from government auditors.

“I think that is the case,” she said, “especially if you were anonymous, and I can inquire about that.”

The implication was that a donation could be kept secret from the IRS.

Both Ms. Liley and Mr. Schiller were set up. No one disputes that.

The issue, as far as James O’Keefe, founder of Project Veritas, was apparently concerned, was how liberal NPR is—the so-called prospective donors were people pretending to represent Muslim interests, after all—and if it takes a little subterfuge to bring out the truth, then so be it and God bless America.

Even before the tapes were made public, NPR was in Congressional hot water. Among many Republicans, NPR is considered to be a bastion of untamed liberal rhetoric and needs to be brought down. The way to do that: Cut off its government money.

But Congress’s support is financially insignificant to NPR. Direct government grants aren’t even a rounding error; for NPR, according to its 2008 informational tax return, direct federal grants represented about three-tenths of 1 percent of its budget and eight-tenths of 1 percent of its private donations.

Gifts from the Corporation for Public Broadcasting, which also received government support and through which NPR receives almost $3-million, are also not a big deal; just about 3 percent of the NPR budget.

When Mr. Schiller asserted on the tape that NPR “would be better off in the long run without federal funding,” he may well have been saying what many people would agree with: that the loss of federal aid would remove a significant arrow in the quiver of conservative criticism.

Even $3-million, however, is certainly less than the amount of government money that finds its way to NPR via the tax deduction. If the average of all deductions for gifts to NPR amount to, say, 20 percent, the $45-million in nongovernment support in 2008 represented about $9-million of indirect government aid.

But the symbolism of direct government support of a non-commercial enterprise is enormous. If Congress does eliminate money for public broadcasting, the ideology of reactive conservatism will gain the upper hand (not that it is ineffective now).

Also gaining more influence than he deserves will be the manipulator of the sting operations, Mr. O’Keefe, who calls himself an “investigative journalist,” on Project Veritas’s Web site.

But he is not a journalist. His goal appears to be to expose on tape only what he doesn’t like about those he disagrees with politically. Someone with a recent college degree in philosophy, as he has, should know better than to confuse that effort with journalism.

Mr. O’Keefe is now applying for tax-exempt status for Project Veritas. There is irony in this: Mr. O’Keefe says he wants to “expose corruption,” yet his actions to date are all about opposing only organizations whose ideology he doesn’t like.

For him, it’s not about achieving an “ethical and transparent society,” as he claims on the Web site, but about playing gotcha in a manner befitting a 26-year-old with unbounded ego and little wisdom.

Transparent? The lad makes his mark solely by deceiving people. (And only naïve arrogance would allow him to believe he could create credibility by borrowing the word adorning Harvard’s crest to use it as his group’s name.)

If he is so concerned about transparency, why, for example, has he never investigated the Koch bothers, who are secretly spending many millions of dollars to change not only the political landscape but the charitable landscape as well?

Given the IRS’s propensity to approve almost every application under the sun—only about 2 percent of all applications are rejected—chances are depressingly excellent that Project Veritas will soon be knocking on your door for tax-deductible donations.

  • How could a legitimate fund raiser consider accepting a $5-million gift, which is what was purportedly on the table, with no cultivation?
  • n What kind of fund raiser would go to such a meeting without first conducting research on a group of people who said they wanted to donate millions of dollars to an organization?

  • Why would someone ask about keeping his or her donation a secret from the government?

While it would be absurd to automatically connect a Muslim group with illegal activity, in these times the legitimacy of the gift offer should at least have been examined more closely.

As the so-called donors were practically begging for favors, NPR’s solicitors would have been wise, as well as practical, to have kept in mind what happened to Acorn and Planned Parenthood, two other victims of Mr. O’Keefe’s sting operations.

That’s, of course, in addition to the Juan Williams fiasco last October, when NPR fired the commentator for saying on a Fox News program that he got nervous when people dressed in Muslim garb boarded a plane with him.

During the very height of public discussion regarding government support, why could it not occur to some very senior people at NPR that an explosive bullet, disguised as a softball, might be sent their way?

Vivian Schiller, although she had no prior knowledge of what would be said in the solicitation interviews, said she resigned as chief executive because “the buck stops here.”

That was a noble gesture, and probably the best decision given the political landscape. But the NPR board needs to take responsibility too.

Part of being a member of a nonprofit board means stepping up and actively taking part in developing policies, especially ethics policies, that send the word throughout the organization that such behavior will not be tolerated.

It could be argued that no one could have predicted an encounter such as the one with the people who pretended to be Muslims, but that would be a lazy response. Given the facts of the last half year, as well as NPR’s place in the public’s—and Congress’s—consciousness, NPR cannot argue ignorance.

The most effective defense of all is not that a couple of rogue employees strayed from NPR’s ideals but that policies were in place—thoroughly developed and thought-out policies the board issued and that everyone knew about.

It seems like that wasn’t the case at NPR. And it isn’t the case at most nonprofit organizations. The most damning aspect of board governance at many organizations is that a head-on examination of ethical decision-making takes a back seat to almost everything else.

The most effective action now—and one way to determine how serious the NPR board is about its responsibilities—is to immediately develop such policies and ensure everyone knows what they are.

Doug White is academic director of the Heyman Center for Philanthropy at New York University and author of The Nonprofit Challenge: Integrating Ethics Into the Purpose and Promise of Our Nation’s Charities (Palgrave Macmillan).