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How the State of the Union Showcases Trouble for the Government-Mandated Governance Structure

The hundreds, if not thousands, of nonprofits and collaborations that are similar to CAPs should definitely take notice.

My ears perked up when in President Obama’s State of the Union speech he mentioned cutting community action programs (CAPs), stating, “I’ve proposed cuts to things I care deeply about, like community action programs.” CAPs have long dealt with the threat of cuts, but mostly from Republican presidents, and so the specific mention by President Obama should give CAPs real cause for concern.  You know times are tough when a Democratic president who has a history of serving the poor aims to cut a long-serving poverty program.

For those unfamiliar with CAPs, they were one of the great social innovations of the 1960’s, initiated by the late Sargent Shriver as a part of the War on Poverty. Today, according to the Community Action Partnership, the Community Action network serves nearly 17 million people living in poverty in the United States, with most of its participants having incomes below 75 percent of the federal poverty threshold ($9,735 for a family of three). Over half of this work is done in rural communities, and a local CAP effort could include a “Head Start program, weatherization, job training, housing, food bank, energy assistance, financial education, or any of the other 40+ distinct programs.” 

While many programs may find themselves in real trouble due to the current state budget crisis and the national dialogue about federal level cuts, the organizations that may be hardest hit will be those efforts that have board structures required by a federal grant or law.  For example, a CAP board structure is required to have at least one-third of its representatives be from the low-income community, exactly one-third be elected public officials and the remaining representatives be from the private sector. 

While the practice of having under-represented populations serving on boards is a good one, the challenge with the above groups is that their governance structures are largely ineffective.  The main reason is that these groups were created around, exist for and are dedicated to government funding.  While most boards are supposed to be monitoring and obtaining organizational resources, government-mandated boards only worry about monitoring the resources and are not accountable to obtaining additional funding. 

Last week I presented at a conference in Washington, D.C. for federally-funded disability groups who had the same federal requirements as CAP programs, and two-weeks earlier I conducted a national webinar for federally-funded mental health collaborations where the collaborative memberships were mandated by grant guidelines.  The topics I covered at the above conferences were either the changing dynamics in the nonprofit sector due to the economy or renewed strategies on resource development for nonprofits. 

In all of these sessions, dozens of board members and executives from these groups asked question after question on getting ahead of the economic or state budget crisis or rapidly creating mechanisms to obtain new funding.  I asked a couple of these groups, “Why the sudden rush” and the common response was that they cannot be as reliant on government funding in these times and that the board needed to become more of an asset in obtaining these funds. 

Although CAP was the only nonprofit-related entity discussed in the State of the Union, the mention made me think of the thousands of organizations and collaborations that have been created out of a government funding stream and how vulnerable these groups are.  As President Obama is scheduled to release his budget on February 14th, his YouTube interview following the SOTU again specifically called out CAP efforts stating, “Frankly, we’re just going to have to trim some of these programs”.  David Bradley, head of the National Community Action Foundation, in the Wall Street Journal, stated “I knew it was going to be a bad budget. I had absolutely no idea that it was going to be singled out in the State of the Union….This was theoretically a liberal, Democratic president who said he liked the program—and threw it overboard.”  While this may or may not be true, the elephant in the CAP room is that their network is unprepared after forty years of existence.  Other networks are probably similar.

Predictably, many local CAPs are really going to struggle due to these cuts and one of the main reasons will be that these organizations are ill-prepared to deal with the changing dynamic.  One of the main reasons for this struggle is the unfortunate fact that the boards of these CAPs are not aligned with one of the most central duties of a board: obtaining the necessary resources to sustain its mission.  With little time to change their organizational DNA, the impact on 1100 CAP efforts affecting approximately 17 million people throughout the United States will be more significant. 

The hundreds, if not thousands, of nonprofits and collaborations that are similar to CAPs should definitely take notice.

Writer’s Note: I should state that I have a longtime understanding of Community Action Agencies (CAA).  My family was a beneficiary of its services; I have worked for a Community Action Program (CAP), I helped create a CAP in Northern Virginia, have spoken at a national Community Action Partnership conference and have consulted dozens of CAP efforts throughout the United States. 

Read more stories by John Brothers.

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COMMENTS

  • BY Tawny Stottlemire

    ON February 4, 2011 04:20 PM

    Thank you for highlighting the proposed threat to the Community Services Block Grant (CSBG) and potential devastating impacts on low-income people in America’s communities.  With respect to your conclusion that CAA boards don’t fundraise, however, I’d like to point out that in 2009 (the latest data nationally available) Community Action Agencies across America leveraged $6.54 for every single dollar of CSBG funding they received.  Those dollars represent state, local, private, and volunteer resources.  If additional Federal dollars leveraged are added to the mix, CAAs leveraged $20.31 per every $1 of CSBG.  Most NPOs could do more to diversify their funding base and CAAs are no different.  But the problem CAAs will face is not boards that don’t raise resources or non-diversified funding bases.  The problems will stem from losing the unique support of CSBG for programs and services that could otherwise never be delivered in our communities.  Sadly, an increasing number of private and even government funding sources are willing to pay for part of a service, but not the whole cost associated with making the service available and accountable.  A foundation may be very willing to support stipends for participation in a job training program, but refuse to pay for the staff person to deliver the job training services or rent for the building where the training occurs.  A funding source may require extensive reporting and accountability for the resources received, but make no funds available to support the administrative structure necessary to keep the books in order and file the required reports.  CSBG fills the gaps and provides resources for direct services to the poor, allowing more community programs to be offered and more dollars leveraged than would otherwise be available.  The tripartite board structure is a unique and beneficial part of ensuring the programs are truly reflective of the needs of the local community. It is a strength of Community Action and should be embraced as such.

  • BY Carolyn Sullivan

    ON February 4, 2011 04:33 PM

    Ms. Stottlemire,

    May I get the source of the statistic about CAAs’ leveraging of CSBG dollars?

    Many thanks,
    Carolyn

  • BY Denise Harlow, CEO NYS Community Action Associatio

    ON February 5, 2011 04:45 AM

    Time, Talent, and Treasure is the old board adage.  If board members give of their time (preferably to cultivate donors); Talent (preferably to host house parties, events, and develop other fund raising skills); and Treasure (give or get that big check every year), they must be doing their job. 

    While I agree that government dictated board structures have their inherent challenges, the Community Action Programs’ (CAPs) tripartite board structure (as discussed above) offers much more accountability to the legal board responsibilities of Care, Loyalty and Obedience than the often sought-after fundraising board. 

    Backing up for a moment, contrary to your initial argument, CAP boards govern organizations that are actually quite adept at gaining community support.  Before they raise a penny of vital “discretionary” fund every nonprofit must have today, they must raise a 25% match to their federal Community Services Block Grant (CSBG).  For example, in New York, if a CAP receives the base CSBG allocation of $225,000, they must raise more than $56,000 before they can raise anything else.  CAPs do this effectively and meet this through one of the key tenants of Community Action (and good fund raising tactics), community partnerships.  During the federal stimulus period, CAPs received additional CSBG resources and had to find additional local matches in order to access the money; a struggle to do in a short period of time in communities with shrinking resources-but they did it.  In addition, most CAPs in New York also run a Head Start program.  Again, before they can raise a penny of the almighty discretionary dollar, they must raise a 25% local match, an ever increasing difficult task.  To see the community support and partnerships that help CAPs get to these significant donations is tremendous, but to ignore the work it takes to garner such support discounts the role such partnerships and relationships have in overall fund development.

    Board governance is about accountability and oversight.  In Community Action, the nonprofit board duties of Care, Loyalty and Obedience are strengthened through the tripartite board structure and embody the spirit behind the letter of the nonprofit corporation law.  Having worked in the governance arena for several years, there are many boards of directors where the check trumps all.  How often are by-law requirements for board attendance ignored (for years) if the board member is a large donor or brings in big money?  How often does the board that has a big “give or get” number for members ensure that all board members get regular board training or are called to task to understand the nonprofit’s financial position?  CAP boards take great care with the organization-they are rooted in the “reasonable persons standard”- and are deeply loyal to the organization.  1/3 live in the community the CAP serves, have neighborhood groups to report to, and understand the challenges of serving low-income communities; 1/3 have an elected position in the community they serve and are held accountable by voters if they are do not take great care or are disloyal to their community; and the remaining 1/3 are private citizen who believe in the need for communities to provide opportunity and hope for all residents.  And coming to Obedience; as you note, Mr. Brothers, these boards have to comply with government oversight and in your view are perhaps to focused on this part of their role.  Very few other nonprofit boards have such mandated organizational accountability to a particular funder; in New York, CAPs are visited by program monitors four times a year and every three years receive a comprehensive organizational review.  All of these reviews require oversight on board performance as CSBG is concerned with organizational capacity, not a singular program’s performance.  So yes, CAP boards are focused on accountability and oversight of agency resources, most of which are public dollars as you note.  They take this legal responsibility very seriously.

    Do CAP boards struggle?  Yes, and so do the boards of all sorts and sizes of nonprofits, for-profits, school boards, and faith-based institutions.  The CAP tripartite board structure is unique.  And it should be noted that many CAP boards do have 100% board participation in fund development.  Many CAPs have fund development committees and advisory committees focused on discretionary fund raising.  More and more CAPs are engaging in fund raising.  And yes, after an 18 member board has its six low-income member and six elected official slots filled, that only leaves six more slots for community members that may have more opportunity to “give or get” those big checks.  By the way, did I mention that Head Start regs also now mandate that legal, fiscal, and early childhood experts also sit on the governing board?  Good practice certainly, but there goes several more of those six remaining slots. 

    Even with these challenges, CAPs raise significant cash and in-kind contributions to meet community needs and to strengthen the organization.  With today’s late government contracting and payment culture, CAPs couldn’t survive without a cash reserve and discretionary resources.  In addition, holiday baskets, coat drives, furniture programs, clothing closets, food pantries don’t fill themselves.  Do we want board members who can write us the $10,000 check or host the event that can raise $100,000?  Yes.  But the importance of good board service goes so far beyond the “treasure”, we will take Care, Loyalty, and Obedience first.

  • BY Tawny Stottlemire

    ON February 6, 2011 08:22 AM

    Carolyn:  The leveraged dollars source document is the 2009 CSBG I.S. Report. This national compilation of outcomes from CSBG is produced annually by the Nat’l Assn. of State and Community Services Programs and is available online at http://www.NASCSP.org .
    - Tawny

  • BY John Brothers

    ON February 6, 2011 04:01 PM

    Thank you all for your posts.  Great dialogue.  No disputing that the CAP board can be a source of strength, my experience states that in recent times it can also show real challenges in the governance structure of these types of nonprofits.  In response, and my inter-workings with CAPs and other groups that are similar, these groups are drawing from other government sources to meet the match (which will be hugely more difficult to manage as state budgets take longer and longer to pay) and that the wiggle room needed and can be obtained by private funds is not in these groups DNA.  The sources that you speak of to pay for admin is exactly the muscle that CAPs would need to have to strengthen to pay for the non-program services.  To do this report, I unofficially looked at the 990s from 10 CAP programs and all of them were 95% or more government funded and had no mechanisms to obtain private funding. This helped prove my sneaking suspicion.

    Respectfully, I would also state, in relation to the data link you mentioned, it is also that my estimation that most of these same groups, at the local level, are not effective at using data and metrics to evaluate their themselves.  Hard for me to embrace your data because I cannot see the proof behind it.  As I look at the document you cite, I think the data points to the reach of the CAP effort but not necessarily the impact.  I find when I speak to CAPs and other similar-type groups, outlining the difference between these is difficult and is why CAPs and other groups are being pushed to the back in relation to the new, social entrepreneurs of poverty alleviation.  I think this is unfortunate but would say that both evaluation and fund diversity is a major reason for this and might be part of the reason for the mention by President Obama in the SOTU.  In my same data analysis, none in the sample group I looked at looked at impact outside of just counting the number of people reached through their services.

    Know that I am a fan of CAP groups, as they served my family, but also see that there needs to be some significant DNA shifts or they will, in my opinion, become dinosaur efforts that are left behind.  I am open to help and donate time to any CAPs (national, state or local) think about how they can make this pivot.  The reason I focused on them specifically is that they were the only nonprofit mention in the SOTU and unfortunately is was a mention that highlights some real concerns about CAPs in the long-term.

  • BY John Brothers

    ON February 6, 2011 07:24 PM

    I also just wanted to highlight the article written for the NY Times today by OMB Director Lew that cites the challenges facing the CAP effort.  He quotes:

    .....“Since they were instituted, community service block grants have helped to support community action organizations in cities and towns across the country. These are grassroots groups working in poor communities, dedicated to empowering those living there and helping them with some of life’s basic necessities. These are the kinds of programs that President Obama worked with when he was a community organizer, so this cut is not easy for him.

    Yet for the past 30 years, these grants have been allocated using a formula that does not consider how good a job the recipients are doing. The president is proposing to cut financing for this grant program in half, saving $350 million, and to reform the remaining half into a competitive grant program, so that funds are spent to give communities the most effective help.”....

    Again, this grant model is similar to the SIF and i3 grants, which is not a process that CAP and other efforts are used to.  I am assuming this immediate shift will be hard for those CAPs that have limited capacity, including resource development and governance limitations.

  • BY Don Mathis

    ON February 7, 2011 11:15 AM

    John,

    Thanks for your article, for stimulating this discussion ,and for your ersonal kind remarks about Community Action Programs (CAPs), .i.e. “they served my family.”  That fact, multiplied by the 20.9 million Americans served by CAPs/CSBG in FY 2009 is really one of the most compelling evaluation aspects of our many program and services.

    I fully understand that evaluation is most rigorous when using control groups, random assigment, and multi-years of collection and analysis.  U.S. Dept of Labor has done that for years for its employment & training progams, spending several millions of dollars annually for reputable firms to produce quality reports.

    Alas, in its 47+ years CAPs have never had that kind of federal govt support for such analysis.  But what the Dept of Health and Human Services has paid for and validated are some extensive outputs which truly do show the value of the services.  If a family eceives emergency shelter rom a CAP, what it meant was that the family was safe, warm, adequately fed and given a stable environment in which it might start to put the pieces of its family structure and lives together.  The fatc that the kids in such a shelter situation don’t eventually go to an Ivy League school (some do) or that the sheltered mom doesn’t become Sr. V.P. at Comcast, doesn’t mean the services were not worth funding.

    For ten years before coming to the Community Action Partnership in 2007, I ran six Boys & Girls Clubs in Maryland, and had 2 Head Start classrooms of 12 kids each about 50 feet away from my office door.  I saw the kids get fed, dental check-ups, have well-staffed classrooms and a great recration area—much safer han the gang hangout directly across the street.  I saw parents and other kd caretakers pick up & drop off their kids and attend training and social events at our B&G Clubs.  The kids were cared for, nurtured, taught rule-following behavior, language skills and other things they might not have gotten.  If those Head Start children score equal to and not ahead of “regular” 3rd graders when they all are in rd grade, does that mean Head Start didn’t have impact?  Spare me.  All I can believe is my own lying eyes.
    Liewise for other CAP programs…homes were made more energy efficient and people warmer (Weatherization Assistance, LIHEAP),  unemployed, dislocated workers got training and found and kept jobs.  homebound seniors got fed and help with their daily living…

    There’s a spirited debate in non-profit and philanthropic worlds whether the demand for evaluation and rigor is becoming too cumbersome, detailed,expensive, time-consuming, etc.  It’s a heathly debate.

    Epilogue—when I asked some HHS officials few months back ,how many of the 1,000 CAPs/CSBG-funded agencies across America could be called “seriously at-risk,” the answer was 24.  Of course, one bad apple is not good or acceptable, but to read OMB director Jack Lew in the NY Times that the programs haven’t proven their worth after 47 years is laughable.  Thank God, Ted Kennedy and Sargent Shriver didn’t live to see the unraveling of the safety net they fought so hard to create and protect…on behalf of the millions of Americans in need.

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