Covering Nonprofits

Pablo Eisenberg is currently a Senior Fellow at the Georgetown Public Policy Institute. Prior to his coming to Georgetown in January, 1999, he served for 23 years as Executive Director of the Center for Community Change, a national technical assistance and advocacy organization working with low income and minority organizations and constituencies throughout the country. In addition, he has published many articles and chapters of books and has been a regular columnist for The Chronicle of Philanthropy for the past seventeen years. His book, Challenges for Nonprofits and Philanthropy: The Courage to Change, was published by the New England Press and Tufts University in December of 2004.

Editor’s Note: Pablo Eisenberg is a long-time observer and critic of the nonprofit sector. Carnegie Corporation offered him this space to explore his major concern about how the continuing decline in the number of newspapers being published—and hence, the dearth of investigative journalism focused on all areas of society, including nonprofits—has impacted accountability in the independent sector. And as they say, these are Mr. Eisenberg’s views, not necessarily those of the Corporation.

The potential demise of daily newspapers and investigative journalism is arguably the biggest threat to the future of our nonprofit sector.

For the past twenty years, the media, notably print journalism, has assumed responsibility for keeping our nonprofit organizations publicly accountable and somewhat in balance, tempering their problems and excesses through the power and threat of information and exposure.

No other institution has had a similar impact. The Internal Revenue Service, which is supposed to oversee and police the nonprofit sector, has had neither the resources nor the will to do the job effectively. State attorneys general charged with a similar responsibility at the state level do not have the money or staff to provide adequate oversight. And self-reform, the cure-all championed by a self-indulgent nonprofit community, has been a miserable failure, if only because its advocates have never been willing to implement any serious self-reform measures.

What has been particularly impressive about the newspapers’ coverage of the nonprofit field has been their influence on policymakers. Past scrutiny has led to investigative hearings and action by the Senate Finance Committee; changes in state regulatory measures; a more critical examination of nonprofit hospitals, big art donors’ tax benefits and the practices of public university and college foundations; increased scrutiny by state regulators; and pressure on the IRS to improve its audit and enforcement procedures.

Nor should one downplay the deterrence factor of media attention. Nonprofits have been increasingly sensitive to the watchful eyes of newspapers analyzing their budgets, compensation policies, potential conflicts of interest and governance practices. While difficult to measure, these watch- dog efforts have made a real difference in preventing undesirable practices and causing institutional changes in behavior.

We should not forget that only a few years ago both the foundation and nonprofit worlds were racked with scandals. The investigative stories of major newspapers such as the Boston Globe, the Washington Post, the San Jose Mercury News and the Los Angeles Times uncovered malpractices at hundreds of foundations and nonprofit groups, ranging from inappropriate expenditures, self-dealing, conflicts of interest, excessive compensation, board ineptitude and the lack of public accountability. Faced with these facts, the Council on Foundations, Independent Sector and other trade associations could no longer offer the lame rationale that there were “only a few rotten apples in the barrel.”

While the nonprofit and foundation worlds appear to have improved since then, as evidenced by fewer headline-making corruption cases, it is difficult to attribute this development to any substantial changes in the way in which the sector conducts its operations. Today, unfortunately, nonprofit organizations and foundations are still beset by the same wide range of serious problems and challenges they faced several years ago. Local newspapers continue to report inappropriate and dishonest activities by nonprofits in communities throughout the country. Every month, the Nonprofit Imperative, a newsletter devoted to such abuses, lists dozens of nonprofits whose malpractices has been identified by the media. The improprieties and scandals have not changed, and the nonprofits involved continue to undermine public confidence in our charitable organizations.

What has changed is that many daily newspapers have abandoned their investigative teams, cut their reportorial staff and narrowed their focus. They are no longer paying as much attention to the nonprofit world that they covered so conscientiously a few years ago. For the nonprofit community, the pressure for accountability is being relaxed. The heat, in short, has been turned off.

To understand the seriousness of the crisis, one only has to look at the numbers. Daily newspapers declined from 1,600 in 1990 to 1,422 in 2007. Recently, both the Rocky Mountain News and the Seattle Post-Intelligencer closed their doors, while the Detroit Free Press, the Detroit News and the East Valley Tribune in suburban Phoenix stopped printing several days of the week. The New Haven Register, the Hartford Courant and the San Francisco Chronicle

are in deep financial trouble. Both the Chicago Tribune Company, publisher of the Chicago Tribune, and the Minneapolis Star-Tribune went into bankruptcy early in 2009. Publicly traded newspaper stocks lost 83 percent of their value in 2008.

According to the State of the News Media, 2009, published by the Pew Project for Excellence in Journalism, approximately 8,300 professional newsroom staff lost their jobs during 2007 and 2008. Daily newspapers have lost 17 percent of their newsroom staff since 2001. Many newspa- pers have either eliminated or drastically reduced their over- seas bureaus. To make matters worse, the layoffs and buyouts of newsroom staff have stripped the dailies of many of their most capable reporters and editors. These reductions are serving as a disincentive to investigative journalism. Under pressure to cover a lot of news with fewer people, newspapers are not giving their reporters the time and resources for sustained investigative work.

By Pablo Eisenberg

The decline in daily newspapers and the reduction in newsroom staff, especially investigative reporters, is a worrisome development. As Charles Lewis, founder of the Center for Public Integrity, a Washington-based center for investigative journalism, notes, “Never in our lifetime has there arguably been a greater public need for independent, high-quality journalism in the United States.” Not only will this turn of events have potentially disastrous consequences for the accountability of the nonprofit sector, but it will reduce the quality of public information so essential to an informed citizenry…the heart of a vibrant democracy. The Project for Excellence in Journalism recently stated the problem succinctly: “The press is no longer gatekeeper over what the public knows.”

It is not likely that we will see a resurgence of the old quality journalism. Declining circulation, reduced advertising revenue, an increase in online journalism and the demands of Wall Street have put growing pressure on news- papers to cut costs and retrench rather than invest for the future. Though still earning pre-tax profits between 12 and 15 percent* newspapers are finding that this is not adequate to satisfy investors or owners who view journalism simply as a business to make money, not as a means to inform the public and fulfill broad social purposes. The days of the old media visionaries and risk-takers like Adolph Ochs, Joseph Pulitzer and George Barry Bingham are gone.

One might have hoped that the growing number of blogs and centers for investigative journalism could have begun to fill the gap left by the withdrawal of newspapers from covering the nonprofit world. But that has not happened. The profusion of blogs is too diverse and unfocused, lacking any quality control, to provide a reasonable overview of nonprofit activity. And the major centers for e Center for Public Integrity and Pro Publica pay little attention to the nonprofit world.

The crisis in accountability in recent years has become all the more acute as the number of operating nonprofits has grown enormously and the sector has assumed even greater responsibility for society’s well being. Public expectations are greater than ever. Public confidence in their performance and integrity is, of course, the key to nonprofits’ ability to raise money. While most nonprofits are honest and transparent, the small number that are not can stain the reputation of the entire field. That is why there must be oversight mechanisms to ensure that both nonprofit organizations and philanthropic foundations operate ethically and effectively. The loss of daily newspapers and the investigative journalism they have traditionally provided will make this task much more difficult.

What can be done to address this dilemma? One answer would be to save daily newspapers by converting them into nonprofit entities. Nonprofit ownership of key papers could infuse journalism with the energy, integrity, quality and stability that it so desperately needs. And it could insure the continuing oversight of nonprofits and foundations.

The New Hampshire Union Leader, the Associated Press and the Delaware State News have operated as nonprofit enterprises, while the St. Petersburg Times, a successful for-profit newspaper, is owned by the nonprofit Poynter Institute which provides the paper with insurance against the harsh pressures of the market. With an infusion of new money, backed by endowment funds, a number of failing daily newspapers could be restored and their former capacity for investigative reporting rebuilt.

Such a task is a great opportunity for very wealthy Americans and our large foundations to have a really huge impact on our society and democracy.

It is surprising that, as yet, neither big individual donors nor major foundations have shown any interest in reviving American newspapers and quality journalism, even as billions of dollars are being poured into arts institutions, universities and health facilities. It’s hard to believe that philanthropy could have neglected such an important priority, and one can hope that steps will soon be taken to preserve an independent and vibrant press—the backbone of American democracy.

There is still time to take action before more ailing news- papers fail. A strong Philadelphia InquirerHartford Courant, or Atlanta Journal-Constitution, with ample endowments to withstand the shock of hard financial times, would not only be a boon to our society but might also motivate some newspaper owners to revert to old times when running a news- paper had a social purpose and was more than a business.

Just as our nonprofit community is endangered by the diminishing strength of an outside force like journalism, it is also imperiled by an invidious internal disorder—the crumbling of its intellectual foundation.

Few nonprofit practitioners have devoted much, if any, time to thinking and writing about what they do, what problems the sector faces and what must be done to meet the challenges of the next 25 to 50 years. Introspection and critical analysis are at a premium. Unfortunately, academic scholarship, while sometimes useful, often lacks the practical understanding of the ways in which nonprofits really operate. In short, the nonprofit field is intellectually moribund.

Though many practitioners in both operating nonprofits and foundations lack the confidence to write and publish, the major obstacle they face is simply the lack of access afforded them by the news media, trade associations and the few publications that cover non-profit organizations. Only a very few outlets are open to them. This needs to change if the sector is to achieve the vision and sense of purpose it so desperately requires.

One small step in this direction would be the creation of an independent magazine that could publish articles by practitioners eager to air their ideas and suggestions. Such a development might encourage nonprofit associations and organizations to establish other vehicles for public discussion and debate. It and other outlets could galvanize the type of thinking and analysis the sector lacks. They could unleash the brainpower lurking in the collective nonprofit mind.

To resuscitate the nation’s daily newspapers and to kindle an intellectual bonfire in the nonprofit community would take a great deal of energy and effort. It also would take a lot of money. But there is plenty of money available, if only our very wealthy donors and foundations are willing to put it to good and vital purposes.

For those who owe their wealth to the opportunities afforded them by our open society and democracy, could there be a more important priority than preserving the vibrant press that is an essential element of a democratic society? And for foundations committed to serve the public interest, what better purpose could there be than strengthening our most cherished civic institutions? Unless major donors wake up to the desperate needs of these endangered institutions, we may well see the end of quality journalism and the decline of the nonprofit sector due to lack of accountability. This would be a grim future indeed; a collective failure that no one would want as a legacy for our nation.

According to “The Newspaper Industry Today,” a paper by Mort Goldstrom presented at a March 2009 meeting of newspaper executives and avail- able on the web site of the Newspaper Association of America (, “Many newspapers have dropped from a 30 percent margin to maybe a 10 to 15 percent margin.” However, other indus- try observers such as Brian Tierney, pub- lisher of the Philadelphia Inquirer, note that local markets may be faring worse in terms of earnings. In September 2009 he told The Biz Blog of PoynterOnline that “…Philadelphia newspapers stand to make about $10 million or $11 mil- lion this year, a meager profit margin of roughly 3 percent.”

Defunct Newsletter that Summarized Some Coverage of Nonprofits