Books

It Is Broke, We Should Probably Fix It: The Nonprofit Model and the Arts

by Alexis Clements on September 4, 2012

One of the first results of our Google Image search for “Nonprofit Industrial Complex.” (via memegenerator.net)

It can be a subtle thing — the way in which an organization or collective comprised of ambitious and purposeful people working toward a clear set of goals starts to slip into something a bit murkier; something that seems to be more about self-perpetuation and outsiders’ goals than about that original impetus to come together. Oftentimes growth is the reason for change. Our society applauds and encourages growth at every level — personal, familial, organizational, economic and political — despite the increased time and resources that growth demands. And many people in the US take the corporate structures of most businesses and nonprofits for granted, without questioning the ways that hierarchical models concentrate power among small groups of people and can easily get in the way of achieving goals and benefits for society.

The book that’s got me thinking about all this is The Revolution Will Not Be Funded: Beyond the Non-Profit Industrial Complex. Edited by members of INCITE! Women of Color Against Violence, a social justice organization working against sexism, racism, and violence,  the book was published in 2007 and follows up on a 2004 conference of the same name organized by INCITE!. The essays are organized into three sections, one that discusses the rise of the nonprofit model, another focused on the ways that nonprofit structures and funding influence and affect those who seek to make change in the US, and a third that puts forth ideas and examples of how to work with or around nonprofits in order to maintain a radical agenda.

The essays draw on the lived experience of those involved in social justice work who have worked both inside and outside nonprofit structures, and each gives very specific examples of the affects that accepting foundation and government money, along with the corporate model they impose, has had on their work. But even if you aren’t actively involved in social justice work, anyone who has been part of, served by, or subject to nonprofits in their life can start to see how the topics of these essays bleed into other areas, and that’s especially true for the arts.

… people in the US take the corporate structures of most businesses and nonprofits for granted, without questioning the ways that hierarchical models concentrate power among small groups of people and can easily get in the way of achieving goals and benefits for society.

Why am I talking about a book focused on radical political work in an arts context? Because I know that for many people there is a lot of overlap between social justice and art (which apparently is starting to be studied and/or proven by research). And also because the arts in the United States today are almost entirely enmeshed within the nonprofit system — young people come out of college after studying the arts as undergrads and immediately form 501(c)3 organizations, some collectives of artists that formed loosely in the 1970s and 80s have grown into powerful nonprofit institutions, and given the government’s near-complete lack of grants to individual artists, in order to get funding for work, artists, almost without exception, have to be at the very least affiliated with a nonprofit entity.

That said, I need to acknowledge that I’m going to be generalizing about some specific experiences and ideas in these essays in order to talk about the arts, and I can’t skip over the fact that most arts organizations, particularly those who receive foundation and government funding, have a long way to even begin addressing the issues that the contributors to this book are working on — i.e. racism, sexism, ablism, economic exploitation, violence, etc. It would be foolhardy to go forward without making that point, and it would be callous to suggest that the only take-away from reading the book is that the nonprofit system is messed up — the primary take away is, in fact, that we, as a country, and as members of the arts community, have a lot of work yet to do toward creating an inclusive and equitable society.

… it’s easy to forget both how young this [nonprofit] model is and that there were other models in place before nonprofits.

So, what are the particular lessons from the book that can be brought into an arts context? I can’t elucidate the history of nonprofits here (not to mention that the history of nonprofits is only barely understood at this point), but it’s useful to remember one thing in particular — nonprofits are, by and large, a product of tax codes created in order for organizations to become eligible to accept government funding, and the nonprofit model as we know it today is largely the result of the Tax Reform Act of 1969, which essentially requires 501c3 (i.e. nonprofits) to operate using corporate structures. That legislation also put some new regulations in place around large philanthropic foundations — remember major funders of nonprofits also operate as nonprofits. Which is to say, 1969 is not that long ago and, given the myopia of the 21st century and the near ubiquity of 501(c)3 organizations in the arts today, it’s easy to forget both how young this model is and that there were other models in place before nonprofits.

Given that, below are some of the most prominent ideas discussed in the book that relate directly to the arts sector today, in an abridged format:

  1. The corporate model imposed on nonprofits forces arts organizations to take on a hierarchical structure, where CEOs and board members hold much, if not all, of the decision-making power within the organization. Which, by the statistics, means that wealthy white folks control most nonprofits — according to the BoardSource Governance Index, 2010, 88% of CEOs and 84% of board members at the less than 2,000 organizations that responded to the survey are white (the National Center for Charitable Statistics estimates that there are, in fact, over 1.5 million nonprofits in the US, so the BoardSource survey represents a self-selected group of less than 0.1% of non-profits who are eager to taut and increase their diversity). This should raise questions about whether or not the people that these organizations claim in their mission statements and grant proposals to be serving are actually represented when it comes to decision-making. In the case of most arts organizations that I know of, based on their mission statement, their constituency is comprised of artists and/or the communities living in and around the place where the organization is located. I’m not going to suggest that all artists or communities are non-white and poor, but I know of very few instances where artists or truly representative community members sit on the board of arts organizations or serve as their presidents.That leads to further questions about who is designed to benefit most from the board and president’s decisions. The poster-boy for enormous conflicts of interest in the arts world today has to be Eli Broad, who seems to be trying to manipulate his way into single-handedly controlling both of Los Angeles’ two major art museums. But it’s also worth contemplating the much less obvious instances of presidents and board members quietly quashing opportunities for those with whom they disagree or driving spending toward programming that reaffirms their position of power and their wealth (i.e. museums that have collections comprised of work almost entirely by white male European artists of Judeo-Christian heritage or so-called community programs that bring those from outside of wealthy communities into an institution to be taught the ideas and prejudicial values of those in power at the institution).
  2. The effort to win and maintain funding can cripple if not completely overshadow the mission of an organization for two reasons: 1) as an organization grows, in order to make enough money to pay for the salaries and benefits of the people who are now part of the staff, programming and fundraising efforts also have to expand, both of which require a huge amount of time and resources; and 2) almost none of the fundraising avenues that provide major support (i.e. tens of thousands of dollars or more) allow any of that money to be spent on operating expenses. These reasons represent an essential paradox of the nonprofit system today — you have to grow in order become a 501(c)3 (you have to create a board and a corporate structure and make yourself subject to annual audits), which means that your expenses go up, but almost none of the money that you’re trying to access by creating that structure will help pay for those increased expenses. Add to that the dramatic expansion in the number of nonprofits in the US over the past couple of decades (see earlier 1.5 million stat) and you inevitably also end up with a dramatic increase in the amount of competition among those vying for the small pots of money in a given field. This leaves like-minded organizations who could form alliances or pool resources feeling an intense need to protect their turf, so to speak, by scrambling to undercut and out-metric one another in the annual reports that tell funders how the money was spent and how many people were reached with that money.Throw in the fact that foundations follow trends and fads almost as readily as your average teenager, changing their funding objectives and programs so quickly that organizations can’t keep up programmatically, and you are faced with a completely unsustainable and fickle funding structure that favors those who can craft the best language each year, above those who do the most work or actually succeed in serving their communities, even if on a modest scale.
  3. Foundation, and much of nonprofit funding, is money that would have been public money but is now maintained and controlled privately. The primary reason that there’s so much money in these major foundations and philanthropies is that wealthy individuals can avoid being taxed on the money they put into them. There’s also the benefit of being able to funnel that money to organizations that will uphold their personal beliefs rather than letting the public do with it as they will. We can all hem and haw about how much we like or dislike the current American political system, but the reality is, as we learn from people like Mitt Romney, the wealthiest people in this country can often end up paying the least in taxes, while simultaneously tucking large portions of their untaxed wealth away into private philanthropic, political and/or cultural initiatives that promote the donor’s personal beliefs and ideals above the beliefs and ideals of anyone who can’t afford to make the same kind of donations — i.e. the majority of Americans.This is where there’s a direct link between the nonprofit industrial complex and the perpetuation of racism, sexism, religious ideology, etc. The government has privatized a huge swath of social services it had begun to handle in the 20th century, which means independent charities and nonprofits are dictating how basic services are provided to the public (for example, education and health care) and who gets to benefit from those services (think about all the attempts to put strict limits around women’s health issues in the past year, think charter schools that have limited admissions policies, think so-called violence-prevention programs that end up dramatically increasing incarcerations, particularly of men of color, and on and on).While it’s tempting to believe that the arts are of universal value, benefiting everyone and so existing outside of or above the problems I just mentioned, when you start digging into the actual work and machinery of many arts institutions, big red flags start to pop up — board members and major donors who lend artwork for exhibition who go on to sell that work for large profits, organizations that don’t pay artists to create work that the organization has been granted large sums of money to present, though they find enough money in those grants to pay salaries and benefits to large staffs, and of course, the persistent and wide-spread under-representation of artists of color, female artists, queer artists and countless other groups from major arts institutions … among a litany of other problems.
  4. By focusing so much time and energy on staying in the nonprofit game (i.e. chasing funding opportunities, filling out annual reports for grants, preparing for audits, maintaining a fundraising staff, etc.), those involved have little to no time or energy to devote to changing the model or operating in a completely different way. This is an extension of the second point, but it’s focused on the fact that once you’re on that nonprofit treadmill it takes an enormous amount of will and energy to either get off of it or consider that you could actually do things in a completely different way. And the competition and isolation engendered by the supposed scarcity of resources trumpeted by nonprofit coverage, ends of preventing colleagues from talking with or helping one another. This came up for me most recently in a video recording of a panel discussion that took place at the Brooklyn Museum that featured six female artists working in performance talking about how they produce their work. A large chunk of their discussion ended up focusing on the fact that some of those on the panel had purposely and specifically opted out of taking the 501(c)3 path, while others on the panel had never heard of the alternative models the others on the panel were employing — in other words, they hadn’t had those conversations before, with each other or publicly.While my primary target in this critique is large nonprofit institutions more than artist-led organizations like those represented by the women on that panel, the lesson their conversation demonstrated applies at every level of the arts. It is crucial to stop and ask if the structure of your organization is enhancing your goals or standing in your way. The tacit acceptance over the past three decades that the nonprofit system is the best one to serve the arts is becoming more and more problematic as the nonprofit industry grows, despite reductions in philanthropy and continued government cuts.

The final section of the book offers perspectives on how some social justice groups navigate outside the nonprofit industry, as well as how others have created blended models that partially incorporate 501(c)3s. All of which prompts some important questions: Why does the nonprofit structure have to mimic corporate structure? Could you work within that structure to place artists and community members on the board and in leadership roles? Are you working to preserve a salary or to pursue a mission? And are your goals served by having to maintain a staff, be subject to the demands of funders, and adopting someone else’s leadership model? Certainly these are difficult questions, but they’re worth asking rather than accepting a status quo that seems to be driving many organizations further from their missions.

There’s much more than can be gained from this book, besides the exposure to the work of the organizations represented by those who contributed for those who aren’t aware of their work, but it’s best to explore the rest through reading.

The Revolution Will Not Be Funded: Beyond the Non-Profit Industrial Complex is available at South End Press and other online booksellers.

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  • Bengalus

    I think your faith in the public will is misguided. After all, the federal government today spends next to no money supporting the arts, particularly the NEA, and an obviously ridiculous amount on defense. The tax deductibility of individual donations to non-profits offers a way to correct this societal misallocation of resources. While the corporate structure you talk about can constrain risk-taking and add unnecessary expenses, I mostly see the opposite among the numerous young non-profit arts groups that I support. The structure encourages accountability and organization while pushing the non-profit’s visionary founders to reach out and create a broader base of support so that their programs have greater impact. The $500,000 a year I have been giving to arts groups amounts to $300,000 from me and $200,000 that otherwise would have gone to taxes and never made its way to the arts. How much money would not be flowing into the arts absent the non-profit structure?

    • alexisclements

      Thanks for your comment, Bengalus. I think we can all agree that the federal government’s funding of the arts in the US is paltry, at best, and that most states don’t do much better–with two of them recently attempting to eliminate all arts funding (unsuccessfully, I should add). And patronage by wealthy individuals such as yourself is not simply a condition of the current arts funding climate in the US, but rather a tradition within the arts that extends back millennia.

      The fallacy that the book highlights is something else entirely–it’s the longstanding and entrenched doublespeak present in the arts (as elsewhere) that is born of the rise of nonprofits. Nonprofits act as charities, doling out services that we believe, or are told, will benefit the public and serve a wide populous. But now, four decades into the nonprofit model as we know it today, it’s becoming clearer and clearer that many nonprofits do anything but benefit a wide and inclusive public. This is particularly true as the nonprofit landscape has dramatically increased while funding has decreased. In the scramble to win the money of wealthy individuals such as yourself, nonprofits are making larger and larger promises about the impact their work will have and also being asked to customize ever-more programs to the particular interests of the donors or foundations granting the money, leaving the core services and operating expenses neglected–hence the doublespeak–they say they serve the community, but the constraints of the nonprofit funding environment make it clear that more often than not they are driven to serve those who provide the money.

      The point is that there is no one-size-fits-all solution. There will always be large institutions funded by major donations and patronage–as has been the case for much longer than the US has been around. The question is whether or not those organizations should truly be considered nonprofits. And on the flip side, we shouldn’t assume that the nonprofit model is the only or the best model. We now know that crowd-funding (Kickstarter, Indiegogo, etc) and other grassroots funding models can be highly successful and are already outpacing government arts funding. Then there’s the Detroit Institute of Arts, which is now literally funded by its community through a fractional tax (who directly benefit through free admission, which they are already taking advantage of in greater numbers than when the museum charged them admission). And on and on. All of which is to say that there are other, and I would suggest, better models available to us than the nonprofit model born of the late 1960s.

      • http://www.facebook.com/peter.walsh.568847 Peter Walsh

        Great article. Having worked with a group of artists and writers in the past to create an arts 501c3, and having experienced first hand many of the downsides you describe, I would love to hear more about alternatives to the non-profit model. Crowd-funding is another piece of the puzzle, but clearly it’s not going to be a viable replacement in the long-run.

  • http://www.facebook.com/profile.php?id=517139481 Adam Carroll

    Very important points you make. I used to be part of it and even promoted it through capacity building workshops and “best practices.” While its not all bad, and intentions are often good, the impact is rarely questioned or examined critically.

    Speaking of impacts, or effects, it should read “effect” not “affects” in paragraph three.

    Oh and I would add Agism to your list of negative forces that run amok in this corporatized sphere.

    The system has made doing good just too complicated. Is the religious sector (under siege in so many ways) a sort of space for resistance? What else is possible?

  • http://www.postlinearity.com gregorylent

    beautifully written .. thanks

  • http://www.facebook.com/undocumentedQ Jonathan Perez

    haha i made that meme, im glad it’s being put to use

  • http://www.facebook.com/people/Danny-Larkin/10910886 Danny Larkin

    Alexis, why didn’t you mention fiscal sponsorship, which is the best alternative to the traditional 501 (c) (3). A recent report by Dance NYC is showing that most small dance companies are now opting for fiscal sponsorship. http://foundationcenter.org/pnd/news/story.jhtml?id=390800013

    • http://www.alexisclements.com/ Alexis Clements

      Danny, I didn’t focus on fiscal sponsorship because fiscal sponsorship involves artists having to directly align themselves with a nonprofit in order to do their fundraising. I don’t deny that the model is useful to many artists, I’ve been a fiscally sponsored artist myself on two separate occasions. But the point of this article in particular is to challenge the assumption that seems to force artists into the nonprofit system as a means of survival, and fiscal sponsorship is part of that system. The idea of the book is to really push people past the nonprofit framework entirely, to question the biases and problems within it, and my article tries to ask how we might do that in the arts. Maybe a blended model is the answer, but it’s important not to take nonprofits and their role for granted, which, in my experience, we do in the arts.

  • http://www.facebook.com/people/Danny-Larkin/10910886 Danny Larkin

    Alexis, the stats on foundations and individual giving reinforce some of your points. In 2011, Four out of five or 80 percent of philanthropic dollars were actually contributed by individuals and bequests. Foundations only accounted for 14% of all donations. Any arts organization that focuses its fundraising strategy on foundations, trying to twist into a pretzel after pretzel to fit objective after objective, is going to be disappointed. Individuals giving – or to put it more bluntly – finding a millionaire to back your cause is the key, but as you have also shown it came at times be a double-edge sword http://www.nps.gov/partnerships/fundraising_individuals_statistics.htm

  • Paul Botts

    Huh? The factual content here is disturbingly low. Having been a salaried administrator at both a sizeable arts organization and at a major arts funder, and now the volunteer treasurer of a small professional theater company which is just now getting to the point of being to hire its first paid staffer, and having also been a working musician hired many times by nonprofits, I’ve learned that a large fraction of the field’s conventional wisdom on this subject is simply false. To pick just a couple of highlights:

    “almost none of the fundraising avenues that provide major support (i.e.
    tens of thousands of dollars or more) allow any of that money to be
    spent on operating expenses.”
    In reality virtually all of the revenues of not-for-profit arts organizations is unrestricted. Per Americans For The Arts, arts non-profits’ revenue stream on average is roughly half earned income, a third individual contributions, around an eighth from corporate and foundations, and the balance from government grants. All earned income is by definition unrestricted as is the great bulk of individual contributions and corporate grants/sponsorships, so for a typical arts nonprofit no more than ten percent of annual revenues can’t be spent however the organization wishes. [A degree of freedom which many other types of organizations, particularly those such as in social services which are funded primarily by government contracts and grants, can only dream of.]

    “By focusing so much time and energy on staying in the nonprofit game
    (i.e. chasing funding opportunities, filling out annual reports for
    grants, preparing for audits, maintaining a fundraising staff, etc.)” Actually the great bulk of arts nonprofits do not have fundraising staffs, less than half of them are subject to annual audits, etc. And see above: the great bulk of the income of arts nonprofits comes with no paperwork strings attached.

    “Foundation, and much of nonprofit funding, is money that would
    have been public money but is now maintained and controlled privately.” (a) In fact funds put into private foundations are not fully tax-deductible, meaning that when a wealthy family puts $10 million into a foundation endowment only around a sixth of it represents tax proceeds being denied to government. (b) Such foundation endowments are legally irrevocable and cannot be controlled by any individual, exactly as an operating not-for-profit cannot be a sole proprietorship. That’s why the Ford Foundation is no longer under any control by the Ford family or company, the MacArthur Foundation no longer has anything to do with that family, etc. If a foundation is dissolved (which happens, rarely) the funds must be disbursed to other not-for-profits not to any individual or family including those from whom the funds originally came.

    “you have to grow in order become a 501(c)3″ — nonsense. The great bulk of organizations which have been granted the tax-exempt status are all-volunteer. I’ve personally helped form three of them; in one case we paid a lawyer $400 to do the paperwork, in the others it was nothing but volunteer time. It’s more trouble to lease a car or hire a properly-skilled horn player than to form a 501(c)3 entity.

    I loved also this little gem: “Why does the nonprofit structure have to mimic corporate structure?” Actually it is the corporate form of organization which mimics the much-older structure which various societies had, since at least the Protestant Reformation, used to organize the local communitarian entities known as churches. One might ponder why lots of groups of people across multiple societies, when forming new entities intended to serve the local common good without aggrandizement by any single person, arrived at the same basic structure and principles which are now reflected in U.S. law for the formation of what we now call nonprofits.

    It’s also worth pondering how well the nonprofit corporate structure (in which those who can be held legally responsible for the organization’s debts receive no compensation) actually does “mimic” for-profit corporate structure (in which directors are paid). Try this: ask someone who has been on both kinds of board how much they actually turned out to be the same experience.

    At any rate, all this whining about being “forced” into the not-for-profit corporate form has a strong whiff of that unfortunate sense of entitlement which far too many artists fall into. There is after all no forcing of anyone into this or any other form of operating. Moreover tax-exempt not-for-profit status is neither a right nor a special privilege. It is a social _contract_: certain special privileges (some of them not granted to for-profit corporations) are provided in exchange for a promise to put all profits to use only in pursuit of certain purposes. The key points about any social contract are (a) the word “contract” which means an _exchange_ of goods or value, and (b) that it is entirely voluntary. You don’t think it’s a good deal, don’t do it. Problem solved.

    I know plenty of artists who work as artists quite happily and successfully without having been dragooned into servitude to corporate masters in that mean ol’ “nonprofit industry”. Others are happy being the pawns of their white male nonprofit-board overlords; others are unhappy in one or the other circumstance; etc. Such, sadly, is life in the big city. Whining at elaborate length about the deficiencies of one particular organizational form which has supported millions of artists over several decades now does not strike me as a a productive use of time but obviously your mileage will vary.

    P.S. And just as an aside regarding funding of the arts: the NEA is not even a
    large fraction of _federal_ funding of the arts, let alone of all
    public funding, let alone of all the funds which this society directs to
    the arts. If they ever make me king that useless agency would be on my
    “gone by noon the first day” list (though the end of a few other things
    — farm subsidies, U.S. involvement in Iraq and Afghanistan and
    revenue-generating college sports, etc. — would admittedly be higher
    priorities).

    • http://www.alexisclements.com/ Alexis Clements

      Hi Paul. Thanks for your comment. Obviously we disagree on many points, so I won’t bother to go into a lengthy response on each point. However, I do want to say that I think it is an enormous mistake to dismiss the ideas in the book as whining. The essays in the book, and my very abridged attempt at a summary of some of the relevant points for the arts, are engaged in a serious critique that looks both inward and outward, and is asking very important questions about why the non-profit system has consistently excluded or further marginalized women, people of color, and minorities, when, ostensibly, it was put forth to help provide services/opportunities/support to all communities in the US. To look seriously at the factors that seem to be leading to that situation is anything by whining. In fact it’s quite the opposite in this instance, as the writers are taking ownership of their work, their goals, and their ideals and searching for the best way to represent those whether it be inside or outside the non-profit system.

      The second point I need to make in response to your comment is that nowhere in the book or in my summary is there any statement purporting that the non-profit system is something we’re all stuck with or compelled to be a part of. In fact, the point of the whole thing is to say exactly the opposite–we have many other options and it’s terribly important to challenge the non-profit “status quo.” While it’s clear that some people such as yourself believe that it is working fine, that still doesn’t mean that it’s above critique or that others can’t see the non-profit system from a very different angle.

  • http://www.facebook.com/kirigamiqueen Savasana Fakeout

    Here’s another perspective: An article explaining that really large nonprofits suck tax revenue that government could use for social services and infrastructure costs: http://www.fool.com/how-to-invest/personal-finance/taxes/2012/09/06/the-coming-battle-between-nonprofits-and-governmen.aspx. Of course the issue with nonprofits in the arts is that the organizations are usually so tiny, with so little wealth to speak of, that the issues are totally different. There seems to be no economy of scale within corporate structure…? Perhaps I just don’t know enough about the various options.

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