Passing the Smell Test

Posted by Laura Otten, Ph.D., Director on January 16th, 2009 in Articles, Thoughts & Commentary

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 Smell Test

What makes a nonprofit a nonprofit?  There are so many ways that people answer this question, most of which are incorrect.  There is, however, little argument that for many, it is the IRS 501(c)(3)designation is the determinant. Technically speaking, I’d agree:  IRS approval  is essential in  announcing yourself as a nonprofit.  But does that really make a nonprofit a nonprofit? I’d have to say no.  All it means is that you have passed the paper review by the IRS.  Theoretically, in order to be approved by the IRS there is a crucial test that an applicant organization must pass:  it must prove to the IRS’ satisfaction–on paper –that it will be working on behalf of some portion of the public good.   Public good; not personal gain.    Over the last four or so months, much media attention in the greater Philadelphia area has indirectly been paid to an organization that passed the IRS paper review–Citizen’s Alliance for Better Neighborhoods.  This nonprofit was started by State Senator Vincent Fumo who is currently on trial for improper behavior in relation to both his job as state senator and Citizen’s Alliance.  An outgoing governor has her next job all lined up:  she’ll work at a center that bears her name in office space that will bear her name and that received a $1 million state bond allocation last year.  The Philadelphia Inquirer, citing Senator Fumo and other Pennsylvania politicians and their favorite nonprofits–all of which had passed the IRS paper test–suggests that “charities tied to elected officials raise ethical questions.”   You think?  They also raise the very important question, despite the IRS “stamp of approval,” of whether they really are nonprofits, doing work on behalf of that all important public good. And so you don’t think this is just about “nonprofits” with close ties to politicians, I’ll switch gears. Guidestar reports that approximately ½ million nonprofits could lose their nonprofit status because the IRS hasn’t heard from them in a while.    They haven’t filed their 990-N for at least three consecutive years!   What have they been doing all of these years?  Nothing?  Or working for that public good?  Both are possibilities.  And maybe those that have been working haven’t had the resources–or understood the importance–to file the 990-N.   A nonprofit should not be defined by its IRS status but by the real work it does, the real company it keeps, the real impact it has with that portion of the public for which it is working hard.    

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