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Wednesday, September 18, 2019

Illinois fails to measure nonprofit spending, policy expert says

By Amanda Robert | Jun 27, 2015

Illinois State Capitol

SPRINGFIELD Ill. (Legal Newsline) - While the Illinois state government gives billions of dollars to nonprofit organizations over the course of an ordinary budget year, there is little oversight of how the organizations spend those dollars, says Kristina Rasmussen, executive vice president of the Illinois Policy Institute.

“They give that money with the best intentions, hoping it will help carry out some of the priorities they have deemed to be important,” Rasmussen said. “Unfortunately, in some instances, government will have long-time partnerships with nonprofits, and some of them are on autopilot, as opposed to, ‘Are we putting our dollars in the highest impact, highest priority areas right now?’”

The Illinois Citizens Board (CUB) is just one nonprofit organization that receives significant funding from the state government. Following efforts led by then consumer activist and now former Gov. Pat Quinn, the Illinois General Assembly created CUB in 1983, to represent the interests of residential utility customers.

According to the Illinois Department of Commerce and Economic Opportunity, CUB has received a total of $1.9 million in state grants since 2007. From 2009 to 2015 – the years Quinn served as governor – the organization received $1.7 million in state grants.

CUB’s most recent $200,000 grant, which started in May 2014 and ended in April 2015, was designated for operating costs. Another grant, which started in May 2011 and ended in April 2013, totaled $782,000, and went to “administrative costs directly associated with performance of the Grantee’s services.”

CUB received a similar administrative grant for $718,000 in December 2009. It ended in November 2011.

According to their description on the DCEO website, these grants were directed to “specific local governments, units of government, educational facilities and not-for-profit organizations by members of the General Assembly and the Governor for specific purposes to bolster the State’s economy, promote a clean environment and improve the overall quality of life throughout the State of Illinois.”

According to the Illinois Comptroller’s Office, grants comprise about 72 percent of the state’s General Revenue Funds budget. The office also points out on its website that, year to date, the state has given nearly $762 million in grants to nonprofit organizations.

Rasmussen contends that a huge portion of these grants come from the Department of Human Services, in an “incredibly political” process.

“It’s a way to implement political discipline within the General Assembly,” she said. “‘You, rank and file legislator, don’t want to go along with us? We’ll make sure this particular disease or community group that you care about won’t get the funding that they did last year.’

“That’s obviously disturbing, because we shouldn’t be spending dollars as a political enforcement tool.”

While a lot of nonprofit organizations’ grants come from the Illinois General Revenue Fund, Rasmussen adds that they have also come from other sources, such as the hundreds of special funds in the state, or even the capital bill signed by Quinn in 2009.

She says that so far, there have been few ways to measure whether nonprofit organizations are putting their state grants to good use. The organizations are supposed to report key information to the state government, but when the Illinois Policy Institute surveys state grants, they often find incomplete files.

“They might have the original grant application, but very little in there about how they actually spend the dollars, and more importantly, the impact and efficiency that came out of it,” she said. “And certainly, none of the impact is available online.”

While there has been some discussion in the Illinois General Assembly about bringing the state standards for grant reporting up to match federal standards, Rasmussen contends that even then, nonprofit organizations wouldn’t always have to explain how they used their grant dollars and why they benefited the community.

In recent years, John DiIulio Jr., a political science professor at the University of Pennsylvania, has focused on the increase in federal grant awards to nonprofit organizations. In an article for National Affairs, he contends that while three-quarters of nonprofit organizations, including faith-based groups, spend less than $500,000 each year and receive little or no government grants, the quarter of organizations that have the largest budgets also have the greatest dependence on government funding.

He says this means that “one-third of all non-profit dollars are from government, paid through grants or contracts.”

“Over the past quarter-century, government grants to non-profit organizations have nearly tripled (in inflation-adjusted dollars),” DiIulio also writes in the article. “And just as businesses lobby to keep government contracts flowing, non-profit organizations lobby to preserve government grants and to block measures to limit itemized deductions in the federal tax code.”

According to the Internal Revenue Service, nonprofit organizations reported $2.9 trillion in assets in Tax Year 2010, the most recent year for which data is available. This represents a 9 percent increase from the previous year.

The IRS also points out that these nonprofit organizations reported $1.6 trillion in total revenue, nearly three-quarters of which came from program services, and $1.5 trillion in expenses.

Additionally, according to the IRS, total expenses reported by nonprofit organizations grew by 127 percent between Tax Years 1985 and 2010.

While the federal government may not provide solutions to Illinois’ problem, Rasmussen contends that other states, such as North Carolina, show some promise.

She explains that the Tar Heel State adopted a new reporting system for nonprofit organizations in the early 2000s. As part of this system, if organizations fail to report their results in the allotted amount of time, the state government stops sending their checks. The state government would also then publish a list of noncompliant nonprofit organizations.

Rasmussen points out that a similar system could work for CUB and for all of the other nonprofit organizations in Illinois.

“I’m of the perspective that if you’re taking taxpayer dollars, you should have to show value,” Rasmussen said. “If you can’t show value, it’s a good sign that we should reevaluate whether this is a good use of funds.”

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