The "nonprofit industrial complex," city government and service delivery

The Baltimore Sun has a commentary, "Baltimore is being strangled by the nonprofit industrial complex," criticizing the city for making a grant of almost $1 million to an organization with a limited track record.

A $900,000 grant by the Baltimore Children and Youth Fund (BCYF) to a nonprofit organization known as Thrive Arts Inc. in 2022 is the latest evidence that Baltimore’s version of the “nonprofit industrial complex” wields too much power. 

As reported by The Baltimore Sun, Thrive Arts was incorporated in 2021 but lost its corporate charter last year after failing to file tax returns for three straight years, and is [legally] now defunct.

It was an extraordinarily large grant for a small organization with no proven track record. Yet to be confirmed is how much of the $900,000 was disbursed to the grantee and spent on the purposes for which it was intended or returned to the city.

I do intend to do a book review on the book Nonprofit Neighborhoods: An Urban History of Inequality and the American State, which discusses how cities began outsourcing dealing with inequality and social issues to nonprofits.  This brief blog entry is by the author too, "The Origins of the Nonprofit Industrial Complex."

I have written many times over the years about problems with DC government grants and nonprofit execution.  

This is in the news more recently because of alleged bribes to a councilmember ("Trayon White expelled from the DC Council for corruption but he’s free to run for his old seat," AP) and government employee ("Former DC government official charged with taking bribe,"NBC4) by a grantee eager to secure their place in the system.

But it's been an issue for a long time, in fact the organization in Baltimore that is criticized by the author is similar to one that engaged in improper grant making in DC ("Harry Thomas, former D.C. Council member, is sentenced to more than three years in prison," Post), leading to the jailing of a Councilmember.

Minneapolis had some terrible problems/mistakes during covid, when it granted tens of millions to a grantee to provide meals, when the grantee had zero capacity to do so ("Minneapolis man admits to stealing at least $3.8 million from COVID-19 relief programs," KARE-TV).

Thinking about this I have five main points:

1.  A lot more money needs to be invested in capacity development and technical assistance for nonprofits, especially those receiving government grants.

2.  There must be transparency with the grant making process--something definitely not present in the Baltimore example.  An RFP and open call process with deadlines and decision making criteria.

3.  Accountability mechanisms must be in place to ensure that the right stuff is being done with the money and that it gets results.  This has been an issue with violence prevention programs in many places, including DC, where one recipient of funds recently was imprisoned for murder ("Former D.C. Violence Interrupter Sentenced for His Involvement in Drive-By Shooting," Washington City Paper, "Violence Interrupters Push Back Against Calls for Defunding," Washington Informer,  Many cities are putting hopes in violence interrupters, but few understand their challenges," NBC News).

4.  Evaluation of success and failure needs to be built into the program ("D.C.’s Violence Intervention Programs To Receive In-Depth Evaluation,".DCist").

5.  Ethics training is mentioned in the academic literature as being important.  I wonder...

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-- "Managing the brand promise of cities in the face of corruption," 2019
-- "Wow: Revisiting DC's Corruption Caucus," 2019

-- Corrupt Cities: A Practical Guide to Cure and Prevention, World Bank
-- "DC ethics legislation misses the point: focus on what produces corruption as a regular outcome, not monitoring," blog entry, 2011
-- Spring 2015 issue of the alumni magazine of the International Anti-Corruption Academy

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I just came across this, I haven't read it.  From the Journal of Business Ethics article, "The Labyrinth of Corruption in the Construction Industry: A System Dynamics Model Based on 40 Years of Research," :

Abstract 

The academic literature has viewed drivers of corruption in isolation and, consequently, failed to examine their synergistic effect. Such an isolated view provides incomplete information, leads to a misleading conclusion, and causes great difficulty in curbing corruption. This paper conducts a systematic literature review to identify the drivers of corruption in the construction industry. Subsequently, it develops a system dynamics (SD) model by conceptualizing corruption as a complex system of interacting drivers. Building on stakeholder and open systems theories, the proposed SD model shows how the complex reinforcing relationship between authoritative, organizational, cultural, and financial drivers of corruption further increases corrupt practices. The new model also provides lessons that can be helpful in the development of policy frameworks to control corruption in the construction industry. To achieve success in the fight against corruption, the findings of this research suggest that (1) corruption must be understood at both the organizational and state levels, (2) anticorruption practices must be informed by ethically grounded stakeholder management strategies, and (3) anticorruption reforms must go hand-in-hand with strategies to tackle the economic downturn.

No wonder corruption is so endemic.  It's embedded deep within the system.  Below is the diagram from the article showing the dimensions of corruption within construction.