The National Organization for Marriage had steady revenues at $1.3 million during the three years reported, but saw an operating loss in 2014. Focus on the Family, another well-known conservative nonprofit, has no public reporting since 2014. At that time, it had revenues of $86 million, or $2 million less than it raised the previous year. Net assets for 2013 and 2014 were $52 million and $51 million respectively. The National Right to Life Committee raised about $5 million in 2014 and 2015, but only about $3 million in 2016. The Family Research Council had a mixed bag with revenues of $15 million in 2014, $12 million in 2015, and $16 million in 2016.
The one anomaly in my admittedly limited cross section of conservative nonprofits was Judicial Watch, a 501(c)(3) that has had some real success using Freedom of Information Act (FOIA) requests to force government transparency. There is no evidence Judicial Watch is engaged in the scheme to overpay fund-raisers who then turn around and do political canvassing. I only found this pattern on the left. But Judicial Watch does benefit from the same pattern of increasing donations that left-leaning groups are experiencing.
Judicial Watch revenues in 2013 were $20 million. In 2014 the revenues significantly increased to almost $30 million; they increased again in 2015 to $37 million and went up even more dramatically in the last reported filing, to $45 million in 2016. Those numbers are nowhere close to ACLU or Planned Parenthood numbers, but they do reflect the same types of revenue increases as other political nonprofits. That could be a result of their proximity to political donors. But it may simply be a result of their unmitigated and high-profile success in obtaining substantive evidence withheld from Congress.
Another pattern that didn’t repeat within conservative nonprofits was the net loss to fund-raising consultants. That pattern seems to be unique to clients of Grassroots Campaigns.
The NRA paid for a number of fund-raising consultants in 2016 for which they received no funding, but they also did not raise any funds that were retained by the consultants. The fund-raisers that they did use, Allegiance and InfoCision, both produced profits for the NRA from their fund-raising, the former for a flat fee and producing excellent results. For example, in 2016 the NRA paid Allegiance $480,000 and Allegiance raised a net profit to NRA of $42,551,885. That’s the year Planned Parenthood raised $2.6 million from the $4.6 million they paid the fund-raiser, for a net loss of $1.9 million. According to the 990s, the NRA routinely distributes money to other organizations of all sizes and types. In 2016 they reported $47 million in expenses. Of these expenses, grants made to organizations (and some individuals) totaled $33,793,429, or 72 percent of their revenue.
Many of the conservative nonprofits we analyzed didn’t even use outside fund-raisers. National Organization for Marriage, Gun Owners of America, Center for Immigration Studies, Eagle Forum—none of them reported payments to a fund-raiser. Of those that did, the fund-raiser consistently raised at least enough to break even.
As for Judicial Watch, they did use outside fund-raisers. They paid one group $4.8 million for production of fund-raising packages and used another for administration of fund-raising lists. For actual fund-raising, they used the same organization as Family Watch, Center for Immigration Services, and Right to Life: MDS Communications Corporation. The fund-raising was not lucrative, but it never ran negative.
Planned Parenthood’s use of outside fund-raisers is a bit of an anomaly among nonprofits of similar size. My review of the 990 forms for similarly sized nonprofits with no connection to politics showed they tend to do their fund-raising in-house. While it appears most nonprofits struggle to find outside fund-raisers who can raise significantly more than they cost, only clients of Grassroots Campaigns seem to be dramatically overpaying for fund-raising and allowing the fund-raiser to control the money raised.
Corrupting Our Nonprofit Institutions
The information we glean from public filings of nonprofit entities certainly raises some questions.
For example, is the 501(c)(3) charity fund-raising activity only happening in politically competitive states and districts? When those volunteers knock on a door for fund-raising purposes, are they also canvassing? Are they gathering information to be used for political purposes at the same time they are supposedly raising funds? When they promise these people their donations will go to a charity, but then don’t actually net any funds for that charity, is that fraudulent?
What about the massive reserves charities are stockpiling—how much of that money have they been able to indirectly funnel to their political activities? Is the dramatic increase in reserves of politicized charities over the last few years related to the fact that donors can now use charities as political vehicles? Is that conversion part of the consulting service that Grassroots Campaigns provides? Is this a new way for Democrats to signal virtue—as they funnel dark money into charities while pretending to eschew dark money from Super PACs?
Those questions raise even more questions. Does the IRS have the necessary tools and data to figure any of this out? If so, are they even willing to do so? Are there any enterprising journalists brave enough to take on the pillars of the nonprofit community to investigate? And what is the opportunity cost of all of this political activity? Are charities even focused on the social welfare priorities upon which they were founded? Does the use of both a 501(c)(3) and a 501(c)(4) within the same organization ultimately politicize the whole endeavor? How far does the politicization extend? Are organizations with no explicit political bias somehow engaging in a clandestine way?
Domestic Spending as a Conduit to Nonprofits
These questions shed new light on the federal budget battles of the last ten years. The Democratic push for more domestic spending actually results in more spending on nonprofits. In fiscal year 2018, the federal government allocated $59 billion for nonprofit contracts and grants, according to USAspending.gov. Does any of that money directly or indirectly fund political activities?
I remember when Republicans gained control of the House of Representatives after the 2010 midterms and made a concerted effort to cut federal spending. Democrats had been increasing domestic spending, which includes heavy spending on government grants and contracts to nonprofit organizations, for years. Having been demoted from Speaker to House minority leader, Pelosi went to the mat to protect domestic spending.
Because we had not yet won back control of the Senate and did not have support for Republican budgets there, we kept funding the government with continuing resolutions. These just extended the inflated funding levels previously set by Democrats. In 2011, Republicans used the debt ceiling vote as leverage to pass the Budget Control Act, which ultimately imposed automatic spending cuts. I didn’t vote for sequestration—I think tailored budget cuts are preferable to across-the-board cuts—but more important, I worried about defense spending.
We were engaged in two foreign wars and President Obama wanted to cut defense spending by $100 billion a year annually. It had a huge impact on military readiness. Republicans were fighting to restore the massive cuts in military spending, with tens of billions of dollars needed to rebuild military infrastructure and modernize our weapons. Democrats were reluctant to increase military spending, but seemingly went along as long as there was an equivalent increase in domestic spending, from which the many grants and contracts to nonprofit entities flow.