The Effects of
Government Funding on Management Practices in Faith-based Organizations: Propositions
for Future Research
Kevin P. Kearns
Graduate School of Public and
International Affairs
University of Pittsburgh
The Bush Administration has taken steps to help religiously
oriented organizations compete for federal grants and contracts to delivery
social services to their communities. A
composite case study is used as a literary device to illustrate propositions
about the possible effects that increased federal funding will have on the
management structure, practices, and culture of a small faith-based
organization. The paper speculates that
the President’s so-called “faith-based initiative” could have some unintended
negative consequences for the organizations it is designed to help.
THE POLICY CONTEXT
The Bush Administration has shown its
determination to provide direct government assistance to faith-based social
service organizations, which the President believes are discriminated against in
their efforts to obtain federal grants and contracts for the delivery of social
services. Shortly after taking office,
George W. Bush created the White House Office of Faith-based And Community
Initiatives to identify and remove perceived barriers to federal funding of
small religiously oriented and community based social service agencies. By Executive Order he has directed seven
cabinet-level agencies to engage in proactive efforts to assist faith-based
organizations obtain federal grants and contracts. Also he vigorously promoted the Charity Aid
Relief and Empowerment (CARE) Act (S. 476), which the Senate passed on April 9,
2003 by a vote of 95-5. The final
version of the CARE Act, which now moves to the House of Representatives, fell
somewhat short of the Administration’s original aspirations, but still contains
some important provisions designed to enhance the ability of small faith-based
organizations to compete for federal grants and contracts. The President has shown that he is willing to
use Executive Orders, in addition to legislative initiatives, to accomplish his
vision of greater participation by religious organizations in the delivery of
social services.
The Bush Administration is particularly
interested in fully implementing and even expanding the so-called Charitable
Choice provisions contained in Section 104 of the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996, commonly known as the Welfare
Reform Law enacted during the Clinton Administration. Charitable Choice allows religious
organizations to use federal money to supply various social services without
altering their fundamental religious character.
Advocates say that religious
organizations provide important services to people in need and should have a
place at the table with secular organizations.
Critics argue that Charitable Choice in combination with the President’s
faith-based agenda has created a “slippery slope” that will lead to the use of
government funds to endorse and promote religious activities and services.
THE MANAGEMEN
Aside from the very significant
Constitutional and policy issues associated with the Bush agenda, the
faith-based initiative poses a management dilemma for leaders of small
religiously oriented organizations that want to enhance their social
services. On the one hand, the lure of
federal funding is tempting. Charities
of all types, but especially small organizations, have been financially challenged
by the persistent economic downturn and the uncertainty of the post-September
11 philanthropic environment. For many
of these organizations, the additional funding from the federal government
would be welcome. On the other hand,
many religious organizations, including some conservatives who typically
support the Bush domestic agenda, are wary of taking government funds. They fear that federal funding carries
strings that will eventually diminish their pervasively sectarian values and
organizational missions. Interestingly,
some of the strongest support for the faith-based initiative appears to come
from constituencies that are not usually aligned with the Bush Administration,
including urban African American ministries.
A BRIEF REVIEW OF
LITERATURE
There are at least four bodies of
literature that are useful in developing hypotheses about the possible impact
of federal funding on the structure and culture of faith-based
organizations. Rather than an exhaustive
literature review, several prominent examples from each major category are
summarized below.
1.The
Literature on Partnerships Between Government and Nonprofit Organizations
There is an extensive literature
cataloguing the history of government – nonprofit relations and the sometimes
stormy relations between the two (e.g., Dobkin Hall, 1994). Beginning in the Carter Administration and
proceeding through the early 1990s, this literature focused on the potential
for constructive partnerships and strategic alliances between government and
nonprofit organizations, with special emphasis on the role of nonprofits as mediating
structures between citizens and large impersonal government bureaucracies
(Berger and Neuhaus, 1977). During the
Reagan years the literature focused on the emerging role of nonprofits as
providers of public goods in an era of public sector devolution,
decentralization, and retrenchment (e.g., Salamon, 1981; 1985; 1987). For the most part, this literature portrays a
cautiously hopeful scenario wherein government contracting with nonprofit
organizations produces a happy outcome for everyone, including citizens who
will benefit from the innovativeness and responsiveness of the nonprofit
sector, and government agencies that can divest themselves from the burdens of
direct service delivery. In this early
literature there is little if any speculation on the potential negative impacts
on the nonprofit sector of growing dependence on government funding.
2. The
Literature Outlining the Challenges for Both Sectors
Beginning in the early and mid-1990s we
begin to see growing concern about the potential pathologies of mutual
interdependence between government and the nonprofit sector. For government, there is the gradual
evolution of a “hallow state” (Milward and Provan, 1993) in which fundamentally
“public” responsibilities are delegated to the private nonprofit sector where
performance is sometime suspect and accountability is difficult to trace (Gaul
and Borowski, 1993). For nonprofits,
research began to show a recurring pattern of negative outcomes associated with
growing reliance on government contracts including increased bureaucratization,
loss of autonomy, mission creep, and the inability of nonprofit boards to
exercise appropriate control over the increasingly complex task of
administering government contracts (Smith and Lipsky, 1993; Smith, 1994; Gronjberg,
1993; Bernstein, 1991; Salamon, 1994; Boris and Steuerle, 1999). This literature, much of which is based on
high quality empirical research, posits that resource dependence often alters
the fundamental character of nonprofit organizations, transforming them into
quasi-governmental agencies that resemble the government contractors that
support them. This body of literature is
perhaps most relevant to our discussion.
3. The
Literature on Organizational Culture, Design, and Transformation
A third body of literature, which emerged
in the 1970s, focuses on the collection of values, beliefs, and assumptions
that comprise an organization’s unique culture
(e.g., Geertz, 1973; Ouchi, 1981; Deal and Kennedy, 1982). Cultural theorists have explored the subtleties
of organizational behavior embedded in implicit belief systems and expectations
of behavior that often are shaped by external forces on the organization. A related body of literature deals with the
process of organizational change, offering descriptive and normative frameworks
for helping organizations “learn” (Senge, 1990) and successfully adapt to
changing circumstances (Deetz, Tracy, and Simpson, 2000) as well as their
natural evolutionary life cycle (Stevens, 2001). The impact of external forces on
organizational structure have been explored by Lawrence and Lorsch (1967) and
many others (e.g., Mintzberg, 1979). A
useful summary of all of these theoretical approaches and their practical
implications is provided by Bolman and Deal (1997). These literatures combined suggest useful
templates for examining plausible impacts on faith-based organizations as a
result of access to federal funding support.
4. Studies of Faith-based
Organizations
Finally, there is an emerging literature
that is focusing specifically on small faith-based organizations and their
response to the new public policy environment that seems to be encouraging a
partnership with them.
Toward that end, as a literary
devise, let’s examine a fictitious case study representing a composite of
congregations that are currently providing social services and might be contemplating
applications for federal funding.
A FICTITIOUS CASE[1]
Let’s consider the fictitious case
of Holy Cross Catholic Church, a small parish (150 families) in an industrial
mid-western city. Holy Cross is 125
years old. In its early years it served
the pastoral needs of immigrant families, primarily from Eastern and Central
Europe, who had come to the city to take jobs in the local steel mills and
other manufacturing plants. Then, Holy
Cross Church was surrounded by modest but tidy row houses, nestled in the
shadow of the steel mill. Over the
years, and especially in the past twenty years, the socio-economic structure of
the neighborhood has changed dramatically.
The steel mill stopped operating 20 years ago and has been
demolished. Most of the young families
have moved away. The remaining
population consists of retired mill workers, service workers, and unskilled
laborers. The neighborhood has high
rates of substance abuse, crime, and domestic violence. The population has become increasingly
diverse. Now, 35 percent of the
parishioners in Holy Cross are African American and a small but rapidly growing
number are Asian. They are fiercely
loyal to the parish and to its pastor, Rev. Andrew Healy.
Healy has been a social activist and
has encouraged the Catholic Diocese to take a greater role in issues of social
justice, anti-poverty, crime prevention, and economic revitalization. When the steel mills closed down, Rev. Healy
led an interfaith coalition of religious leaders who pressured the large
corporations to do more to relieve the pain and suffering caused by the
economic dislocation. Although, Rev.
Healy has “mellowed” somewhat, he continues to be blunt and sometimes
confrontational on issues such as economic development, job training, environmental
justice, welfare reform, healthcare financing, and human rights. His style alienates some people, especially
those in positions of authority, who are the targets of his passionate sermons.
The Diocese maintains only superficial
ties with Holy Cross and, in fact, has cut it off financially. The Bishop tried to close Holy Cross in a
“consolidation” move several years ago, but backed down in the face of vigorous
protests from parishioners and neighborhood advocates.
Under Rev. Healy’s vision, but with
programmatic leadership from dozens of volunteers, Holy Cross offers a modest
portfolio of social services. It
operates a food and clothing pantry that is open three mornings a week. It also provides a bi-weekly parent education
and parental support program, an after school mentoring program for youth, and
a very modest emergency loan program for families in financial distress. These services are offered free of charge to
anyone in need. Less than one-fourth of
the clients in these programs are Holy Cross parishioners. All of the programs are modest in scope, with
a combined budget of less than $20,000.
Holy Cross relies on a dedicated corps of over 50 volunteers who work
20-40 hours per month.
The management culture is fluid and
informal. These programs are run by the
parishioners, not under a separate 501c3 corporation. There is a paid (part-time) volunteer
coordinator and a parish advisory council that plans and approves new social
programs. The advisory council is
chaired by Rev. Healy but decision making is remarkably democratic, and always
involves direct input from the volunteers.
A “faith” component per se is not readily apparent in the social service
programs (i.e., there is no evangelizing), but Rev. Healy says that “all of the
volunteers are motivated by a shared passion for social justice as derived from
the Gospel and the life of Jesus Christ.”
Some of the service volunteers are more religiously oriented than
others. Therefore, the way any
particular client is treated with respect to the faith-component of the
programs can vary significantly depending on what volunteers are working at the
time. Staff meetings and advisory board
meetings always begin and end with a prayer.
Volunteers sometimes encourage clients to improve their spiritual
condition. Training sessions for
volunteers include theological teachings and reading materials, but they are
not mandated to use them in their interactions with clients. There is a high level of collaboration with
other churches and religious organizations in the community. Holy Cross often refers clients to other
organizations and congregations when it cannot meet their needs.
Funding, of course, is a continuing
problem. All of the programs are funded
primarily from the donations of parishioners, collected every Sunday. Rev. Healy has a good relationship with a
local grocery store chain and several restaurants, which provide food and
in-kind services for the pantry.
Clothing donations come from a variety of sources. Occasionally, a “large” gift of several
hundred dollars will come from the estate of a deceased parishioner or as an
unsolicited and often anonymous donation; there are no formal fundraising
strategies or activities other than an occasional bake sale or raffle. Expenses sometimes fluctuate, especially when
needs are great or when professionals are brought in for consulting for the
mentoring, parenting, and parental support programs. There have been several financial crises, but
as Rev. Healy says, “The Lord seems to provide for us, just when our hope is
about to run out. We operate on faith,
not cash flows.”
Nonetheless,
Healy has been intrigued by the notion of securing government funding to
support some new social programming at Holy Cross. He thinks that there might be a good chance
of securing a contract from the U.S. Department of Housing and Urban
Development (HUD) for transitional housing for single mothers and their
children. Many of these women suffer
from substance abuse, domestic violence, and severe poverty. To operate such a program, Holy Cross would
need to buy and renovate a nearby abandoned apartment building, with ten
units. Healy has been approached by the
local Housing Authority regarding a partnership on the proposed project. The director of the Housing Authority wants
Holy Cross to act as the fiscal agent and prime contractor on the project
because she believes that, in the current political climate, there will be a
better chance of getting the federal money if a faith-based organization submits
the proposal and takes the lead.
There are some obvious benefits to
the transitional housing project, but some potential hazards as well. Rev. Healy thinks carefully about the
project, and especially how federal funding will affect Holy Cross Church and
its social service mission. Healy is
confident that government funding will not affect the “faith component” of his
services. But he wonders if there are
broader managerial and cultural effects that are likely to result from a
government contract.
SOME PROPOSITIONS
The
proposed partnership with the federal government and the local Housing
Authority will result in a higher level of resource dependence, which in turn
could have effects on the management infrastructure and culture of Holy Cross
Church. Here are a few propositions for
consideration by Rev. Healy and other leaders of faith-based organizations.
At the most fundamental level, the
federal contract for transitional housing may begin to transform Holy Cross
Church from an expressive to an instrumental organization. Lester Salamon (2002, p. 10) reminds us that
many types of organizations in the nonprofit sector, including churches, exist not to provide goods or services but to
give their members a vehicle for collective expression of beliefs and
values. Simply stated, the primary mission of Holy Cross Church is
to provide its members with a vehicle for the expression of their faith, not to
provide social services to the community.
Because the social services now offered at Holy Cross are staffed almost
exclusively by volunteers, one could argue that these services provide a
vehicle for the collective expression of faith and an opportunity to practice
their theological belief system. In that
sense, these services may be a central ingredient in the expressive culture of
the parish.
On the other hand, the scope and scale of
the transitional housing program will very likely require a high level of
professional expertise (see discussion below) and a concentration of resources
that could conceivably transform the expressive culture of Holy Cross into the instrumental culture of a housing and
social service agency.
What types of changes in norms, language,
and behavior might indicate that this organization is transitioning from an
expressive to an instrumental culture?
Here are a few specific propositions:
The transitional housing program will
likely begin to transform Holy Cross from a volunteer
culture to a professional
culture. Rev. Healy will need to hire
professionals to write the grant application, conduct community needs
assessments, and do feasibility studies and cost analysis with respect to
renovating the abandoned apartment building.
He will need professional assistance with financing, legal issues,
architectural design, and perhaps even public relations since some neighborhood
residents apparently object to the transitional housing project. If the project is ever completed, he will
need to hire professionals to staff the transitional housing facility and to
design and deliver so-called “wrap-around” support services to the mothers and
their children. As the project
progresses, he will need professional assistance in monitoring and evaluating
the success of the project according to governmental goals and objectives.
Here are a few specific propositions
regarding change in norms, values, and behavior that might be observed if
indeed there is a shift from a volunteer culture to a professional culture:
As noted above, the social programs at
Holy Cross have occasionally encountered financial crises, but Healy and his
volunteers have faith that “Divine Providence” will always intervene. This type of belief system, whether literal
or not, creates a kind of laissez-faire
management culture with steady-state features.
That is, the flow (or lack of flow) of resources is presumed to be
somewhat random and, accordingly, organizational activities and initiatives
follow no particular pattern or cycle.
With outside funding from the federal government and the Housing
Authority, Holy Cross will immediately enter a new environment that will be
heavily dependent on a regular cycle of cash flows with administrative and
programmatic activities (planning, budgeting, staffing, implementation,
billing, accounting, evaluation, etc.) that correspond to that cycle. Interruptions of that cash flow, for whatever
reason, will be far more disruptive for the transitional housing program that
they ever would have for the old volunteer-driven programs (Smith, 1994, p.
329)
Here are some issues that Holy Cross may
need to prepare for if it is to thrive in this new fiscal environment.
Obviously, none of this is to suggest
that there is anything inherently wrong with the transitional housing
program. In fact Rev. Healy and his
followers could easily make the case that this federally funded program would
enrich and enlarge their spiritual mission. There is even some evidence that
the religious character of services offered by faith-based organizations has
not been compromised by government grants and contracts (Green and Sherman,
2002). But, from a management
perspective, it is at least plausible that the transitional housing program
will transform Holy Cross Church and its many volunteers into an instrument to achieve the social service
goals and objectives of the federal government in addition to being a vehicle
for the expression of theological
beliefs and values. Also, it is
reasonable to predict that the new transitional housing program and the
partnership with the government agencies will introduce a higher level of professionalism to the existing
volunteer culture of the Holy Cross social service program. Where professionals and volunteers work
side-by-side, there often develops two cultures that are not always in harmony. Lastly, the financial flows associated with
the transitional housing program will create a higher level of resource dependency that may alter the
internal and external relationships of the organization.
MANAGEMENT IMPLICATIONS
FOR HOLY CROSS CHURCH AND OTHER FAITH-BASED ORGANIZATIONS
Rev. Healy and his counterparts in other
churches and faith-based organizations would be well-advised to carefully
consider the non-financial baggage that may accompany federal grants and
contracts. One is reminded of the old
saw, “Be careful what you wish for, because you just might get it.” Here are a few suggestions for faith-based
organizations considering such a strategy.
Even if only a few of the effects
speculated above occur, Rev. Healy and his volunteers will need to embrace the
notion of transformational change,
which will affect not only programmatic agendas, but the core principles and
operating philosophies of the organization.
This type of change is likely to be traumatic for the organization on
many levels, and may take years to accomplish.
Most religious leaders are not likely to
possess the substantial managerial skill to lead their organizations through
the types of transformational change described above. After all, they are spiritual leaders, not
managers. Using a framework developed by
Bolman and Deal (1997), transformation change will require a mix of skills
including: a) mastery of the design and implementation of complex
organizational structures, flows, and procedures; b) brilliant insights into
worker motivation and human resource management; c) a keen sense of political
management and the role of power in organizational transformation; and d) a
theatrical understanding of the importance of symbolism and how to focus the
attention of workers and volunteers on the values and philosophies that are the
core of the organization.
Many, though not all, government-funded
programs require grantees and contractors to be formally recognized by the
Internal Revenue Service as tax-exempt organizations under Section 501c3 of the
Internal Revenue Code. The Bush
Administration seems to be ambivalent at best about this requirement, and in
fact has urged federal agencies to reexamine their statutory and regulatory
practices to allow unincorporated churches and community organizations to
compete for federal funds.
Despite the apparent ideological
motivations of the Bush administration, there are good reasons to formally and
legally separate the religious and charitable activities of faith-based
organizations. Rev. Healy should
seriously consider establishing a 501c3 organization to run the transitional
housing project. A separate
incorporation of the housing project might allow Healy to “insulate” his
informal volunteer programs from the professionalized and highly public housing
project. Such a move would address many
aspects of accountability beyond mere compliance with the law (see Kearns,
1996).
CONCLUSIONS: POLICY AND
RESEARCH IMPLICATIONS
From a policy perspective, the Bush
faith-based initiative poses serious questions regarding the separation of
church and state. Although faith-based
organizations like Catholic Charities and United Jewish Federation have
received various types of government funding for many years, there have been
protections against the use of government funding for explicitly religious
activities. The Charitable Choice
provisions of the 1996 Welfare Reform Law put a crack in the wall between
religiously-oriented and secular social services. Now, the Bush initiative is trying to pry
that crack open to, in his words, “level the playing field” for faith-based and
secular agencies competing for federal funds.
The constitutional issues are
substantial, and well beyond the scope of this paper. But the managerial issues are equally
important and, in the long term, could have a huge impact on the landscape of
social services and charitable activity in the United States. The stakes are high and the risks may
outweigh the benefits. In the long run,
the faith-based initiative of the Bush Administration may have effects that are
quite the opposite of those intended by its designers and proponents, including
the following:
·
The
gradual erosion of a rich mosaic of community-based religious organizations
that provide needed services to their communities, replaced by a homogenized
group of government-funded agencies that may end up behaving much the same as
their secular counterparts. The
diversity that the Bush agenda purports to promote may actually yield to a
creeping conformity of structures, missions, and values.
·
The
gradual devaluation of grassroots volunteer activity in favor of
professionalized social services. The community investments and volunteerism
that the Bush Administration seems to covet may actually give way to a creeping
professionalism and bureaucratization within churches and other small
faith-based organizations that obtain federal contracts to deliver social
services.
·
The
proliferation of 501c3 organizations with all the administrative and regulatory
complications that accompany them. There
are already nearly 1 million 501c3 organizations in the nation and some
estimates suggest that over 25,000 new 501c3s are formed every year (Gaul and
Borowski, 1993). The IRS cannot possibly
regulate these organizations with any real rigor and large donors in the
philanthropic community are already complaining that there is redundancy and
counter-productive competition within the nonprofit sector.
But these, as well as the other
propositions contained in this paper, are speculative. To date, research on these issues has taken
one of two forms: 1.) large surveys of faith-based organizations, which are
methodologically incapable of capturing the complex and sometimes subtle changes
in organizational culture and character that may accompany federal funding, and
2) studies conducted by researchers and institutions that are ideologically
aligned with the Bush agenda and, therefore, potentially suspect in terms of
objectivity.
What is needed are in-depth case studies
and careful longitudinal research designs to assess over time whether the
propositions expressed above have any merit.
Only then will all of us be able to get beyond the ideology and the
political rhetoric to explore the real impacts of federal funding on our grass
roots religious organizations. I propose
that the propositions stated above provide the preliminary hypotheses for such
a research design.
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[1]
This is a fictitious case, based on a composite of 276 congregations in