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How Non-profits Help Themselves by Serving the Working Poor As Poverty Pimps

In our hatred, we’ve referred to each other in various disparaging terms to describe each other's socio-economic position within our great society. The most common of these is trailer trash. However, I perceive that in our future there will be two groups of people – those that live in mansions and those that live in trailers. Thus; the poor of all stripes will be united as a trailer trash nation!

According to the National Low Income Housing Coalition (NLIHC),” 40 percent of those facing eviction from foreclosure in the US are renters; yet regulations on the rental industry vary state to state with little protection for those living in rental properties.” Since 2000 of this decade a manufactured home started and remained at $35,000.00 and moved upwards above $100,000.00this is in-spite of the economy’s changing condition.  Yet, this cannot be said for traditional homes; in bad condition traditional homes may start at $45,000.00 and sky rocket upward towards the economic stratosphere where it remains out of reach of first time home buyers earning realistic incomes – incomes that are quickly vanishing from sight.

Regardless of state of purchase $35,000.00 is the average starting price for a manufactured home anywhere in the US. However, the cost of vacant land required for these homes can actually vary depending upon its condition and use requirement. Within 12 years, provided that their medical care is administered through Medicare, a person living upon SSI, SSDI paying $300.00 per month could purchase a 1 bedroom single wide home, and still possess enough money for: food, second hand clothing, personal hygiene products and limited internet/cable capabilities from a company such as COMCAST. Based upon interviewing various individuals existing upon fixed incomes; while living in MHSA (mental health and substance abuse) co-ops, the above situation is not only desirable, but actually describes their socio-economic life as consumers within their communities.

Usually in MHSA co-ops there are at least 4 individuals living in a 4 bedroom flat sharing living expenses. This particular living situation which has been created and managed by MHSA agencies is how many MHSA agencies pay for housing their service population. Other individuals existing within this type of living situation have complained that the current socio-economic situation within the country prevents them from moving out of these co-ops because it affects their ability to afford housing and acquire employment necessary to afford housing. Thus; those individuals who have recovered from their substance abuse and mental health issues remain stuck within their co-ops because the country’s current socio-economic situation prevents them from moving out of their co-ops and living on their own successfully.

This situation actually gluts our social service system transforming it into a backed-up toilet which is subject to flooding whenever individuals in need of services attempt to access them. According to Gotham Gazette’s interview with Michael Stoller executive director, Human Services Council (ed. Artl., 07/28/10) “the long-term impact, if things do not improve, is dire. Government funding will shrink radically, as will funding from philanthropic and corporate foundations and from (now less-wealthy) individuals. This will dramatically reduce the services nonprofit social service agencies can provide. At the same time, the need will be greater, as more people lose their jobs and fall through the frayed safety net.”  Perhaps the greatest fear of these individuals is that they will end up sabotaging themselves by leaving their co-ops and return to their prior conditions of substance abuse and mental illness. Due to our country’s present socio-economic situation, this fear is extremely realistic.

From activists, to social service providers, to city officials; “cities provide easy access to necessary services which marginalized populations could not obtain within rural areas” has been a persistent battle cry of most activists and social service providers since either can remember. But, is that really true? According to Talia Whyte of the Grio (ed. Artl., 04/22/10 urban Americans are faced with various environmental issues that result in debilitating biopsychosocial outcomes which affect their ability to survive and flourish as healthy productive members of society.
Based upon these 6 internet sources:
 It could be strongly argued that cities are detrimental to the US poor due to their overcrowded conditions, and failing infrastructures such as: deteriorating roads, abandoned buildings which are becoming crack dens, unpaid overworked police/fire departments and depleted social services and lack of employment. These conditions render the argument that the poor must exist within urban areas to possess access to social services, medical care and increasingly unsafe public transportation moot.   Perhaps what should be argued is that urban areas when properly constructed are places for affluent singles and couples where as rural areas such as hamlets, villages and small towns, possessing: various amenities found in cities, social services, healthcare and public transportation are more suitable for those that subsist upon fixed incomes or are members of America’s working poor. 

Based upon Stoller’s statement and realistic fears by members of MHSA service populations that they could return to their past unwanted conditions due to the country’s poor socio-economics, perhaps cities are no longer able to provide marginalized populations such as the working poor or those dealing with recovery from substance abuse and mental illness with much needed social services or support.  So, why is there a huge push for those living upon fixed incomes to remain living in urban areas as disempowered renters? Perhaps it’s because service to marginalized groups provides:  employment, monetary rewards, public prestige and potential long term security to those that run even inefficient non-profit organizations and/or municipal departments that both handle and utilize funds to provide services to non-profit organizations and marginalized populations.

Our present government uses two kinds of grants: 1) 'discretionary' grants, grants handed out by an agency of the Federal government - for instance, grants provided by the Department of Health and Human Services to a homeless shelter; 2) Grants providing Federal money to States, cities, or counties to distribute to charities and social service providers these are referred to as 'formula' or 'block' grants. Thus; religious and grassroots organizations that provide vital Federal services to the poor on an annual basis may apply directly to the Federal government or an entity that distributes money it receives from the Federal government for hundreds of millions of dollars in grant monies. Despite whatever questions the government may ask about an organizations effectiveness and accountability, it allows organizations to list what is referred to as “indirect/administrative costs” or “overhead,” – costs  that are not easily assignable to a particular project or unit within an organization. These costs benefit the organization as a whole, but not their projects. Because it may not be possible for organizations to determine what percentage of their costs are necessary for:  heat, light, water, and rental fees should be allocated to each project – that figure can be difficult to determine, and may not be cost effective for a large organization to pin down. These indirect costs create loopholes for funds to be manipulated in ways that may not at first appear obvious such as fictitious projects or over inflated costs that can be hidden within a projects overhead. Example; building materials which normally cost $12,000.00 can be increased to $24,000.00, the cost of providing services to marginalized populations could be used to disguise over inflated salaries for positions that suffer from nepotism and are undeserving of such increases; while the blame for increased cost in services are passed onto those receiving them. 

However, the government recognizes these indirect costs as being legitimate and has established a budget category for organizations to list them. Yet, in order for an organization to request funds to cover their indirect costs, organizations must establish an “indirect cost rate” with a Federal agency. By establishing an indirect cost rate, the organization can pay a certain percentage of its indirect costs with Federal funds. Since there is no government oversight to determine if an organization’s ICR is legitimate, the federal government is capable of being fleeced by corrupt non-profit organizations which utilize marginalized populations to provide themselves with socio-economic opportunities, social prestige land political leverage; while delivering a minimum of needed services to those populations. According to the Hauser Center for Non-profit Organizations,  research into nonprofit sector fraud has been based on newspaper reports (Fremont-Smith 2004a, Fremont-Smith and Kosaras 2003, Gibelman and Gelman 2001, 2002). These articles do not get at the real extent of fraud in the non-profit sector since most fraud goes unreported (Ayers 2006). The Association of Certified Fraud Examiners (ACFE) estimates that all organizations lose on average %6 of their revenue to fraud every year (ACFE 2005). When this percentage is applied to the nonprofit sector, it could be suggested that non-profits lose approximately $40 billion each year through fraud (ed. Artl. Dec 2006 working paper).

This leads us to ask the question –what would happen if non-profit organizations where confronted with a limited number of marginalized individuals in need of services? A rational conclusion would be that those non-profit organizations in existence would be forced to compete for both clients and resources in order to remain in operation. However, human nature is neither innately rational nor compassionate; as organizations begin to compete with each other over available resources and clientele, those organizations incapable of obtaining or keeping clients and resources would either drop out of competition or be swallowed by their larger competitors and cease to exist. This would lead to their larger, stronger non-profit competitors scrambling for remaining available resources and service consumers to survive.  Yet, within these non-profit organizations, there would be a need to sacrifice those organizational members that would be considered inefficient in performing various job functions in order to: cut fat, increase productivity, and decrease waste to increase the organizations chances of survival. In business terms this makes perfect sense; however, what must be considered is the affect that these actions would have on individual organization members, their desire for socio-economic survival, and moral behavior. 

According to Stanford Social Innovation Review “ethical challenges involving complex relationships between individual character and cultural influences arise at all levels in: for-profit, nonprofit, and government organizations. These challenges can result in criminal violations or civil liability. Common challenges involve activities that border: fraud, conflicts of interest, misallocation of resources, inadequate accountability and transparency.
Research identifies four crucial factors that influence ethical conduct:
  • Moral awareness: recognition that a situation raises ethical issues
  • Moral decision making: determining what course of action is ethically sound
  • Moral intent: identifying which values should take priority in the decision
  • Moral action: following through on ethical decisions.
Individuals vary in their capacity to properly interpret and prioritize moral issues, determine appropriate moral behavior, cope with frustration and make good on commitments” (ed. Artl. By Deborah L. Rhode & Amanda K. Packel Summer 2009).

It is these 4 Ms that both shape and determine the socio-economic destiny and structural make-up of an organization. If organizations are composed of people – then would not organizations that cater to marginalized populations possess even unconsciously a desire to keep those populations under their control in order to prevent losing their control or access to valuable resources that support their socio-economic existence? I propose that this is why those that say they believe marginalized populations are best served by remaining in congested urban environments are actually unconsciously stating that they themselves are better served by these populations remaining within an urban environment in order to maintain their control over these populations by acting as intermediaries between marginalized populations and Federal and Municipal sources of funding. 


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