Why the Government Screwed Up By Spending $138 Million On Nonprofits

The Social Innovation Fund (SIF) was conceived early on in Obama’s presidency as part of his grand vision of hope and change. It was essentially a $50 million piggy bank to fund “the most promising nonprofits in America.” 

While the intention behind the fund is admirable, the U.S. government has not inspired significant faith lately in its ability to balance a checkbook, nor has it proven to be a transparent or fair judge in the face of politically charged decisions. The question, then, is not whether nonprofits need and deserve more funding, but whether the government is the right allocator of that money.

It’s not hard to understand the motivating factors behind SIF’s inception. In 2009, Americans were collectively suffering and were deeply aware of the challenges we as a nation face. Many had strong faith in Obama’s ability to transcend politics and buckle down to do some good for this country and world.

Anyone who has ever worked in nonprofits is intimately aware of the ever-present challenge known as fundraising. Many would-be philanthropists are hesitant to donate too much money to any one charity for fear that the organization will not make good use of their money or be effective in their quest to make change.

A government-run organization to identify, fund, and otherwise support promising nonprofits sounded like a great idea. Winners would be rated and selected by non-governmental panels of experts, so the process would be fair and collaborative. SIF would be to nonprofits what venture-capital firms are to tech start-ups.

More than four years later, SIF has doled out $138 million to almost 200 organizations. They’ve partnered with private donors and companies to match that number with an additional $350 million. This has not been money wasted. It has funded organizations doing important work on education, health care, and job training, and has had real impacts on people’s lives.

Can you hear the “but” coming?

As we have been reminded again and again lately, politically backed institutions act with political motivations that often lead them astray of their stated goals and methods. As much as I abhor the Tea Party, the recent IRS scandal provides a perfect example of what can go wrong when institutions that are intended to serve all Americans allow politics to prevent them from doing their job fairly, efficiently, or transparently. 

It’s hard to think of a social issue that isn’t politically divisive. Even seemingly innocuous causes, like ending childhood hunger, can be polarizing by nature of the organizations that champion it. Religious affiliation, the source of the money, strategy decisions, leadership personalities, and tangential issues (philosophies on sex ed, for example) can all have a negative impact on the way organizations and their charities are perceived.

That’s not a criticism of nonprofits— it’s an inherent part of the work. But it also means our government needs to be extremely careful about what it uses taxpayer money to fund and how it goes about that process.

There has been much inside baseball controversy over the last four years about some of the various SIF winners (“under-qualified!”) and the lack of transparency in general around the process for selecting beneficiaries. Politically charged debates surrounding the selection criteria and process do not help any organization or cause. They’re distracting and make all involved parties look bad.

That being said, SIF has not allocated enough taxpayer money to warrant the sharp criticisms it has received. I would encourage its harsher critics to compare the amount the government has spent on this program over the past four years with the amount it has spent on war, prisons, or corn subsidies in any one. That should help put things in perspective.

One of the best outcomes of SIF has been the laying of the framework for collaboration and cooperation between the private and public sectors. These relationships are mutually beneficial and can be powerful forces for social good. Private donors contributed more than twice the amount than taxpayers did, so the cash and will to help nonprofits clearly exists.

In today’s world, with the tools and cultural shifts that come with the Internet era, there are simply better ways to connect donors with information and causes, and to create transparency around that process. Money that isn’t associated with any political party or initiative is less vulnerable, and therefore more sustainable.

SIF has provided a blueprint for engaging the private sector in social issues and taken important steps to raise awareness and identify nonprofit organizations doing great work. We should build on that momentum with nongovernmental forces, so that its impact is not wiped away in 2016.