Nonprofits should be open to scrutiny

in Voices by

By Jay Bender 

Where does your tax money go?   

In most instances it supports direct government activities such as schools, police, housing, public health and the like. But in many instances your tax money is transferred to nonprofit corporations that have convinced government leaders that they perform a service worthy of public support.  

Museums, festivals, parks and tourism promoters are common nonprofit recipients of public funds. 

There is a bill, H.3931, pending in the SC House of Representatives, that would exempt nonprofit organizations getting public funds from the Freedom of Information Act. 

The bill is being promoted as a way to make nonprofits accountable to the governments that provide funding by requiring filing of general statements about how your money is being spent. 

If you believe that nonsense, I have some beachfront property in Walhalla for sale. In too many instances, those doling out your money are benefiting from the use of those funds to hire their relatives or worse.  

If this bill passes, we will never know. 

Some legislators have been told nonprofits are not subject to the Freedom of Information Act, and this bill will add “transparency.”  Nonprofits receiving or spending your money are already subject to the open government law, and you are entitled to see their records. All you have to do is ask. 

In 1974 the General Assembly enacted the Freedom of Information Act, based on a finding that it was vital in a democratic society that public business be conducted in an open and public manner. 

The Supreme Court of South Carolina has repeatedly ruled that this law exists to prevent secret government activity. 

One mechanism used to hide government activity has been through the use of nonprofit corporations. 

The University of South Carolina for years hid a presidential slush fund behind a nonprofit foundation. When the public and press demanded an accounting of the foundation’s activities through Freedom of Information Act requests, the foundation refused to provide access, saying the law did not apply to it because it was a nonprofit corporation.

The S.C. Supreme Court said otherwise. The court looked to the definition in the law of those organizations to which the law applied. These organizations are identified in the law as “public bodies.”  

If an entity is a public body it is required to disclose certain records and conduct its meetings in a prescribed manner. 

A “public body” includes “any organization, corporation, or agency supported in whole or in part by public funds or expending public funds.”  

The USC Foundation met this definition, and, as a consequence, was required to account for how it spent its money. When exposed to public scrutiny many of the expenditures, such as gifts to elected officials and lavish speaking fees, were questioned and protested. 

Is there value in knowing how a nonprofit organization that gets tax money spends that money? Most of us think so. If you know where the money is going, you have grounds to tell your representatives in government that you approve or disapprove of the way your money is being spent. 

We should be past the point where we will accept an assurance such as, “Trust me. Great things are being done with your money.” 

There is too much evidence to the contrary that trust is not enough. In Richland County alone we’ve had a recreation commission paying inflated salaries to relatives who probably shouldn’t have been on the payroll in the first place. We’ve had the records of a high school booster club requested by the Attorney General who is investigating charges that much of the money is not accounted for. 

Two festival organizers are being questioned about what they have done with the public money they have received to conduct festivals that seem not to have happened. 

I suspect certain nonprofit organizations across the state would be exposed to scorn or prosecution if their activities were subjected to public scrutiny. There are allegations in several parts of the state that tax money is being laundered by nonprofit corporations to fund political contributions.  The only thing transparent about H.3931 is the desire of organizations supported by or spending your money to do it in secret. This bill should be defeated. If not, your tax dollars will go down a rabbit hole never to be heard from again.  

Tell your House member you want true accountability and defeat the bill. 

Jay Bender is a retired media law professor and an attorney for the S.C. Press Association.