🔒Nonprofit human-services sector in need of reforms

If I had the power to give homework to the members of the state legislature, their first assignment would be a book report on the 2017 Legislative Briefing Booklet prepared by the Connecticut Community Nonprofit Alliance, the leading state association that speaks for our nonprofits.

The booklet is a terrific document. On one level, it offers some head turning, common-sense recommendations to ease the costly regulatory burden borne by the state's network of nonprofit human-service providers. However, on a deeper level, there is an epiphany between its lines: Our nonprofit human-service provider network is standing ready and willing to play a helpful (and perhaps leadership) role in reforming bureaucracies that have exhibited a tendency to eat their own young (at least financially) and are long overdue for reform.

Let me start with the reasoned assumption that there will always be people among us who require care and assistance because they are afflicted with physical or intellectual disabilities, mental health conditions, broken families or other maladies of the human condition. There is a thin and porous line between people who have been so afflicted (directly or vicariously) and those who have not. The case for providing assistance is axiomatic, and the only question is how best to do so.

Unfortunately, our system seems to have been deliberately designed to find the most complex way to get the job done. The state competes with itself. It provides human services directly with its employees (at higher wage levels and costs), and it also hires the nonprofits (the competitors) to do the same work for much less money while simultaneously subjecting them to an impenetrable regulatory regime that, as the briefing booklet says, can require the nonprofits “to maintain as many as 24 separate licenses from state agencies to operate their programs.”

The rub in this arrangement is that the “much less money” the nonprofits are paid is essentially 100 percent of their operating budget. This means that they depend on their high-price competitor (the state) for their existence while simultaneously trying to survive under the competitor's burdensome regulatory regime. The bizarre circularity in this arrangement is that the costs of regulatory compliance are (re)paid to the state with some of the same dollars the state paid the nonprofits in the first place to provide services.

What the state giveth it taketh away.

A few years ago, when I was still practicing law, I represented a state-funded nonprofit caught in a feud between two state agencies, which could not agree if the nonprofit was out of regulatory compliance when it accepted into its programs a troubled individual assigned to it by one of the two agencies.

After weeks of wrangling we ended up on a settlement conference call with representatives of each state agency, the state agencies' lawyers (from the attorney general's office), and the nonprofit's executive director. The case was settled when the nonprofit agreed to pay a $5,000 penalty to get the matter over with — which of course was paid with taxpayer dollars the nonprofit had been paid by the state.

Even worse, everyone involved in the settlement conference was being paid with taxpayer dollars in that the agency personnel and their lawyers were state employees, and the executive director's salary and my fees (like the $5,000 penalty) came from state funds that flowed through the nonprofit's budget.

The Nonprofit Alliance's “head turning common sense” suggestions for reigning in the regulatory morass is found on page eight of the briefing booklet (it is on the web). On that page, the Alliance begins with some specifics about the economic burden of “complying with multiple and redundant licensing requirements,” (noting that it is common for a nonprofit to “undergo as many as eight separate multi-day licensing reviews each year”), before putting its suggestion on the table — something called “deemed status.”

What this means is that nonprofits that have been accredited by well-known national accrediting bodies (all of which have rigorous standards) would be “deemed” to be in compliance, allowing them to avoid “duplicative and burdensome state licensing requirements.” The booklet goes on to explain that the state already has “deemed status” protocols in place for hospitals, and that several states have adopted them for human-service providers.

It is a great idea.

Let me close with what I said above about the “epiphany” to be found between the lines of the briefing booklet. I have always felt that the human-service nonprofits do not get the respect they deserve. It may be because they are not businesses that create taxable wealth; it may be because, on a personal level, we prefer not to think about them because we fear personally the maladies they confront in the ordinary course of operations every day.

Regardless, in this context the briefing booklet is a clarion call not just for regulatory reform, but for the respect the nonprofits are due for their professional acumen, willingness to take the lead on necessary reforms, and, of course, fulfilling that axiomatic duty to maintain the safety net we all may need at one time or another on our journey.

John M. Horak is the director of TANGO Nonprofit Education and Consulting.