The Political Economy of Non-Profits: Child and Disabled Labor in the United States

Sloan-Kettering’s CEO Peter T. Scardino: over 2MM in compensation.

By JP Miller

[A]fter ten years in the Army and another six at University, I wandered into many offices looking for gainful employment. I was not what one would call a corporate man and armed with only an M.A. in Political Science, my choices were nearly non-existent. Working for the Department of Commerce was a brief interlude as I had no real direction or permanent position and limited pay. But, I happened to stumble upon the “non-profit” world out of sheer desperation. I simply answered an advertisement and after one interview was hired.  I felt good about being able to work in a wholesome environment, helping others. I felt like this could be a career. But after a two year stint with the Boy Scouts of America (BSA) and less than a year with Goodwill Industries, I was totally disillusioned. 

I discovered that a “non-profit organization” or “501 (c)(3)” is simply a lie and a most insidious, Orwellian use of language. To tell what I discovered requires me to implicate myself in a sense. I went along with the program and was paid well for my misdeeds. But, being a new father and with a large family to support, I fought the urge to quit. So I had to be fired for reversing and doing the right thing.

A 501( c ) or non-profit organization is simply the same as any for profit organization except they are tax-exempt and recognized as such by the IRS. There are 29 variations of non-profits that range from churches to veterans organizations. I was employed by the BSA from 2001 to 2003 and Goodwill Industries during 2004. In the cases of the BSA or Goodwill industries, both are considered charitable organizations despite the fact that donations and monies earned are distributed among multitudes of semi-professional employees as salaries. The funds are also used for dinners, parties and company cars. I have attended some of these parties which provide free alcohol, entertainment and sumptuous meals. The CEO or President of the organizations many subsidiary offices or in the case of the BSA, the Council President, are typically paid a salary that rivals that of for-profit businesses and in many cases exceeds that of the public or private business. While the President of each subsidiary office makes typically over $150,000 a year and the semi-professional case workers or executives make around $30,000 to $40,000 yearly, the most significant and most abundant labor force, which is made of the poor, children, uneducated, and disabled or displaced persons make a negligible wage. And, thanks to a depression era law under the ironically named Fair Labor Standards Act (FLSA) of 1938, non-profits are exempt from paying minimum wage in the case of the disabled and are able to use child labor. There are over 1.5 million businesses in the US that are designated non-profit. But, I will have to use the above cases of the BSA and Goodwill Industries as examples because of my intimate knowledge of their practices.

The BSA is one of the largest, conservative, faith-based organizations in the world. And, they are a corporate juggernaut that thumb their noses at labor laws, commit thievery, act as racists, admit prejudice, practice misogyny, and misuse child labor for profit. The BSA does not admit children and adults who are atheists, agnostics, women, or openly gay. (Once I had to fire an adult who was gay and had been a scoutmaster for over 20 years) Nor, do they admit the poor or members of other races by means of not recruiting them or elimination because of their inability to pay the costs of membership. That doesn’t stop them from counting them on the rolls and inflating their recruitment numbers. Typically, the District Executive (DE) will add these children to the membership drive for one month during the annual round-up by means of information gained by earlier DEs and kept by staff for just that reason. Yet, the children and adults included have no idea they are scouts for a month.

Not only does the BSA use child labor year round to pay their own salaries and provide for the corporation that produces the goods for sale, they cook the books. Much of the money paid by children and their families are diverted ever so quietly into the pockets of the professional district managers and the top management. There is an unwritten code among the district executives that provides bonuses paid by unwitting families. There are multitudes of scams and outright theft. Every event, from a car derby to a camping trip has two sets of paperwork. One set is seen by the families, kids and adult scout masters, and the other seen by the District Executive (DE) and the financial executive, who skim off the top. All those kids, families, volunteers, and scoutmasters are simply paying the “professionals” bonuses. The money gained by these methods and a rest and relaxation budget is used for luxurious trips to ski resorts, white-water rafting, political minded events, and outright trips to strip clubs.

The largest crime committed by the BSA is their “fundraising” events where child labor is used as a means to sell products such as flavored and expensive popcorn to unwitting adults outside the doors of Walmart and grocery stores throughout the entire United States. Cub scouts, boy scouts, explorers and their families spend countless hours peddling goods for the BSA without making a cent. They are paid with cheap, Chinese made trinkets. The corporation that produces the goods reaps millions off child labor as does the BSA.

If the misuse of child labor and diversion of collected funds is not enough, most disturbing is the BSA’s political activities. Regularly, the state politicians make use of connections with the BSA to promote and fund there selves into office. And, in turn, the BSA councils use the politicians as recruitment tools and rely on them to bring thousands of dollars into the coffers of the BSA council. While I was a DE, the Governor and local politicians aligned themselves with the BSA just long enough to be able to point to their charity work or in the Governor’s case, call attention to himself as the civilian President of the State BSA offices.

Boy Scouts and the District Executives sponsored and provided labor for a golf tournament for the Governor. His hangers-on or lesser politicians who rode his shoe strings into office came along to be seen with him. The tournament cost the local BSA council nothing and the entities and persons who contributed to the event will never know where there money went and for what. Where all the donations and payments went, I will never know. I don’t want to know. But, I’m sure the top management and the then Governor know.

The BSA requires its District Executives to provide three money making activities. First, and the most obvious, is the annual donation drive. The DE visits families (who have already paid to join the BSA, sell products for the BSA and buy their goods sold by the BSA) to remind them of their need to support the council, which provides the scouting opportunities for them in the first place. Then there are the churches, The United Way, the schools, the corporations, the trusts, the mom and pop stores, veterans’ organizations, the rich and the famous, the poor and the infamous. No one is exempt from this money grab and incredible amounts of money are promised. The executive who brings in the most promised money is regaled with trips and a bonus. The competition is fierce and many executives create promised donations out of thin air to swell their totals. And, when collection time comes then the promised money is a function of shame, begging, political pressure, and convolutions of invention and diversion.

The second and most despised activity required of the DE by the council is to visit schools, churches, civic organizations, and informal gatherings in order to recruit adults and children into the scouting fold. These are potential members and potential profits.  Usually the DE or one of the existing adult scouts gives a speech to the audience telling them the benefits of scouting and the fun they will all have. But this can’t happen unless they pay for the membership, buy the scout uniforms and various patches and take over the work load of the DE. Recruiting adults is the hard part and the most lucrative. They are the ones who end up buying all the scouting equipment, pay for the camp-outs, sell the popcorn, and provide the labor for the council. Usually, the white schools are where the kids join and pay on the spot, begging their parents. Each kid that joins is given a trinket that is dangled in front of them like a carrot on a stick. Depending on how much money is paid in cash, the DE can skim some off and sign up the children and adults to a lesser period of time.

The obscure, rural, poor, and diverse membership drives at black churches usually amount to nothing since the costs are high and the opportunities for them are scant. Yet, the DE is able to acquire the names and relevant information of the attendees for later use as inflation of their rolls. Not once did I see and African-American or poor kid at any of the events. Once, I did see an African-American troop that basically operated mysteriously, outside normal channels with the council. They were self-sustaining and very well managed and completely segregated from the white troops. At least they didn’t get set up for the donation squeeze.

The third function of the DE is to provide programs and events for his or her district. Most importantly, the DE is there to collect the money from the scouts and their families to finance the event. From camping trips to parades to civic functions, these elements of scouting are encouraged and arranged by the DE. The labor, development and securing of money is done by volunteers and troops or scoutmasters. When enough funds have been collected to finance the event then the DE collects the money and presents it to the council. And, as I mentioned above, the many DE skim off the top by producing two sets of paperwork. It’s not unusual for the DE and financial executive to make a few hundred dollars in cash from each event. The DE often brags about who made the most from an event and when there is an entire council event, the DE divides up the spoils.

I promised to tell how I was fired by the BSA. It was simple enough. After two years of watching all the above practices, I decided to do a little something about the exclusion of the poor and the minorities. After one foundation donated quite a bit of money to the council, an adult volunteer and I used half the money to set up a campaign to recruit and pay for as many of the excluded as I could at a large school event. I believe it would have worked if I hadn’t openly promoted the recruitment at the rural and black schools. So, thankfully, the council president fired me for this transgression.

This is only an attempt to break down and bring to light the many scams, thefts, misdeeds, and utter indifference to integrity that the BSA brings to the non-profit arena in the US. Their racism, intolerance, and outright misogyny is another question that remains given their popularity and reverence by the public. Scouting is a worldwide phenomenon and a giant profit machine. The US BSA has holdings of over a billion dollars tucked away and a fund of 56 million just to fight molestation suits. Their annual profits are over 300 million and this does not include the immense amount of real property they own. Somehow, I can’t believe that Robert Baden-Powell had all this in mind in 1908.

My education about non-profits was just beginning.

My employment with Goodwill industries was another experience that taught me the value of a person’s labor and the value of that person seen through the eyes of a non-profit.  I was hired immediately when I mentioned that I was disabled. It turned out that the hiring of anyone disabled is used to promote Goodwill as a true and good charity not to mention they are allowed to pay the disabled less than minimum wage. More on that later.

The first job I had with Goodwill was as a project manager. I had a crew of poor, homeless, disabled minorities that repackaged donated goods for placement in their stores. It was fine enough until we looked at our paychecks. Our hourly wage was less than minimum wage and certainly not enough to live on. I advocated for my crew and soon enough, the temporary employment of my crew was over.  They required me to fire them. Instead of firing me, I was promoted to a position as Veteran’s Case Manager and given a salary of over $30,000 a year. It was a comfortable job but my duties were vague and I spent many hours daydreaming.

Veterans would come to me or I would go to the Veteran’s hospital and recruit other disabled veterans to sign up. Then I would attempt to help them find employment and any social services they qualified for at the time. It became endless rounds of denied applications and promised help that never materialized. Eventually, Goodwill would hire some of the disabled veterans for menial tasks in their wide expanse of donation and retail stores. At the time, I was ignorant of the fact that the disabled were being paid below the minimum wage and that the FLSA allows non-profits to hire disabled workers and pay them sub minimum wages. So, the few that were hired by Goodwill were disabled, poor, and dislocated persons who could legally be paid less than the average person. And, the Goodwill powers that be knew all along that exploiting the disabled was legal and was good business.

I worked less than a year for Goodwill. After I complained to other employees about the inability to perform my job and the exploitation of the ones that were hired, I found myself alone and on the edge with management. I quit before I could be fired.

Remunerations for Goodwill executives account for more than 30 million dollars annually with six and seven figure salaries while disabled employees can make less than 5 dollars an hour. Goodwill claims “they are providing a service to the disabled who normally could not find employment”. “Labor groups and disabled Goodwill workers say the FLSA provision is a relic of an earlier time and Congress should change the law to require that all workers, including the disabled, are subject to the minimum wage”. Reports are out there that many non-profits are using this loophole in the labor law to exploit workers. The Helen Keller Institute was pointed out as providing blind employees to Appleby’s and Barnes and Nobles that paid them at less than four and five dollars an hour. The BSA use child labor to amass huge profits while being protected by the FLSA loopholes that allow non-profits to work children a certain number of hours in “charity” work.

The labor laws of the US are antiquated and allow non-profits to exploit children, the poor, and the disabled while the CEOs make huge salaries and the corporation as a whole pays its semi-professional and professional employees more than adequately. Both the BSA and Goodwill industries are long established non-profits and huge conglomerates that generate billions of profits. Their monetary holdings are astronomical and secure behind the Labor Department’s and societies disdain for the poor, children, minority populations, and disabled. This is part of what allows such abuses to continue. Many groups have called for the revision of these exploitative laws but so far the Labor Department has failed to neither move nor even recognize the depression era laws as problems. As it is, non-profits are safe behind their governmental protectors who include congressmen who take campaign donations from the 1.5 million 501(c) and align themselves with them to aid in re-elections. Change is not likely to happen anytime soon and the exploited are not likely to have any relief as long as the “non-profits” make such profits.

ABOUT THE AUTHOR
The Greanville Post, Pravda, Countercurrents, and Cyrano’s Journal.

APPENDIX

Are nonprofit CEOs being overpaid? 

The following material is provided as complementary data. A good source of information on top executive compensation of nonprofit executives can be found on the American Institute of Philanthropy site. Note that in the table below a majority of the huge compensation packages are paid to doctors who manage health-oriented charities.

TOP 25 COMPENSATION PACKAGES

The salary information below was calculated by adding the IRS Form 990 categories of “Compensation,” “Contributions to employee benefit plans,” and “Expense accounts and other allowances.” Not included are any benefits received but not reported in the charity’s IRS Form 990.

When information is given only on the national headquarters and the charity does not include its affiliates in its financial statements, “National Office” or “N.O.” appears after the group’s name.

NOTE: CharityWatch grades are not based on the salary ranges reported in the IRS Form 990. DUE TO DIFFERENCES IN THE WAY SALARIES MIGHT BE ALLOCATED, HIGH SALARIES DO NOT NECESSARILY INDICATE INEFFICIENCIES JUST AS LOW SALARIES ARE NOT ALWAYS A PLUS.

* Includes “Compensation,” “Contributions to employee benefit plans,” “Expense accounts and other allowances,” and deferred compensation earned in reporting year, as reported to the IRS. Compensation of medical professionals may include fees for patient care in addition to salary.

Further info of value on this topic: 

• As President and CEO of the U.S. Fund for UNICEF, Caryl Stern earns $454,855.00. She does not have a company car; she drives a 2007 Prius which she purchased in 2009.

• Salvation Army: The current National Commander of the Salvation Army (since 2010) is William A. Roberts. The Salvation Army is not required to file a Form 990 with the IRS because it is primarily a religious organization, but according to the Better Business Bureau (BBB), Roberts’ last reported total annual compensation was $126,920. Forbes rates this organization’s efficiency at 82%, a fair bit lower than the 93% figure claimed in the e-mail.

• Goodwill: Goodwill Industries International is not a business that takes in donated items and resells them for a profit. It is a not-for-profit organization that provides job training, employment placement services and other community-based programs for people who have disabilities, lack education or job experience, or face employment challenges. Goodwill raises money for their programs through a chain of thrift stores which also operate as non-profits.The current President and CEO of Goodwill is Jim Gibbons, who in 2011 received a total reported compensation of $725,000.

• March of Dimes: Charity Navigator rates the March of Dimes‘ efficiency at 64.6%, not impressive.

• St. Jude Children’s Research Hospital: Charity Navigator rates the efficiency of St. Jude Children’s Research Hospital at 70.3%, considerably lower than the 100% figure claimed by some of the organization’s apologists.

• Ronald McDonald Houses: Ronald McDonald House charities operate at local levels in dozens of different metropolitan areas in the U.S. with varying levels of efficiency. Charity Navigator rates the efficiency of the parent organization at 89.5%.

• Lions Club International: Charity Navigator rates the efficiency of the Lions Clubs International Foundation at 83.9%.

A 2011 addendum to the original message presented the following information:

According to the most recent available Form 990 filings, all of these statements are false and/or misleading (in large part because the National Commanders are not necessarily the top business executives of these organizations):

• The two men who served as National Commander of the American Legion during the 2009 tax year (David Rehbein and Clarence Hill) received total aggregate compensation of $103,701. The American Legion’s National Adjutant (Daniel Wheeler), who is described as “the administrative head of the organization,” received $201,661 in total compensation.

• The two men who served as the Veterans of Foreign Wars’ Commander-in-Chief during the 2009 tax year (Glen M. Gardner, Jr. and Thomas J. Tradewell, Sr.) received an aggregate total compensation of $329,868.

• In the 2009 tax year, the National Adjutant of Disabled American Veterans (Arthur H. Wilson), who is described as “serving as the DAV’s chief executive officer,” received a total compensation of $328,252.

• The Military Order of the Purple Heart (MOPH) is a separate entity from the Military Order of the Purple Heart Service Foundation (MOPHSF), although the former is largely dependent upon the latter to raise funds for its programs. For tax year 2009, the Executive Director of the MOPHSF (Gregory A. Bresser), who left that post in August 2009, received $142,986 in total compensation.

• In tax year 2009, the President of Vietnam Veterans of America (the closest match to the “Vietnam Veterans Association” mentioned in the e-mail), John Rowan, received a total compensation of $69,874. (The highest paid executive was CFO/staff director Joseph Sternburg, who was paid $137,902.)

Unfortunately, the five veterans-related charitable organizations mentioned above don’t receive very high marks for efficiency (as determined by Charity Navigator, the BBB, or Form 990 information): 

• American Legion: 55%
• Veterans of Foreign Wars: 84%
• Disabled American Veterans: 77%
• Military Order of Purple Heart Service Foundation: 35%
• Vietnam Veterans of America: 25%

Read more at http://www.snopes.com/politics/business/charities.asp#J8Mipt2q8RmciUQr.99