Capital Research Center gratefully acknowledges the assistance provided by OpenTheBooks.com in compiling federal grant data for fiscal year 2018, which provided the impetus for this research. This piece is one in an occasional series exploring the funding of nonprofit organizations by the federal government.
Americans are among the world’s most generous people, but should the federal government be subsidizing the country’s instinctive altruism with taxpayer dollars? Do the inefficiencies inherent to government bureaucracy prevent volunteer service from being as effective as it could be? The Trump Administration’s proposal to eliminate the Corporation for National and Community Service (CNCS) raises the question of whether federal national service programs would be better left to state and local governments, private philanthropy, and individual choice.
The CNCS is an independent federal agency created in 1993 through the merger of similar preexisting agencies. Its two largest and most well-known programs are AmeriCorps and Senior Corps. AmeriCorps funds service opportunities for younger Americans; Senior Corps does the same thing for those 55 and older. The service can include disaster recovery, housing construction, mentoring and teaching, and environmental cleanup.
Such volunteer service is a popular concept among Americans. A 2015 poll commissioned by Voices for National Service (a national service advocacy coalition sponsored by City Year, itself one of the largest CNCS grant recipients) found high levels of support for national service programs across all partisan demographics. Some polling even found significant support for a year of mandatory national service, even if there are a number of problems with that idea. Regardless, it’s clear that today’s Americans continue to reflect the propensity for volunteerism that so-impressed Alexis de Tocqueville, of Democracy in America fame, back in the 1830s.
AmeriCorps and Senior Corps make grants to state and local governmental entities, as well as nonprofits. The programs’ combined operating expenses account for approximately 70 percent of CNCS’s $1.1 billion budget. Chiefly, this money supports program staff and participants through benefits like wages, stipends, training, subsidies for childcare, and health insurance. There also exists a trust fund for education awards paid to volunteers upon completion of service.
The amount provided to AmeriCorps members varies depending on the program. In 2019 AmeriCorps State and National—by far the largest of the three AmeriCorps programs— announced $560 million in grants and education awards. That comes to a per-volunteer cost of about $8,600 in federal money. The actual cost to the taxpayer is somewhat higher, however, since many volunteers qualify for federal benefit programs like SNAP (food stamps) during their period of service. Due to more restrictive stipend policies, Senior Corps programs are much less expensive on a per-volunteer basis. Despite receiving less than half of the federal funding that AmeriCorps does, Senior Corps supported almost three times the number of participants in 2018.
Notwithstanding all of the good work the volunteers do, the CNCS has recently been the subject of scrutiny, to the point that the Trump Administration has proposed shutting the agency down entirely for a number of reasons. The first is simple budgetary pragmatism. With a federal deficit approaching $1 trillion, cuts need to be made somewhere.
Another, also articulated by the Heritage Foundation in its 2020 Blueprint for Balance, argues that it is not the proper role of the federal government to decide which charities to support. Rather, organizations operating CNCS programs should be funded through voluntary contributions from the increasingly well-heeled philanthropic private sector. Perhaps state and local government could also continue to play a role. Any of the above would be better positioned to evaluate the effectiveness of services provided to a given community or population than would a federal agency.
Probably the central argument for eliminating the CNCS, however, is its recent operational track record. The Trump Administration pointed to a number of “management and oversight challenges” plaguing the program. This perhaps understates the actual scope of the problem. Financial recordkeeping at the agency is so inadequate that a firm contracted to perform an independent audit covering fiscal year 2018 was unable even to gather sufficient evidence to issue an opinion. Such a disclaimer is the “worst possible outcome for a financial statement audit,” and 2018 was the second year in a row in which it was issued. Auditors identified ten different material weaknesses, each flagged as an area in which the agency might not be able to prevent or detect a misstatement of its finances.
The CNCS also struggled with improper payments. These are payments that either went to the wrong recipient, were for the wrong amount, were insufficiently documented, or were misused by the recipient. Compliance with applicable federal law requires a maximum improper payment rate of 10 percent for each program operated by an agency, but another recent audit found fiscal year 2018 rates in excess of 15 percent for four programs (including AmeriCorps) and over 20 percent in two of those. It also noted that CNCS expects to report rates in excess of the 10 percent limit for all of its programs in fiscal year 2019 and that in any event, due to multiple deficiencies, the rates reported by the agency “are not complete or accurate.” The auditor noted that such persistently high rates “may result in the continued waste of agency funds.”
Grantee oversight is also particularly insufficient. A comprehensive 2017 Government Accountability Office report found significant issues with grant monitoring, especially in evaluating grant risk and shifting priority accordingly. An Inspector General report from the same year explained that “[t]he entire grant monitoring program rests on assumptions that are untested…the [risk evaluation criteria] do a poor job of predicting which grantees will produce catastrophic outcomes…”
In practice, this means the CNCS only conducts site visits on a small portion of grantees in a given year, and “does not directly monitor subgrantees, where the majority of AmeriCorps members serve.” Required criminal background checks on volunteers and staff also frequently go unperformed by grantees; rates of noncompliance in fiscal year 2016 were 22 percent in the AmeriCorps State and National program, and ranged from 36-41 percent among Senior Corps programs. In that year, fully one-third of total expenditures in the Senior Corps Foster Grandparents Program went to staff and volunteers for whom the required background checks were either not completed or not documented.
Eliminating federal funding for CNCS programs would also eliminate an issue that routinely crops up in federal grantmaking to nonprofits: the partisan proclivities displayed by some grantees. While 501(c)(3) nonprofit organizations are officially nonpartisan, in practice many skew right or left in their work. And, even though AmeriCorps explicitly prohibits certain uses of program funds, oversight still occasionally documents violations, such as distributing political bumper stickers or transporting clients to abortion clinics.
Even grantees that don’t misuse program funds can still have overt political biases. Teach for America has been noted for its recent “hard-left shift” for its criticism of the Trump Administration in general and Secretary of Education Betsy DeVos specifically. Michael Caudell-Feagan, the founding executive director of Equal Justice Works, a longtime AmeriCorps grantee, went on to become a senior program director at the Proteus Fund (a large pass-through funder of many left-leaning groups). His immediate successor, Kathleen Welch, is a “highly influential figure” in Democratic fundraising and is closely involved with the massive progressive donor collective Democracy Alliance. The Chicago chapter of Public Allies, a major AmeriCorps grantee committed to “advancing social justice and equity,” was headed by Michelle Obama early in her career, and she continues to remain involved with the organization. Some other left-leaning groups that have received over $1 million in AmeriCorps funding over the years include UnidosUS, the U.S. PIRG Education Fund, and Green New Deal supporter GRID Alternatives. The union-affiliated NEA Foundation and major left-of-center funders, the Annie E. Casey Foundation and Silicon Valley Community Foundation, also received grants under two other now-defunct CNCS programs. Community service and ideological partisanship existing within the same organization is a suspect marriage in any context, but this is doubly-so when the service is partially funded by public money compulsorily sourced from taxpayers of all political stripes.
Against this backdrop, the clear question is whether programs like AmeriCorps and Senior Corps would operate more effectively if the federal government got out of the way. Indeed, an existing network of private funding already exists. Private sources currently contribute more than $1.2 billion to CNCS programs each year—more than the agency’s total federal budget. To be sure, much of this money is leveraged by the federal grants themselves, so it’s not a given that these funds would automatically remain available absent the flow of CNCS dollars. Still, a very modest redirection of the over $400 billion that Americans give to charity each year would be more than enough to make up the difference. Prospective grantors might welcome the chance to support programs and organizations that demonstrate an ability to effectively mix volunteerism and charity. State governments, nearly all of which have a State Service Commission in place to funnel formula grants from the CNCS to local recipients, could also elect to continue funding the programs, as could local governmental institutions such as school districts.
The impact that elimination of the CNCS would have on the operations of current grantees would not be uniform. Organizations for which CNCS grants tend to account for a small portion of their revenue, such as Habitat for Humanity International, Teach for America, or the Student Conservation Association, would be less-affected than those for which the agency provides a larger share, such as City Year or Public Allies. A Congressional Budget Office report recognizes that: “In the absence of federal funding, the volunteer programs could continue to operate, but only to the extent that state and local governments and private entities chose to fund them.” Organizations with large and well-established sources of non-federal funding would undoubtedly have a smoother transition.
Still, for all of the above, total elimination of the CNCS is not the only option on the table. It certainly appears unlikely in practice, given Congressional pushback against the idea, broad public support for volunteer service, and arguments against elimination from respected voices on the topic, including from the President’s own party. One alternative the agency might consider is the revival of a proposal that dates back at least to the early days of the George W. Bush administration. As articulated by former CNCS Chief Executive Officer Leslie Lenkowsky, the idea is to supplement or replace the current organization-focused AmeriCorps grant structure with a volunteer-focused one. Under this system, prospective volunteers would apply to the CNCS directly for a federally-funded service voucher which they could redeem at any properly-accredited charitable organization willing to host their service. The effect would be to shift the choice of service opportunity more towards the individual who will actually be volunteering.
In theory, such a system has much to recommend it. It addresses the concern that the federal government shouldn’t be directly involved in deciding which charities to support. It reduces the CNCS’s grantee oversight burden since the agency would no longer be engaged in direct organizational grant monitoring. Though many volunteers would doubtlessly still choose to serve at large and well-established nonprofits, a voucher system would open the door to service at smaller organizations that may hold special significance for the volunteers or their local communities. Lenkowsky offers the examples of nursing homes and church groups, but one can easily imagine the system supporting service at a myriad of places from animal shelters to county parks departments. Finally, it has been noted that “…the biggest benefits of national service seem to accrue to service participants themselves, rather than to the populations and communities they are supposed to serve.” If the act of service itself is as much the ends as it is the means, it makes sense to place as much control of that service in the hands of the volunteer themselves, thereby maximizing the benefits he or she hopefully will receive from it.
It may well be that the CNCS can correct the problems it faces and reorganize itself into a more fiscally-responsible and effective agency. An ambitious Transformation and Sustainability Plan aims to completely overhaul its operations, though the Office of Inspector General is seriously concerned that such dramatic reorganization “overestimates the Corporation’s capacities” and creates “a substantial risk that CNCS will not be able to achieve its mission of supporting national service.” Whatever ultimately becomes of the agency, the bottom line is that volunteer service must be viewed separately from a single bureaucratic vehicle for that service. The latter only exists to support the former, and to the extent it fails to effectively do so, other options should be explored. The fiscal inertia inherent in government funding should not substitute for programmatic efficacy, especially in something as important to America’s societal fabric as helping one another.