Nonprofit Deaths
“NEW BEGINNING” BY LEMYRE ART/WWW.LEMYREART.COM

Editors’ note: The following mini–case study is part four of a series of studies submitted as part of the graduate course “The Nonprofit Sector: Concepts and Theories,” taught by Chao Guo, associate professor of nonprofit management in the Penn School of Social Policy and Practice at the University of Pennsylvania. Below is an introduction by Mark A. Hager, associate professor of philanthropic studies in the School of Community Resources and Development at Arizona State University. This article is featured in NPQ’s winter 2014 edition, “Births and Deaths in the Nonprofit Sector.” Click here to read part one, part two, and part three.

After the article’s conclusion, scroll down to read a clarifying note from the Nonprofit Quarterly‘s editorial staff.

The story of ACORN illustrates how nonprofit organizations, like organizations in other sectors, are not infallible. ACORN’s downfall exemplifies what happens when a variety of factors are allowed to conspire to end an organization’s life. However, a more in-depth analysis of ACORN’s death exposes possible signs of life. Does ACORN’s legacy live on within the disaffiliated local branches? In other words, is ACORN truly dead, or is a reincarnation taking place?

Death

ACORN’s death occurred in 2010, when the organization filed for Chapter 7 liquidation. But the death of ACORN cannot be fully understood without looking at the organization’s history. Founded by Wade Rathke and Gary Delgado, ACORN began in 1970 as Arkansas Community Organizations for Reform Now (the organization later changed “Arkansas” to “Association of”). ACORN became a national and international network of community organizations, with an emphasis on advocating for low- and moderate-income families on social issues. During its lifetime, ACORN’s membership included 175,000 families in 850 chapters in seventy-five cities in the United States and abroad.1 But as the years progressed, the ACORN story revealed a plethora of ways in which to effectively kill an organization.

ACORN’s demise was predicated upon years of poor leadership and mismanagement, among other factors. This is seen in the decision making of the leadership during key periods of the organization’s history. Media coverage began highlighting the lack of accountability within the organization when, in 2008, ACORN’s get-out-the-vote organizing prompted allegations of nationwide voter fraud by the group.2 Another costly blow to the organization was the revelation that same year that Dale Rathke, the cofounder’s brother, had embezzled $948,607.50 from ACORN and affiliated organizations in 1999 and 2000.3 Worried that conservative opponents would use the news of embezzlement against the organization, ACORN leadership had not reported the fraud; instead, they chose to keep the matter confidential, and had not even informed the board of directors.4 When the embezzlement and decade-long coverup of the crime eventually came to public light via a whistleblower, the organization, with its reputation already tarnished by the voter-fraud allegations, struggled to maintain its credibility.

Subsequently, it was revealed in September 2009 that a conservative adversary of the organization’s had caught on film members of a local branch of ACORN giving advice to activists posing as a pimp and a prostitute on how to cheat the system and lie on bank loans.5 Although ACORN was found to have done nothing illegal, the organization’s handling of the scandal brought its management even more into question, and highlighted how poorly the organization managed screening and intake processes, as well as staff supervision and training.6 According to The Hill, less than one week later Congress decided to pass an act to defund ACORN. The federal government had been a steady ACORN funder, giving the organization $50 million dollars between 1995 and 2009; but, as then–House Minority Leader John Boehner said at the time, the bill “indicates that the writing is on the wall for ACORN.”7

Organizations can rise or fall depending on how they react to adversity. An independent assessment of ACORN’s governance, by Senior Counsel with the Proskauer Rose law firm Scott Harshbarger (former Massachusetts Attorney General and former CEO of Common Cause), describes an organization that was eager to expand and did so too quickly and without adequate infrastructure. Harshbarger also found that ACORN was straying from its core mission—and mission drift, whether unintentional or purposeful, can be a strong factor in an organization’s demise. In addition, Harshbarger found that ACORN’s complex governance structure was prohibiting it from maximizing its efficiency. ACORN’s national structure was a 501(c)(3), its local chapters were 501(c)(4)s, and there were boards for both arms of the organization. Although the organization included 501(c)(3)s, 501(c)(4)s, 527s, PACS, and for-profit entities, the power was concentrated in only a few members, and it was alleged that the powerful few were not accurately representing the stakeholders and constituents.8

ACORN’s mismanagement was costly, yet the organization did not take the opportunity to learn from its critical errors. Harshbarger’s management audits brought no response from the board, and ACORN’s nonresponse—coupled with its failure to put a reform plan into motion—brought the organization yet closer to its demise.

ACORN’s spiraling path downward overshadowed the organization’s accomplishments as a whole, as well as the accomplishments of its neighborhood chapters and its affiliates.9 However, some chapters disaffiliated from the organization just prior to its closure and continue to remain open today under different names. So is ACORN really gone for good, or does its legacy live on, for better or for worse?

Reincarnation

What does one do when an organization is getting ready to close yet the issues it addressed in the community are still unresolved? This is the question many ACORN chapters began asking in 2010, when the organization readied to close its doors. Two of ACORN’s largest chapters, in New York and California, were the first to separate from the umbrella organization, with many others following suit shortly thereafter.

ACORN’s California chapter, which represented about an eighth of ACORN’s national membership, changed its name to Alliance of Californians for Community Empowerment (ACCE) in January 2010. The newly founded group supported a comparable mission, was staffed by many of the same employees who had worked for ACORN, and was mostly funded by the same donors. The former head organizer for the California chapter, Amy Schur, was named executive director of ACCE.10

Suspicions abound that ACORN is still alive and well, hiding behind alternative names of the “new” organizations. Darrell Issa, California Republican representative on the House Committee on Oversight and Government Reform, issued a written statement to Fox News likening these metamorphoses to a “criminal” who changes his or her name but continues to operate much as before. Issa described the new entities as remaining, when it came down to it, the same corporation with the same board, staff, and people—in other words, with having changed in name only.11

Issa was not alone in declaring his concern. The Capital Research Center reported that ACORN is still being led by Wade Rathke at ACORN International (under the name Communities Organized International [COI]) since 2005.12 Additionally, Cause of Action, a nonprofit that focuses on government accountability, keeps a list of rebranded former ACORN entities, still-active ACORN entities, and ACORN allies on its website. As of August 2012, the website listed 174 active organizations.13 (The list has not been updated since that time.) Two of the active organizations, Affordable Housing Centers of Pennsylvania (AHCOPA) and ACTION United, are currently housed where the former ACORN chapter of Pennsylvania called home. While AHCOPA’s executive director Kenneth Bigos says that the organization does not have direct ties to ACORN, AHCOPA’s website states that the organization has been operating since 1985, which is the same year that ACORN’s housing branch started operations.14 In contrast, ACTION United’s website puts its establishment date as 2010.15 AHCOPA’s website lacks any information linking it to ACORN, while ACTION United’s website clearly acknowledges the link: “ACTION United was formed in April 2010 by staff and former leaders of Pennsylvania ACORN, which was destroyed by right wing forces angry at the 1 Million voters registered by ACORN nationally in 2008 and the results of that voter engagement. Seeing a strong need to continue the work done by PA ACORN for over 30 years, ACTION United has continued to employ much the same organizing model as ACORN.”16

According to Fox News, ACORN’s housing sector lost more than any other division within the organization. The federal freeze in funding decreased the housing budget by 75 percent, from $24 million in 2009 to $6 million in 2010 across all of the organization’s remaining offices. The organization reduced the number of families to whom it provided financial advice from twenty thousand to ten thousand.17 Bigos has acknowledged that there is still an overwhelming population of families in Pennsylvania who need personal finance education.18

AHCOPA has a staff of five: three counselors, the executive director, and a part-time administrative assistant. According to Bigos, local residents are required to attend a First-Time Home Buyer Counseling and Education program, which is a group educational workshop. Once the individual has attended the workshop (provided by a local realty agency), the attendee can request one-on-one counseling with a housing specialist. Individuals are also welcome to meet with foreclosure specialists if they are at risk of losing their homes. When questioned about the relationship between ACORN and AHCOPA, Bigos seemed hesitant to acknowledge any connections outside of his organization’s fundamental mission to provide financial counseling to community residents and “some advocacy work on the side.” Bigos did acknowledge that some members of AHCOPA’s board of directors were formerly with ACORN, but, he added, AHCOPA has a different tax identification number and different funding from that of ACORN Housing Corp. in the past.19

AHCOPA’s next goal is to develop a relationship with Habitat for Humanity Philadelphia. Bigos hopes that families who are not selected through Habitat’s housing project will be able to go to AHCOPA for counseling with the aim of being selected during the next Habitat homeowner search. Additionally, Bigos envisions a program where individuals who are not interested in living where Habitat is currently building can come to AHCOPA to find out how they can finance their home in a location of their choosing without Habitat’s financial assistance. The goal would be to help improve applicants’ credit scores to ensure a low interest rate, a service that is similar to that provided by Habitat. According to Bigos, around 90 percent of AHCOPA clients live on incomes that are approximately 80 percent below the area’s median income. This means that the household income of a family of four is below $63,000. AHCOPA hopes to help such families secure a home with a value of $80,000 to $110,000. The only fee that AHCOPA charges for its services is $12.25 for an individual credit report or $22.50 for a joint report.20

• • •

While AHCOPA and Action United are attempting to provide assistance that ACORN used to provide to the Philadelphia community, it is clear that there are many similarities between the new organizations and ACORN—from values to staff members to protocol. Is it really possible to transform how an organization functions by changing its name but keeping its location, ideas, and staff members the same? And, was it appropriate for the new organizations to keep the same individuals running their offices, considering that there had been so much corruption in the old organization? Some may decide not to donate or request financial assistance from these organizations purely because of the association. The hope is that organizations like ACTION United and AHCOPA will be able to succeed in their mission to help their local communities, even as ACORN goes down in the books as one of the most catastrophic suicides in nonprofit history.

Notes

  1. “Association of Community Organizations for Reform Now,” ACORN, accessed October 15, 2014, www.acorn.org.
  2. “18 Former ACORN Workers Have Been Convicted or Admitted Guilt in Election Fraud,” November 26, 2010, www.foxnews.com.
  3. Stephanie Strom, “Funds Misappropriated at 2 Nonprofit Groups,” New York Times, July 9, 2008, www.nytimes.com/2008/07/09/us/09embezzle.html.
  4. Ibid.
  5. Bruce Trachtenberg, “Good News for ACORN,” Nonprofit Quarterly, March 3, 2010, dev-npq-site.pantheonsite.io/daily-digest/1932-nonprofit-newswire-good-news-for-acorn.html.
  6. Rick Cohen, “An Independent Governance Assessment of ACORN: The Path to Meaningful Reform,” Nonprofit Quarterly, December 7, 2009, dev-npq-site.pantheonsite.io/philanthropy/1650-an-independent-governance-assessment-of-acorn-the-path-to-meaningful-reform.html.
  7. Molly K. Hooper and Walter Alarkon, “House Votes to De-Fund ACORN,” The Hill, September 17, 2009, thehill.com/homenews/house/59281-house-votes-to-defund-acorn.
  8. Ibid.
  9. Ian Urbina, “ACORN on Brink of Bankruptcy, Officials Say,” New York Times, March 19, 2010, www.nytimes.com/2010/03/20/us/politics/20acorn.html.
  10. Kate Linthicum, “California ACORN Breaks Off into New Nonprofit Group,” Los Angeles Times, January 13, 2010, articles.latimes.com/2010/jan/13/nation/la-na-acorn13-2010jan13.
  11. Stephen Clark, “An ACORN by Any Other Name Still Smells like an ACORN, Critics Say,” March 26, 2010, www.foxnews.com.
  12. “ACORN International: Wade Rathke shakes down the whole wide world,” October 2, 2013, capitalresearch.org/2013/10/acorn-international -wade-rathke-shakes-down-the-whole-wide-world.
  13. “CoA Uncovers Still-Active ACORN Entities, ACORN Allies, and Rebranded ACORN Organizations,” Cause of Action (blog), August 22, 2012, causeofaction.org./still-active-acorn-entities-acorn-allies-and-rebranded-acorn-organizations.
  14. “About Us,” Affordable Housing Centers of Pennsylvania, accessed November 9, 2014, ahcopa.comcastbiz.net/about-us.shtml.
  15. “About ACTION United,” ACTION United, accessed November 9, 2014, actionunited.org/about. html.
  16. “History,” ACTION United, accessed November 9, 2014, actionunited.org/history.htm.
  17. “ACORN Branches Rebrand after Video Scandal,” March 15, 2010, www.foxnews.com.
  18. Kenneth Bigos, in an interview with Marissa Meyers.
  19. Ibid.
  20. Ibid.

Emily Conners is an AmeriCorps VISTA through the Corporation for National and Community Service and a graduate student in the Nonprofit Leadership program in the Penn School of Social Policy and Practice at the University of Pennsylvania. Marissa Meyers is a graduate student in the Nonprofit Leadership program in the Penn School of Social Policy and Practice at the University of Pennsylvania.

ACORN

NPQ has received some criticism about the case study above on ACORN. As we considered the concerns expressed, we recognize there are some things NPQ should have done differently, primarily in editing the article for source material.

To be more specific, some of the sources cited above, like Fox News and the Capitol Research Center, are ideologically biased, and no acknowledgement was made of that fact. Additionally, other sources should have been clarified and their perspectives explained, such as Darrell Issa, who has made broad-brush attacks on ACORN, and Cause of Action, which is a conservative organization that was founded by one of Issa’s former staff members at the Committee on Oversight and Government Reform.

Other issues that might have been addressed in editing have to do with the need for additional context-setting for ACORN, whose involvement in political mobilization and advocacy made it vulnerable. The student authors, to be clear, were looking at the situation primarily through the lens of management. These problems should have been picked up in editing, and NPQ takes full responsibility for any mistakes of balance.

Readers are encouraged, therefore, to look back over other articles we have written about ACORN over an extensive period to get a fuller picture of the organization and the reasons for its demise:

The (Infuriating) Rest of the Story on that ACORN “Sting” (March 11, 2013)
Project Veritas Voter Fraud Sting Backfires (May 25, 2012)
Republicans Imagine the Hand of ACORN Pulling the Strings on Occupy Wall Street (November 14, 2011)
Why Sting Operations Cheapen Public Policy Discourse (March 29, 2011)
ACORN Foe Tries to Embarrass CNN Reporter on a “Palace of Pleasure” Boat (October 4, 2010)
ACORN on Brink of Bankruptcy, Officials Say (March 20, 2010)
Acorn Antagonist Arrested in New Orleans (January 27, 2010)
An Independent Governance Assessment of ACORN: The Path to Meaningful Reform (December 7, 2009)