By Catherine Komp,
NC Local Newsletter Editor
Nonprofits across North Carolina reported $82 billion in revenue on their most recent tax filings, according to ProPublica’s Nonprofit Explorer. If nonprofits were classified as a sector, they’d be in the top five – with an estimated 11,000 of them providing more than 360,000 jobs across the state. That’s the most recent data from the North Carolina Center for Nonprofits.
While nonprofits have a sizable presence and economic impact in many communities, they aren’t often reported on like other industries or local government. The Chronicle of Philanthropy calls this “one of the most undercovered — but crucial — sectors of American life.” They’re partnering with the Associated Press and the Conversation to expand accountability coverage of nonprofits, charities and philanthropy through a year-long newsroom fellowship that aims to support an in-depth project as well as instill this kind of coverage for the long term.
WHQR Public Media is a 2023 fellow and used the fellowship to dig into the $1.25 billion foundation that county commissioners created from the sale of the county-owned New Hanover Regional Medical Center to Novant Health. They just published their months-long investigation: “The New Hanover Community Endowment’s uneven path to ‘transformational change’” following coverage earlier this year of some of the Endowment’s first grant recipients.
We chatted with News Director Ben Schachtman and Reporter Rachel Keith about their experiences covering the Endowment, local nonprofits and what they learned during the fellowship. Our conversation has been edited for length and clarity.
NC Local: Your piece points out that over the last year, WHQR received a lot of inquiries from the community about the Endowment, which will be ramping up to distribute $60 million a year. What did people want to know and how did this inform your investigation?
Ben Schachtman: Since this was announced in 2020, I have well over 100 calls, text messages, direct messages on social media, emails. A lot of people in the community just didn’t understand what the Endowment was. We don’t have any major philanthropic bodies here in southeast North Carolina. Most of the nonprofits here are sustained by government grants, which is a whole other thing, and by the city of Wilmington and New Hanover County, to the tune of around $3 or $4 million a year. So even understanding at sort of a legal organizational structural level what the endowment was, people were confused. And then people didn’t understand what the process would be like to get an order of magnitude more money than anyone here has ever seen into the community. That was kind of compounded by the fact that I don’t think the Endowment knew either.
Rachel Keith: We could see the explosion of how much money was involved at public meetings. School board candidates or people that were elected to the school board constantly talked about using that money. People talked about applying to the Endowment to fix all the issues in the school system. And it always comes up now in conversations that there is this endowment and that could be a pot of money that we can use now to fix this problem we’re dealing with.
NC Local: You both had been covering the sale of Hanover Regional Medical Center to Novant Health for years, but when did you start looking more deeply into the Endowment?
Ben Schachtman: So I don’t mean this in a negative way, but it was kind of a black box, if only because they had basically one employee. When they were going into the first grant cycle they hired Lakesha McDay as a VP, I think right in the middle of the grant application window, but there wasn’t really like a staff that we could talk to. As I point out in the article, the announcement of the grants was literally CEO William Buster reading a list of 100 and some names. And it was right before Christmas and no one was available to talk. It was just like, what the hell just happened?
So people in the community, in the nonprofit world and the government sector, they were trying to figure out how did these grants get picked? Why did the people who didn’t get them not get them? Where do these amounts come from?
Rachel Keith: I would add for this first round of grants a lot of it was “What can you get done in a year?” A lot of these were capital based projects, so they were trying to get money out for updates to buildings or if you need vehicles. This new round, they’re looking to try to do more systemic change. But this first round again was kind of like an easy “What can we give you money for, for a physical product that you need.”
NC Local: So with this first cycle of grant making, totalling about $9 million to about 100 nonprofits, how did you choose which grantees you were going to take a look at?
Ben Schachtman: The newsroom broke it down and we each kind of picked 3 or 4 organizations to just reach out to and see how receptive they would be to talk. Some of this didn’t really end up in the reporting, it was just important for us to talk to a lot of nonprofits about their experience, so we would have a better sense of what was a one off, what was a trend. And a lot of these conversations were informal and on background because no one wants to alienate themselves from the Endowment.
This might be the touchiest subject we’ve ever approached with people at an institutional level because you gained so very little by saying something wrong about the Endowment. I have no sense that the Endowment is seeking to retaliate against people that bad mouth it, or even say things were confusing. But people are just very, very cautious about what they say about the experience. And so we sort of divided and conquered and then we did some public records requests. Rachel, help me with that. She did some public records requests for Cape Fear Community College, and I did some for UNCW because at least those were public bodies. We could look at their communications. We could look at their actual grant application compared to what the Endowment put online and there was a lot more data, a lot more information there that we could look at.
Rachel Keith: The staff that’s with the Endowment now have been doing these roundtables per topic, and I went to the education one, Ben’s been to one on public safety. Our colleague went to another one and they invite 20 different leaders in that subject area to kind of talk freely. And I witnessed a lot of honest talk about what they were dealing with and unfortunately, I couldn’t report on those meetings [under Chatham House rules], but I could get in touch with people afterwards to say would you mind saying this on the record? But there were those conversations, and it does seem to me like William Buster does want to hear what they’re facing and he doesn’t want people to sugarcoat what’s going on. I mean, I haven’t witnessed that.
NC Local: Were UNCW and Cape Fear Community College the only two applications you could request public records for?
Ben Schachtman: Yeah, by and large. Nonprofits are aren’t subject to open records law, and neither is in the endowment, something that irks me slightly. It irks me a lot. I think we could make a good case in court to take the Endowment and hold them to public records law. I do think the fact that the county appoints a minority of board members would not be in our favor. I think we can make a good case. Honestly, I think in North Carolina courts, we would lose. And that’s a lot of time and energy and money. And frankly, this, this the way we went about it was more time consuming. But I think it was probably the better use of time and energy.
NC Local: What about any discussions while when the Endowment was being formed that there should be more transparency?
Ben Schachtman: It’s interesting if you go back to 2017, 2018 before the hospital sale, the hospital was always very, very proud and would reiterate all the time that they got no money from the county. But the fact of the matter is on paper, under the law, the hospital belonged to the people. And so when it was sold, the proceeds belong to the people. And the long and short of it is that they took a public asset, sold it, took the public money and squirreled away in a private foundation. They privatized over a billion dollars of taxpayer money.
The decision to make this private and shield it from public records law, that happened in open session of the Board of Commissioners and people certainly did complain, but it didn’t sway the county commissioners.
NC Local: How transparent has the endowment been with you all when you ask for information?
Ben Schachtman: About certain things, they have been transparent. They’ve always been willing to pick up the phone and talk to us. One thing they have not shared with us is you know who didn’t get grants, and that’s totally standard operating procedure for any private foundation. So for like the Knight Foundation or MacArthur Grant, we don’t know who applied and was rejected.
But with the county, we would know and especially because this is such a small community, all things considered, and there’s so much money, the concern is that and this is not an allegation against the current board, but the concern is that there could be a situation where the board of the Endowment is playing favorites and that there are political connections. And only being able to see who gets the grants and not knowing who didn’t get the grants makes it a little harder to provide oversight, to be a watchdog reporter on the Endowment. I think the Endowment is aware of that. I think they are trying to walk a line and be more transparent than they legally have to be. But I still think they are obviously less transparent than a government body would be and I think there will be some friction about that.
Rachel Keith: When they gave out the money and [nonprofits] had a mid year report due and a yearly report, those are not online anywhere. You can ask for them. And with some of the nonprofits, I said, “Could you send me your report?” And some of them would say, sure, I’ll send it over. But then I had a couple that said wait a minute. I need to ask the Endowment if this is appropriate. My colleague Kelly ran into “No, I’m not sharing this with you.” There’s no mechanism to show that accountability piece that if they received that money, that this is what they actually did with it. I’m sure the Endowment is keeping up with that, and if they do squander the money or they don’t feel like it went to a good cause or what they said they were going to put it toward, then they’re probably not going to get money in the future.
NC Local: Your article talks about the first round of grant giving being “chaotic” and the Endowment’s lack of a strategic plan to guide giving. Did they provide you with any information about what criteria they used or a rubric to select grantees?
Ben Schachtman: No. We had the current chair Bill Cameron in here for a longer interview and what he was willing to tell us was that there were some that were very clearly going to do good, grants that fell right into one of their four buckets, the Endowment’s four areas of interest. And there were some that were very clearly not, that had nothing to do with those four things. And then there were some he said were tough, but he wouldn’t really elaborate on what made them tough and frankly, there are some grants.
For example, this didn’t get into the final article, but it was interesting. We went and met with Catholic Charities. And their grant was, to me, the ideal one year grant because you can go to their property in Northern New Hanover County and see exactly what they got. There’s a walk in freezer, a walk in fridge, there’s a trailer that’s got like a dozen washer dryers in it that you can take in a disaster situation to anywhere and help people get a clean pair of clothes (which having lived through a hurricane with no power, that’s pretty crucial.) They have a mobile command center. So you can look at their grant and see everything in a parking lot, basically.
And then some of them were very unclear. You know, it was capacity building, was all we knew, you know, over $100,000 for capacity building and that’s an incredibly vague term. So like Rachel said, we believe that the Endowment is not in the business of throwing away money and that they are checking up on these people and holding them accountable. But we can’t hold them accountable because there’s very limited information. So you know, trust but verify, we only have half of that.
NC Local: And then two Endowment board members are no longer on the board. Did you have difficulties getting information about that?
Ben Schachtman: Yes. I reached out to a number of them about that issue and about other issues. It’s my understanding there are more fiscally conservative people on the board, people who have concerns about some of the ideological framework that some of these grants might be given through. None of them wanted to talk to us. They sent everything through proper channels. I will say for a young board, they’re a very well disciplined board.
Rachel Keith: And the two new appointees were the two commissioners that voted to sell the hospital.
Ben Schachtman: Yes. That was a very interesting situation because even the founding documents require them, and I’m paraphrasing the language here, to pay very close attention to race, sex, gender, ethnicity when they’re appointing members. And in addition to not reappointing, I just say removing because that’s what happened, Hannah Gage they also did not reappoint Dr. Virginia Adams, who was the only Black woman on the board. Josh Stein said that concerned him, that it concerned the Attorney general’s office. He doesn’t appear to have done anything about it. We reached back out to him a couple of weeks after that happened and he didn’t have anything else to say. Which is the same thing that happened with the county boundary issue where he said that the endowment should not be limited to just New Hanover County. But he hasn’t taken any legal steps to do anything. So, it’s kind of an empty sentiment.
NC Local: You include a disclosure in the story that WHQR management applied for a grant with the Endowment, but the newsroom wasn’t involved and didn’t know any of the details. Was that an intentional decision early on since you knew this would be an issue you’d be covering? And will that firewall continue anticipating both future applications to the Endowment from WHQR and you continued reporting on the topic?
Ben Schachtman: It was definitely intentional. We added a similar note to a piece we did at the beginning of the year regarding the Endowment’s first grant round. We haven’t mentioned it every time, but if it’s the issue of grants that did and didn’t get accepted, we add that notice. In the future, we will likely apply for grants from the Endowment again, and some of that will include our newsroom I imagine. So, it’s good that our station manager takes point on writing grants like that — he serves as a firewall there. And if we do get a grant, particularly one that supports the news team, then we’ll definitely disclose that as well. We hope our reporting speaks for itself — no fear or favor — but a disclosure notice never hurts, in my opinion.
NC Local: In addition to those things, which may deserve some follow up later, what other questions do you want to look at or remain unanswered?
Ben Schachtman: The biggest one for us and this is the one that’s been really hard for people to get their heads around, is what the hell does transformational change mean? That phrase has been thrown around in almost every meeting I’ve been to. What it really boils down to from my many conversations with [Endowment CEO] William Buster is a lot of nonprofits, and I don’t mean this disparagingly, but they are not fixing the problem. They’re treating symptoms of the problem. Bikes on Christmas for kids who are living in poverty. I’ve told the story before. I’ve been there on the Christmas Day bike giveaway. It is amazing. The look of joy in the kid’s face. I have nothing negative to say about that.
But it doesn’t do a damn thing to change the conditions that are the reason the kid didn’t get a bike in the 1st place. The broken families, the criminal justice system, the redlining, the economic inequality, all of the nasty history of American culture. And so that is kind of what Buster is saying is that with $60 million a year, we can take a swing at those issues. And it’s really unclear from where I’m sitting now how we get from our current group of nonprofits, who are all operating on a scarcity model, who are in many cases treating major social problems symptomatically — how do we get that group of people, that community to reimagine what they’re doing and start tackling the actual root of some of these issues?
I’ve talked to a few people who have some big ideas. And some of them sound crazy, but they’re less crazy when you have $60 million a year, every year, forever. But that’s the biggest question for me is how do they change the mentality of an entire nonprofit community?
Rachel Keith: When Ben went to the Endowment’s public safety meeting and when he was talking to me about what happened there, I think a lot of them don’t know how to measure what they’re trying to actually do. You know, community commitment or engagement and you’re like what? That’s not something that we can really see and talk about, you know “this is the end goal.” And I think that’s the struggle with a lot of organizations and their goals. But make sure that you really are defining what you want to solve and how you’re going to measure that and how that measurement can be public facing to some degree to hold accountability, right?
NC Local: This coverage was supported in part through your fellowship that you got through the Chronicle of Philanthropy. What didn’t you know about covering nonprofits and foundations and charities that this fellowship helped you with?
Ben Schachtman: For me there were two big things. One, it was just access to experts who can tell us how these things usually work, what the best practices are, and to use that as a framework to look at a very new, very large philanthropic organization. The second part was being able to have conversations with them about how you report on nonprofits, because it’s sensitive. With the government, most reporters I know feel zero compunction about attacking the government for making mistakes. They’re the ones in power. They have absolute authority. We’ve turned over a lot of our rights to them and we give them our money and so we hold them 100% accountable and we don’t feel bad when they make a mistake. We jump all over them. And that’s our job.
With a nonprofit, it’s different. These are people who are, in many cases, volunteering their time. They could make more money in the private sector. Their end goal is just public good. I can’t always say that for the government, you know. And so it feels awkward, a little bit, to beat them up for mistakes. You almost feel bad holding them accountable.
But nonprofits have become such a big part of our culture, they take on so much responsibility and they are ultimately the recipient of so much public money that they’ve become almost like another branch of government. And so being able to talk through that process of what the tone is and what’s a reasonable level of accountability for a nonprofit? That was good, it was great to be able to bounce questions and issues like that off of them.
Rachel Keith: And they’ve been doing trainings on 990s and there’s one coming up on 501c3s. And they did a really cool training on solutions journalism and that doesn’t mean that there’s an answer to every problem, but how you approach that in an ethical way. You know there’s a problem, here’s these new ideas, here is how it’s being implemented is going well and what are some shortcomings, that’s solutions journalism. People feel like there’s something that’s being done to kind of fix this intractable problem. And so I found that really helpful, they gave us examples and offered their staff to help us write solutions journalism stories. I thought that was an interesting perspective that I’d like to take in my writing in the future.
NC Local: Could you share any tips for others looking into covering nonprofits, charities and foundations in their communities?
Ben Schachtman: There’s an incredibly rich amount of data out there through GuideStar and Pro Publica. North Carolina is an exception where non profits don’t have to file what they file with the IRS with the state. But in other states there’s a treasure trove of data at the state level usually a Secretary of State will have that data. And ways to look for pain points in nonprofits. This is all recorded in their federal filings: how much money they spend raising money and how much money they actually raise. You’ll see there are some nonprofits, without naming names, that will throw a very lavish black tie ball every year and it’s $1,000,000 once you’ve paid the guest speaker and the band and rented the five star hotel and had the best chef in town cater it. And then they raise $1,000,000. And it’s like, does this nonprofit just exist to throw this party? And the answer is yes. And then you can tell that there are some that for every dollar they spend, they’re bringing in $10.
The other thing is to look at how much of their expenditures are overhead, administrative overhead, looking at the top salaries basically. And again, we’ve seen a lot of amazing nonprofits where people are making, frankly, less than they should be. People who are working 60 hours a week, every week for an amazing cause and paying themselves $45,000 a year. You know, where you can’t even afford to live in the region where you’re doing the work. And then there are some nonprofits where the administrative salaries are through the roof.
So those things that are crystal clear in the 990, no one can argue with it, being able to walk through those filings with someone that was super helpful.
Rachel Keith: The trainings also talked about this trend, that a lot of this nonprofit work goes to middle class working people. But when you look at it, is it going to the lowest level of poverty and that’s the issue with the Endowment. New Hanover County is in a lot better shape than our surrounding counties. And those people that came to the hospital from surrounding counties, supported the hospital, but they’re the ones with the most needs. And that was the big flashpoint with the board, [whether grants could be distributed outside of the county]. So just trying to look into the most vulnerable, and who’s it really helping.
Ben Schachtman: The last just real quick last thing I will add is that the Chronicle of Philanthropy gives you something called a buddy. Our buddy was Drew Lindsay. This sounded very cheesy to me, almost patronizing when they first brought it up. But honestly it’s been crucial. It’s been so helpful to have someone who you can, day or night, just send a quick email like, hey, I came across this, am I crazy? Sometimes you’re really fixated on this thing, but this it’s quite common and OK in the philanthropic world. I’m used to government accountability and he’s like this actually isn’t as much of a problem over here. And sometimes he’d be like that’s weird, you should definitely dig more on that. So I’m a convert. I enjoyed having a buddy.
Want to strengthen your coverage of nonprofits and philanthropy in your community? Applications are open for the Chronicle of Philanthropy’s 2024-25 Philanthropy & Nonprofit Accountability Fellowship. The initiative provides news organizations with $30,000 to subsidize the work of editors and reporters, as well as tools and training during the year-long initiative. Deadline: January 8, 2024.