But I have a broader concern, which is that, as a sector, we seem to be confused about what we are about and the value we provide to society as a whole. I believe that while it is important for us to address operational issues, there is a bigger issue we should be addressing, and that is, What is our value to American society? What is our true purpose as a sector distinct from government and for-profits?

PND: What do you think the Senate Finance Committee will do with the panel's recommendations?

AA: I suspect the committee will adopt most of them and will take concrete action in a few areas — credit counseling, vehicle donations, to name two — where it feels the abuses have been egregious.

PND: You've written that regulation at the state level has far more serious consequences for the day-to-day operations of charities than regulation of the sector by the federal government. Why is that?

AA: If you look at all the various public agencies and entities that have their fingers in the work of nonprofits, it becomes obvious pretty quickly that there are far more reporting requirements at the state and local level than there are at the national level. I'll give you an example. We monitor proposed legislation at the state level and its potential impact on the sector. In 2002, to give you an example, state legislatures proposed more than twenty-five hundred bills that did or could have had some impact on nonprofit organizations. Most of those involved reporting requirements or restrictions on what nonprofits can and can't do and would have placed additional administrative burdens on organizations, if they even knew about the requirements, which is not always the case with small nonprofits.

PND: Some of the regulations we're talking about are beneficial, though, aren't they?

AA: Sure. The effort by various state attorneys general to regulate the activities of professional fundraisers is one example. Another has to do with requiring nonprofits of a certain size to have regular audits of their financials. California law, for example, requires nonprofits with budgets of $2 million or more to conduct an annual audit of their financials. Of course, most foundations require audits of their grantees, so it may be a moot point whether the threshold is $2 million or some other number; if you're a nonprofit and you want that grant, chances are you're going to have to audit your financials.

PND: Do states have the power to change or undo regulations passed at the federal level?

AA: No.

PND: The changing regulatory environment is only one of the external factors nonprofits leaders have to deal with. Another is the constant struggle to secure resources, which, if anything, has intensified over the last few years, in part because the number of nonprofits continues to grow while funding for the sector has remained flat. I know you're asked this question all the time, but I'm going to ask it anyway: Are there too many nonprofits in the United States?

AA: I've written quite a bit on this issue, and I think the answer depends on one's perspective. On one level, you can look at the question in terms of efficiency — that it makes sense for groups offering duplicative services in a community to combine their forces. But if we look at the contribution nonprofits make in our communities apart from the services they deliver — I'm thinking here of all the things they do to build social capital and strengthen civil society — then I'm not sure that efficiency is the metric we should be focusing on. In fact, I've argued that, given the lack of civic engagement in this country, we don't have enough nonprofits. I don't doubt that there will be, and probably needs to be, some pruning in the sector, whether through mergers or groups simply shutting their doors. But if we're willing to sacrifice some nonprofits for the overall good of the sector, we also have to be willing to redouble our efforts to strengthen the capacity of the nonprofits that remain.

PND: You've also argued that the nonprofit sector is a sort of social laboratory where risks can be taken without consideration of the bottom line. Do you think that, given heightened media and legislative scrutiny of the sector, nonprofits and the sector are becoming less willing to take risks?

AA: I do think there's a danger the voice of the sector could be, if not silenced, muted. And I also think we are losing our willingness to take risks and be the kind of social laboratory you're talking about. There seems to be less interest and investment in creating risky or innovative programs. And there certainly has been retrenchment at the federal government level. But it's not just about funding. I sometimes think we've lost our sense of hopefulness, our collective belief that, as a sector, we can make a difference. And some of that has to do with the fact that this administration is intimidating nonprofits and discouraging them from engaging in their constitutional rights to represent the issues and constituents they care most about.

PND: Are you referring to the situation last year involving the IRS and the NAACP?

AA: Well, that's certainly an example that bears looking at. There also was a case last year involving a Head Start where a letter went out to parents saying that they were not supposed to lobby because they were part of a nonprofit. The most recent example I can think of is H.R. 1461, the Housing Finance Reform Act, which includes a provision that prohibits nonprofits from applying to the fund if they have engaged in selected nonpartisan advocacy or voter registration activities in the last twelve months or "maintain affiliations" with nonprofits that engage in such activities. If it becomes law, it will be a serious blow to the affordable housing community and nonprofit advocacy rights.

The point is, there are a growing number of threats to the sector about what we are allowed to say and do. Just because we work for a nonprofit doesn't mean we've taken a vow to not be critical of policies we don't agree with. In fact, our history as a sector is all about being the space that encourages civic engagement and accommodates diverse points of view and constructive criticism. We have an obligation, when we see injustice or a policy that isn't working, to speak out. But there are a lot of forces right now that are working to discourage us from making those kinds of statements in a clear and direct way. And if we, as a sector, forfeit our ability to do that, it will be a sad day — not only for us but for society as a whole.

PND: Instead of providing general operating support or even special project funding, there seems to be a growing trend among large foundations to run their own programs. Is that a reflection, in your view, of a lack of confidence in nonprofits on the part of foundations, or is something else going on?

AA: I think it's a combination of things. You're right, we are seeing more foundations acting as operating foundations and wanting to be in control of programs. But I think it's more a reflection of the focus many foundations put on achieving results and having impact. So much of what we do in the nonprofit sector is concerned with longstanding social problems to which there are no easy solutions or answers. And that often makes demonstrable results hard to come by. But if you're a foundation that puts an emphasis on results, your tendency will be to more narrowly define what it is you hope to accomplish. That, in turn, can make it harder to find nonprofits with the kind of programs that address the need you want to address.

Let's remember another thing: The majority of funding for nonprofits is not coming from foundations. Foundations account for roughly 10 percent of nonprofit funding, and that percentage has been declining over the last twenty years or so. Government funding is still a significant source of revenue for most nonprofits — in fact, the average nonprofit receives more than 30 percent of its funding from government. But while that support is critical, as a sector we need to realize that it comes at a price. More specifically, it has serious implications for the notion of the nonprofit sector as a laboratory where risks and creative approaches to social problems are encouraged and taken. There's not a lot of room to be creative or to stretch beyond your traditional programs if the bulk of your funding is coming from a public-sector agency that has laid out, in great detail, exactly what it wants you to do. As a sector, we need to explore new models of funding that empower us and enable us to flexibly represent and serve our communities and constituents.

PND: How much of this sense of a loss of purpose you described earlier has to do with the aging of the baby boomers, many of whom started and/or went to work for nonprofit organizations in the 1960s and '70s and are closer to the end of their careers than the beginning? And do you agree with those who say the sector faces an impending leadership gap caused by the retirement, over the next five years or so, of large numbers of baby boomers?

AA: I think almost any issue of importance in society today — including the nonprofit leadership issue — is driven, in part, by the aging of the baby boom generation. But it's more complicated than that. As you suggest, a lot of baby boomers — and I'm one of them — were inspired to go out and change the world by the civil rights and anti-war movements, or had direct experience with either the Peace Corps or Vista. As we grew older and adjusted to our life circumstances, however, we became more and more involved in the day-to-day operations of our organizations and all the things that go into running and growing an organization. And along the way, some of us may have lost some of the fire that drove us into nonprofit work in the first place.

But let me tell you a story. In 2001, I did a series of eight visioning sessions in different sites around the country in which I tried to address the issue of what are we about as a sector. And the first thing I asked the participants in those sessions to do was to reflect back on what drove them to work in the nonprofit sector in the first place. Well, their stories, which in most cases were about wanting to give back and making a difference, were quite inspiring. At the same time, people also confessed to feeling a little...weary, and said they felt their organizations and the sector as a whole had become more bureaucratic. Don't get me wrong; when we gave people an opportunity to reflect on why or what had caused them to get into nonprofit work, their eyes would light up and they would remember the day or the moment as if it were yesterday.

In other words, their passion for nonprofit work is still there; it just needs to be reignited. And that's something we're trying to do address at NCNA through a number of initiatives, including the convening of what we're calling a Nonprofit Congress. As I mentioned, I've been doing a lot of reading about the nonprofit sector, including the landmark Filer Commission report. And that report, which was issued thirty years ago, details nine distinct functions of the sector, only two of which deal with service delivery. The other seven functions have to do with being a laboratory for social experimentation, making sure minority points of view are heard, extending American generosity to the international arena — all the things that make the nonprofit sector such an important component of civil society in this country. Unfortunately, what we've seen in the thirty years since the Filer Commission report was issued is a gradual reduction of the sector's involvement in many aspects of civil society and a much greater association of the sector, in the public's mind, with the service-delivery aspects of the work we do. There are a lot of reasons for that, and I've mentioned a few of them, but the point I want to make is that we need, as a sector, to renew our commitment to civic engagement and rediscover what we represent and what really inspires us.

PND: You travel a lot and have the opportunity to meet with nonprofit leaders from around the country. Do you see a passion for nonprofit work in the twenty- and thirty-something nonprofit leaders you meet?

AA: In 2003, we started a leadership program at NCNA called Generation Nonprofit, or GenNP, to help young and new leaders in the state association network connect with and learn from each other. And let me tell you, working with this group has been very inspiring. These young leaders have a lot of enthusiasm for working in the sector. And, as I'm sure you know, they bring a uniqueness all their own to the sector's work. In particular, this new generation of nonprofit leaders is looking to the Web and virtual technologies as a way to organize, communicate, and promote the work of the sector. It's exciting stuff, and I'm sure it will transform the nonprofit sector.

At the same time, I believe that there's a hunger for something out there, but it's not easy to articulate. Personally, I think people are hungry to trust and feel hugely disappointed and betrayed by many of the institutions they were taught to trust. That disappointment, in turn, has created a collective reluctance on the part of Americans to get involved in with institutions at all levels of society. I mean, look at the impact that corporate outsourcing and downsizing policies are having on people and communities. Look at the impact the administration's fiscal policies are having on people and communities. Look at the impact, in terms of civil liberties, that the war on terrorism is having on people and communities, particularly Muslim-American communities. It's all so complicated and happening on such a large scale that people end up feeling powerless to make a difference. So they keep their head down and retreat into small circles of family and friends. But it doesn't have to be that way; there are plenty of things the average person can do to make a difference, in their communities and in the world. And how we get that message out to people is something those of us who work in the nonprofit sector need to be talking about.

PND: When you encounter a group of people in your travels with that hunger to trust, that hunger to make a difference — especially if they're in their twenties or thirties — what kind of advice do you give them?

AA: Funny you should ask. I met with my twenty-something intern recently, and we got to talking about the Nonprofit Congress idea and what we hope to achieve with it, and besides thinking it was a really cool idea, she saw it as an opportunity to be part of something bigger than herself. I don't think she's unusual in that respect. Young people in our society want to contribute and are looking for places where they can make a difference. But the more we look and operate like the for-profit and public sectors, the greater are the chances that we'll lose these young people to other industries. I mean, why should a young person choose to work in the nonprofit sector if what we have to offer does not feel qualitatively different than what the other two sectors have to offer? On the other hand, if we remain true to our values, I think we have a good chance of remaining relevant and attractive to young people. And, down the road, that's essential if we hope to hand the torch to a new generation of leaders.

PND: So you're saying that our greatest value proposition as a sector is that we're the sector that cares about people and doing the right thing?

AA: To a degree, yes. Look, the private sector is not evil. The public sector is not evil. American society has achieved what it has thanks to the efforts of all three sectors. In fact, our most extraordinary results often are achieved when we work in partnership with other sectors. At the same time, each sector has a distinct role to play, and the role of the nonprofit sector is to inform, inspire, and involve Americans in civil society — and, in so doing, to strengthen American democracy. If you think about it, we're on the front lines of the perpetual battle to keep our democracy vibrant and vital. We see firsthand the impact of policy decisions or economic decisions on communities and families. The information we gather and share about the consequences of those kinds of decisions informs debate in both the private and public sectors, as well as among the general public. And informed debate leads directly to citizen action. To lose that link would, I think, be a tremendous blow to our society.

PND: Okay, here's your chance: What three things would you like to see done to preserve and strengthen that link?

AA: In order to inform the link between debate and citizen action, we have to get organized as a sector. As nonprofits we need to come together across sub-sector issues and across state lines and begin to identify the ties that bind us together, Advocacy rights, federal and state budget issues — these are all issues that nonprofit organizations and the constituents they serve should be engaged in. This kind of organizing will help us to see that we have a lot in common — that, as nonprofit leaders, we want to leave the world a better place; we want to improve the quality of life in all communities, not just our most affluent communities; we want the voices of all Americans to be heard. These are the commonalities that should define us. And for that to happen, we need to reach out beyond our own narrow self-interest as leaders and citizens.

Second, we need to broaden our network of supporters. Again, this may mean teaming with groups that we may have traditionally seen as adversaries. Locating other organizations that are interested and involved in the same issues is critical to building our collective power and voice. NCNA has just launched a two-year initiative designed to do just that — create a public policy platform for the sector — by bringing together the voices of as many sub-sector and state representatives as we can.

Last but not least, we have to get to work and jump in. We have to get directly involved in pushing our collective agendas. It's the responsibility of all nonprofit leaders, not just a few. We all need to be a part of the solution!

PND: Well, thanks very much, Audrey, for taking the time to speak with this afternoon.

AA: You're quite welcome.

Mitch Nauffts, PND's editorial director, spoke with Audrey Alvarado earlier this year. For more information on the Newsmakers series, contact Mitch at mfn@fdncenter.org.