An Accountability Assessment of Public Funds Paid to Selected Associations for Membership Dues
Executive Summary
Introduction
The PEER Committee authorized an accountability assessment of state and local public funds paid to private nonprofit associations for membership dues.
Currently, over 4,000 private non-profit associations operate in the state of Mississippi. State law authorizes agencies and public bodies, in many cases, to transfer public funds to private nonprofit associations in the form of membership dues or, in some cases, payments for services. PEER reviewed whether private nonprofit associations receiving public monies through membership dues publicly disclose their expenditures by funding source.
PEER does not question the need for such associations, the legal authority for public entities to pay membership dues to private nonprofit associations, or the right of an association to expend funds as it sees fit. PEER does support the idea that such associations should be sufficiently open with funding and expenditure information to allow the general public to evaluate how publicly funded dues are spent. Only then can the public make a reasoned judgment as to whether to continue supporting membership in these associations.
Method
PEER assumed that associations with membership consisting primarily of public officials or public employees would be the most likely to have significant support from public funds and requested revenue information from twenty-five private nonprofit associations that have memberships of public officials or public employees. Although this is a small percentage of Mississippi’s approximately 4,000 private nonprofit associations, these twenty-five associations represent the major associations of public employees and officials.
Through surveys and interviews, PEER contacted the twenty-five associations for a breakdown of state and local public revenues received and expended in fiscal years 2000 and 2001. Seventeen associations responded that they received public funds from state or local government entities in the form of membership dues paid for public employees during fiscal years 2000 and 2001. These seventeen associations had a total membership of 3,194 in FY 2001.
Results of Accountability Assessment
The public cannot readily determine how private nonprofit associations that receive membership dues from public sources expend those funds.
No law requires private nonprofit associations to maintain a separate record of how they expend funds from public sources. Thus no one can readily determine how these associations expend their funds received from public sources.
In FY 2001, the seventeen nonprofit associations responding to PEER’s survey reported receiving a total of $1,453,313 in membership dues paid with public funds.
Public funds paid to the seventeen associations responding to PEER’s survey totaled $1,402,535 for Fiscal Year 2000 and $1,453,313 for Fiscal Year 2001 and provided from 5 percent to as much as 73 percent of the total revenues for these associations.
The private nonprofit associations surveyed do not segregate expenditures by funding source. As a result, PEER was unable to answer the question of how these associations expend public monies received through membership dues.
It is the practice of nonprofit associations not to segregate expenditures by funding source. As a result, the associations cannot track how public funds are expended and PEER had no source for the information. No legal requirement mandates that private nonprofit associations segregate expenditures by funding source.
While state law authorizes the use of public funds to pay the dues of public officials and employees for membership in various private, nonprofit associations, no law requires the associations to maintain a separate record of how they expend public source funds. The absence of expenditure information by fund source limits external oversight of expenditures by the public.
Although state law places extensive controls on agencies and governing authorities’ expenditure of public funds to help safeguard against waste, similar safeguards are not in place to protect against the potential waste of public funds paid by agencies and governing authorities to private not-for-profit associations as dues. While the legal character of these funds ceases to be public once paid to a private entity, the fact remains that funds that could have been used to further public purposes are passed to private entities that may do with them as they see fit.
As a result of this lack of external oversight, neither the public nor the public entities that have paid dues to the not-for-profit entities that receive dues can determine for what ends their resources have been expended. Without this detailed knowledge of the purposes for which funds were expended, public entities and their members lack sufficient knowledge to be fiscally informed members of their associations and to encourage changes in the ways private associations spend publicly provided funds.
Recommendation
The Legislature should enact disclosure and accountability requirements for nonprofit associations receiving public funds so that the public has full access to information on how funds received from public sources are being spent.
Specifically, the Legislature should require that nonprofit associations maintain accounting records that segregate the receipt of public funds and accurately reflect the expenditure of all funds received from public sources, reporting every expenditure by major object. Also, the Legislature should mandate that when private nonprofit associations report lobbying expenditures as required by MISS. CODE ANN. Section 5-8-9 (1972), they should clearly identify those expenditures made with funds received from public sources.