Social Service Graft And The Met Council

When the "independent sector" came to rely on big government checks, corruption inevitably followed

A social service provider’s perp walk

It is tempting to view the indictment of William Rapfogel, the longtime head of the Metropolitan Council on Jewish Poverty who allegedly conspired to steal millions, as a story merely of personal corruption and sensational details, like $400,000 in cash stashed away in a closet in his home in Monticello.

But the charges against a long-respected leader of a major New York social service organization are also an object lesson in what happens when charities become dependent on government contracts — when sadly it makes sense to come up with cash to turn into campaign contributions, as Rapfogel is said to have done.

The Metropolitan Council, founded in 1972 to address the under-appreciated problem of Jewish poverty in New York, has become, to say the least, a much different sort of organization than a traditional communal charity that relied on personal charity, or tzedekah . According to its audited financial statement for 2009 (the most-recent posted online), the Met Council did receive some $8 million from private grants and the United Jewish Federation. But that was a small fraction of the $96.9 million it received in government grants.

This is hardly exceptional. At all levels of government, public funding of what was once called the "independent sector" of private groups providing help to those in need has exploded over the last 40 years.

The federal Administration for Children and Families, part of the Department of Health and Human Services, directs some $58 billion to state and local governments which, in turn, disburse funds to nonprofits. The Urban Institute has estimated that all levels of government have some 200,000 contracts with 33,000 human service groups — and that government aid "accounts for more than 65% of these organizations’ total revenue."

New York City in fiscal 2013 had 4,501 contracts with social services agencies, totaling $3.9 billion — amounting to 35% of the city’s total contract spending.

The theory behind this dramatic change in the way social services in America are funded was that government dollars would let nonprofits reach more in need, while providing better services than government itself could.

It hasn’t worked out that way.

Even as family break-up, educational under-achievement and other problems of poverty have festered or worsened, spending has grown without (as the Met Council scandal makes clear) the sort of accountability built in when local leaders raised their own funds, often using volunteers rather than employees.

In the new system, it makes sense to pay big salaries to professional directors — Rapfogel was earning more than $400,000 as chief executive — and to rely on them to ensure a steady flow of a social service organization’s lifeblood: government money.

Even honest nonprofit leaders feel pressure to find money to make campaign contributions to those who are the gatekeepers of the contracts they depend on. It’s a short jump from such "honest graft" to plain old stealing.

By all accounts, Rapfogel, by allegedly padding the Met Council’s insurance contracts, became expert in generating illegal cash both for himself and for campaign contributions, even dividing contributions such that they would generate the maximum in public matching funds. The scheme for which he has been indicted appears to include $13,000 in campaign contributions to Assembly Speaker Sheldon Silver since 2000; the Assembly approved some $1 million in grants to the Met Council.

New Yorkers know that these stories are not unusual. The power base of now-disgraced Brooklyn Democratic leader Vito Lopez was a taxpayer-funded nonprofit, the Ridgewood Bushwick Senior Citizens Council, whose income from government contracts allowed it to keep his campaign manager on its payroll.

While many honest social-service organizations now rely on government funds, is it time that we acknowledge this system is failing — producing poor results and corrupt consequences.

This piece originally appeared in New York Daily News

This piece originally appeared in New York Daily News