Friday, September 16, 2011
In Hershey School Scandal Underscores Need for Watchful Governance, published in the Chronicle of Philanthropy, Pablo Eisenberg, senior fellow at the Center for Public & Nonprofit Leadership of the Georgetown Public Policy Institute, forcefully calls for more effective governmental oversight of the Milton Hershey School:
For two decades neither the Pennsylvania Attorney General’s Office nor the Internal Revenue Service has been willing to take serious action to remedy the abuses that have plagued one of the wealthiest nonprofits in America, the Milton Hershey School for poor children.
It is one of the longest lingering scandals in the modern nonprofit world and one of the most glaring examples of the abuses of the public trust that can happen when regulators fail to keep a close eye on a charity’s governance.
Eisenberg summarizes various problems that have plagued school operations over several years, and takes particular aim at decisions made by the school’s managers, also members of the board governing the Hershey Trust. Recognizing that the Pennsylvania Attorney General will soon announce findings of its investigation that might force the school to alter its operations, Eisenberg laments that the AG may do little more “than slap the organization’s wrist or impose modest fines.” Says Eisenberg, “Odds are that the state will leave the Hershey School’s structure, governance, and practices essentially intact.” Arguing that just the opposite is the proper response, Eisenberg opines:
If the attorney general, Linda Kelly, were serious, she would order that the board restructure itself to include a majority of members with expertise in education and child welfare and a real concern for the future of the school. She would also force the board’s chair, Mr. Zimmerman, to step down, along with his longtime cronies on the governance bodies. …. And state regulators should impose tight restrictions on self-dealing, conflicts of interest, and compensation.
Eisenberg further asserts that the status quo “reflects a failure of both federal and state government oversight and enforcement.” He continues:
Protect the Hersheys’ Children has asked the Internal Revenue Service to take action, charging that the attorney general’s office has spent years mostly looking the other way when it comes to abuses at the Hershey nonprofits. …. If neither the Pennsylvania Attorney General’s Office nor the IRS is willing to demand that Hershey change its operations, then it will be up to the public to take action.