By Amuse on X
A democratic republic, properly ordered, rests upon the rule of law, the separation of powers, and the transparency of governance. Any deviation from these principles invites not merely inefficiency but systemic corruption. And yet, over the past four decades, Congress has quietly constructed an edifice of semi-private, quasi-official institutions that operate under the banner of public service but evade the mechanisms of public accountability. These entities, though legally distinct from the federal bureaucracy, function as its proxies, enjoying the benefits of government association without submitting to its constraints. They are known by various names—, federally chartered nonprofits, congressionally established NGOs, or “quasi-governmental organizations”, but they share a common flaw: they are antithetical to constitutional self-government.Upgrade to paid
The most glaring defect lies in their legal ambiguity. Take the United States Institute of Peace (USIP), a textbook specimen. Chartered by Congress in 1984, the Institute is simultaneously governed by federal law and sheltered from it. It may accept appropriated funds, and its board includes Cabinet-level officials, but it claims independence from the executive branch. Its finances, contracts, and employment practices are largely governed by nonprofit law, not federal standards. Most egregiously, Congress empowered USIP to create its own NGO, the Endowment of the United States Institute of Peace, into which it may funnel unobligated taxpayer funds. These funds, once transferred, are no longer subject to the ordinary appropriations process and may be spent indefinitely, without the annual scrutiny to which agencies are otherwise subjected.
Here lies the central tension. The structure creates a fork in legal reality: on the one side, a federally funded agency, subject to political oversight, at least in theory. On the other, a nonprofit entity that wears the veneer of public service but is governed by private law. Yet the same board directs both. In effect, public power is outsourced to a legally distinct twin, insulated from political accountability. Predictably, abuse follows. In 2025, a watchdog report revealed that a former Taliban commander had been paid over $130,000 by USIP-affiliated programs. The Institute claimed no wrongdoing. It had, after all, followed the procedures of its endowment. The incident was not an aberration but an inevitability.
This twilight status, neither fully public nor truly private, renders such institutions nearly impossible to govern. Consider the National Endowment for Democracy (NED), another brainchild of Congress, formed in 1983. NED is a nonprofit, legally prohibited from being a government agency, yet it exists only by grace of federal appropriations. Its mission, to “promote democracy abroad”, is laudable in the abstract. But in practice, it functions as a pass-through: federal funds flow into NED, and NED distributes them to its four core grantees, each tied to a major political or corporate interest. These include the National Democratic Institute (linked to the Democratic Party), the International Republican Institute (tied to the GOP), the Solidarity Center (linked to organized labor), and the Center for International Private Enterprise (connected to the U.S. Chamber of Commerce).
This is not democracy promotion, it is ideological export via shadow diplomacy. And it is done outside the formal structures of the State Department or previously through USAID, precisely to avoid the legal constraints that would otherwise apply. The governing board of NED is notionally bipartisan but functionally homogenous. Despite statutory requirements for ideological balance, whistleblowers have alleged viewpoint discrimination against conservative staff and grantees. Meanwhile, NED and its grantees are not subject to the Freedom of Information Act. They are not subject to the Hatch Act. They may act politically, so long as it is abroad. But foreign governments, not unreasonably, view NED as an agent of the U.S. government. China and Russia have both banned it outright.
And for good reason. The NED model is uncomfortably close to an off-the-books foreign policy apparatus. It is plausible deniability in nonprofit form. If the U.S. wants to support dissidents in Tehran or train political organizers in Venezuela, it can do so without State Department fingerprints. That freedom, however, comes at the cost of oversight. NED receives over $300 million per year in federal funds. Who decides where it goes? The same individuals who sit atop its grantee organizations. They recuse themselves, we are told. But the incestuous structure is plain: board members at NED vote on budgets that fund the entities they help to lead. This is not a system designed to prevent conflicts of interest; it is a system that institutionalizes them.
The Smithsonian Institution presents a related but distinct problem. Born of a private bequest, the Smithsonian today is a sprawling hybrid of federal authority and private fundraising. Roughly two-thirds of its annual budget comes from Congress; the rest from donors, endowments, and commercial revenue. Unlike executive agencies, the Smithsonian is not subject to the Administrative Procedure Act. Its trust fund employees are not governed by federal civil service rules. And while it must report to Congress, it is not clearly within the executive chain of command. This too has led to corruption. In the early 2000s, the Smithsonian Secretary billed nearly $90,000 in personal expenses to its trust accounts, with the quiet assent of the Board of Regents. His salary, padded by private funds, exceeded $1 million. Congressional hearings followed, but the governance structure, anchored in private-public ambiguity, remained unchanged.
Even more concerning is the National Institutes of Health’s partnership with the Foundation for NIH (FNIH). This foundation, also chartered by Congress, solicits private donations to fund research supposedly aligned with NIH priorities. But the firewall is porous. In one notorious instance, NIH staff actively solicited alcohol industry funding for a major clinical trial, using FNIH as a laundering mechanism. Internal emails showed officials promising industry executives favorable outcomes. When the story broke, the NIH Director canceled the study. But the structure, private money funding public research, with minimal transparency, remained intact. The potential for regulatory capture is immense.
The pattern repeats at the Wilson Center, a think tank established by Congress to honor President Wilson. It operates within the Smithsonian framework, funded in part by federal appropriations and in part by private grants. Its board includes Cabinet officials and presidential appointees. Yet it accepts money from foreign governments and corporations. In 2010, it awarded honors to a Turkish foreign minister and billionaire businessman, reportedly to secure donations. Critics lambasted the move as a sellout of American values. The Center defended itself. The donors had not dictated content. But the optics were damning, and the practice continues.
What unites these entities is a structural flaw. Congress creates a nonprofit, charters it by law, funds it with taxpayer dollars, and then exempts it from the very laws that govern federal agencies. These entities then assert independence from the executive branch and from judicial oversight, citing their nonprofit status. And when scandal erupts, the response is always the same: it was within the rules. Precisely. The rules are the problem.
No democratic government should permit such ambiguity. Public power must be wielded by public officials, under public rules, accountable to the electorate. The dual structure, agency by day, nonprofit by night, undermines that principle. It creates shadow budgets, dual loyalties, and opaque governance. These hybrids are not a clever administrative innovation. They are a subversion of constitutional norms. Congress should dismantle them.
This means repealing the charters that permit public-private mingling. It means restoring the principle that if an entity spends taxpayer money, it must follow taxpayer rules. It means that diplomacy should be conducted by diplomats, not by nonprofits masquerading as independent actors. And it means that federal appropriations, once allocated, cannot be sequestered into endowments exempt from oversight.
The United States has many capable nonprofits. Let them remain private. Let them raise their own funds, pursue their own missions, and remain outside the halls of government. But Congress must not continue the dangerous fiction that chartered NGOs, endowed with federal dollars and insulated from public law, somehow advance democratic values. They do not. They corrode them.
To preserve the integrity of republican government, Congress must bring these entities back under the constitutional umbrella or let them go entirely. The halfway house of quasi-government is not a compromise. It is a betrayal.
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