Philanthropy Information Retrieval Project

Report #115: July 25 – Sept. 18, 2003

The Philanthropy Information Retrieval Project (PIRP) reports on new ideas and other developments that may affect the field of philanthropy in the years to come. In contrast to other publications that cover today’s breaking news, PIRP generally highlights emerging issues that may be visible only on the horizon. PIRP was started in 1996 by the John D. and Catherine T. MacArthur Foundation and was transferred in 2003 to the Aspen Institute, where it is currently funded by the Robert Wood Johnson and Northwest Area Foundations. Burness Communications, Bethesda, MD, prepares the copy. As the publication’s editor, I welcome your comments and suggestions – Alan J. Abramson, Director, Nonprofit Sector and philanthropy Program, The Aspen Institute

1. RECENT PAYOUT DEBATE COULD SET THE STAGE FOR ADDITIONAL SCRUTINY OF FOUNDATIONS BY POLICYMAKERS

A controversial Congressional provision to alter the foundation payout rate by excluding all administrative expenses has now been scaled back. However, the bill’s sponsors succeeded in drawing a level of public attention to foundations not seen in many years – attention that could provoke further Congressional scrutiny. On September 17, the U.S. House of Representatives approved a bill that allows for up to $100,000 of the salary of a foundation executive or trustee to count toward the annual 5 percent payout requirement. The House bill must now be reconciled with a previously approved Senate bill.

Payments to foundation trustees received significant attention in the recent debate. Several commentators noted that, in contrast to foundation directors, most trustees of nonprofits receive no compensation. And Washington Monthly founder and columnist Charles Peters mentioned the trustee payment in a brief item headlined “Flawed Foundations,” in the journal’s September issue, in which he expressed dismay that foundations would sooner cut back on auditing and annual reporting expenses than on paying their leaders.

2. FOUNDATION EXECUTIVE, INDEPENDENT ANALYST: FOUNDATIONS MUST CONTINUE TO ADVOCATE FOR PUBLIC POLICY, HELP ADDRESS PUBLIC NEEDS

In responding to depressed assets, foundations are not only decreasing their levels of giving, says one foundation associate, they are also reducing their involvement in shaping public policies through research, advocacy, and grantee capacity building. This jeopardizes low-income families, the Annie E. Casey Foundation’s Michael Laracy wrote in the Summer 2003 Wingspread Journal, published by the Johnson Foundation of Racine, Wisconsin. Because foundations have long helped convince state and local governments to provide needed services for the poor, their retrenchment in advocacy could be far more damaging to the poor than the actual dollar amount of the cuts, Laracy reasons. He suggests in his article that foundations should: consider increasing payout rates to minimize cuts in grantmaking; continue their support for nonprofit advocacy and public policy efforts rather than redirecting funds to traditional direct charities; and seek common ground between liberals and conservatives in helping low-income families.

Hard feelings, and worse, will develop if philanthropy doesn’t help to address the severe budgetary crises plaguing nearly all 50 states, according to philanthropy analyst Susan Raymond. Writing in her Aug. 22 Observations in Philanthropy column, Raymond reports that most of the states hardest hit by budget deficits have the lowest levels of charitable giving. She notes that all philanthropies will be asked to help make up for cuts in government support of nonprofits. Foundations must be vigilant in adhering to their grantmaking focus so as not to drift from core philanthropic interests or goals, she said. But they also should do all they can to avoid losing the public’s trust in them, which could result if they are seen as the “haves” doing nothing to help the nonprofit “have nots.”

3. OMB WATCH, ALLIANCE FOR JUSTICE EACH LAUNCH EFFORTS TO INCREASE FOUNDATION ADVOCACY; COLUMNIST CALLS FOR SAME

As calls for greater foundation advocacy grow, two nonprofit groups have launched efforts to increase the advocacy efforts of nonprofits and foundations. Earlier this month, the nonprofit watchdog group OMB Watch launched its NPAction Web site that provides articles, how-to tip sheet, and other key information to help foundations and nonprofits legally advocate for public policy. The new Web site, NPAction.org, was established through a partnership with other advocacy nonprofits and was funded by the Ford, David and Lucile Packard, and Surdna Foundations and the Atlantic Philanthropies. A month earlier, OMB Watch announced its “Face on the Numbers” database that will include stories about people or communities who have been helped by public programs and services which are now threatened by budget cuts. These stories, being submitted by nonprofits, are searchable by issue area, keywords, city, state, or congressional district, in an effort to help policymakers better understand the effects of their actions. And as part of its own Foundation Advocacy Initiative, the Alliance for Justice has begun a free bimonthly electronic newsletter, Foundation Advocacy Bulletin, to keep grantmakers up-to-date on how the foundation world is supporting advocacy.

All this comes at a time when America’s foundations should undertake a “major strategic public education campaign” to help address the critical needs of the less fortunate, according to national columnist Matthew Miller. Writing in a July 30 column, Miller said that campaigns to push for greater health care coverage, among other pressing issues, will be needed to counter conservative media campaigns during next year’s national elections. Foundations are reluctant to be so public and to risk ruffling feathers, but, Miller asked: “If they don’t step into the breach, who will?”

4. TWO EFFORST, ONE FOUNDATION-DRIVEN, LAUNCHED TO ENCOURAGE FOUNDATIONS TO INCREASE SUPPORT FOR NONPROFIT OPERATING EXPENSES

Two efforts are under way calling for more foundation support of nonprofit operating costs. The Edna McConnell Clark, William and Flora Hewlett, and Surdna Foundations, as well as the Open Society Institute and the Rockefeller Brothers Fund convened foundation and nonprofit representatives in June for a discussion about common grantmaking concerns, according to OMB Watch. The nonprofit watchdog group reported in its July 28 Watcher newsletter that a working group developed out of the meeting, with plans to circulate a statement later this year. The statement will include a set of agreed-upon principles, including the need for more support of operating costs, which currently account for only 11 percent of the grants budgets of large foundations. Meanwhile, the National Committee for Responsive Philanthropy launched a campaign to encourage foundations to devote as much as 50 percent of their grant dollars toward nonprofit core operations. Less than 10 years ago, foundations devoted nearly 16 percent of dollars for operating support, according to NCRP research presented at another June meeting of nonprofit representatives. In late July, NCRP released a report on the gathering and its operating support campaign, The Core of the Matter.

5. FOUNDATIONS MUST HELP ENSURE THAT TERRORISM PREPAREDNESS EFFORTS LEVERAGE ALL PUBLIC HEALTH INITIATIVES, ACCORDING TO HEALTH AFFAIRS

Heightened efforts to improve the nation’s public health system’s preparedness for terrorism should do “double duty” to help revitalize the entire system and fight other emerging and existing health threats. Shelley Hearne and Laura Segal of Trust for America’s Health wrote a special report, available for purchase, in the July/August Health Affairs journal on foundation efforts to improve public health. Hearne and Segal explain what they mean by “double duty” or leveraging initiatives. Since the same public health officials responsible for protecting us from terrorist threats, such as smallpox, are also responsible for protecting communities from other health threats, they argue that foundations should help ensure that terrorism preparation efforts also help to modernize the nation’s public health infrastructure.

6. FOUNDATIONS ARE AS RESPONSIBLE AS ACADEMICS FOR DISAPPOINTING RESULTS IN HIGHER-EDUCATION GRANTMAKING, TWO EDUCATION LEADERS SAY

Foundations are cutting back their traditional support of higher education in large part because they haven’t seen enough impact. However, the foundations are as much at fault as academics, according to two education leaders. Robert Diamond of the National Academy for Academic Leadership and Robert Weisbuch of the Woodrow Wilson National Fellowship Foundation each wrote letters in the Sept. 5 Chronicle of Higher Education. Diamond suggested that foundations failed to see much innovation from their grantmaking because it was generally occurring at state institutions, liberal-arts colleges, and community colleges, not the “prestigious institutions” foundations tend to fund. Weisbuch wrote that the problem is in foundations’ failure to involve faculty members in helping to draft their grantmaking plans, despite the fact that these are the people who shape and deliver institutional innovation. The letters came in response to a July 25 op-ed by Antioch University’s Mary Marcy, who explored the most common reasons given by the foundations that are reducing support in the higher education field.

7. KELLOGG FOUNDATION OFFERS KEY LESSON FOR FUNDERS BASED ON AN ASSESSMENT OF A FORMER GRANTEE: OVERSIGHT MATTERS

A new report from the Kellogg Foundation offers lessons for funders from the experience of SeaChange, a nonprofit founded in 1999 as an entrepreneurial nonprofit marketplace. SeaChange later merged with the National Gathering of Social Entrepreneurs to form the Social Enterprise Alliance. The report, Building an Organization to Last, finds that while SeaChange benefited from a visionary leader and considerable support from funders, it lacked a sound management structure and suffered from poor oversight by a board that was too close to the CEO. The report recommends that to prevent this type of failure in the future, foundations should establish clear parameters for their engagement with an organization, ensuring that they not only have the money to give, but the time required to effectively oversee their investments.

8. SPORTS PHILANTHROPY IS 'HIGH VISABILITY FOR LOW BUCKS,’ ACCORDING TO CRITICAL NEWSPAPER ASSESSMENT

Professional sports teams offer little beyond publicity for charity events, a finding that led the Minneapolis Star Tribune to call sports philanthropy "high visibility for low bucks.” A lengthy recent article in the newspaper compared the monetary contributions of sports teams to other corporate entities, reporting that visibility and "star power" are virtually all sports team offer charitable efforts – actual cash is a rare gift. The newspaper reported on efforts such as the Robert Wood Johnson Foundation-funded Sports Philanthropy Project to help improve this situation, and help teams better plan their charitable activities to include important topics such as domestic-violence prevention or reducing obesity in kids.

9. ATLANTIC PHILANTHROPIES TO SPEND DOWN ITS BILLION-DOLLAR ENDOWMENT WITHIN NEXT 15 YEARS

After decades of anonymity, the Atlantic Philanthropies, a collection of grantmaking institutions around the world, only emerged as a large public grantmaking entity over the past few years. And now Atlantic has announced that it will spend down its nearly $4 billion collective endowment over the next 12 to 15 years, in line with its founder’s belief of “giving while living.” According to a recent press release, Atlantic founder Charles Feeney, who co-founded the Duty Free Shoppers Group, will rededicate his philanthropy to four major issues around the world: aging, disadvantaged children and youth, the health of populations, and reconciliation and human rights.

New Resource

Management Consulting Firm Develops Standards, ‘Scorecard’ to Help Improve Nonprofit Boards

The consulting firm Growth Strategies, Inc. is working to improve nonprofit and foundation boards by developing new standards and a checklist for assessing performance. The firm’s executive, Herb Rubenstein, has developed 10 standards for boards based on the lessons he’s derived from the well-publicized failures at corporations, such as Enron, and nonprofits, including the United Way. Rubenstein has also developed 10 clusters in what he calls a “scorecard” that he hopes will help organizations better assess and improve board operations and effectiveness.

Note to Readers

We would appreciate your offering us information that we can include in a future edition. If you have an item you believe would be helpful to your colleagues, please e-mail it to Doug Rule. Thank you in advance for your cooperation.