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.  In line with its role as an early alert system for the field of philanthropy, PIRP intentionally includes items that are critical of current practice and policy as well as reports that are supportive.  PIRP was started in 1996 by the John D. and Catherine T. MacArthur Foundation and was transferred to the Aspen Institute in 2003, where it is currently funded by the Robert Wood Johnson and Northwest Area Foundations and The Philanthropic Collaborative.  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.    TWO FOUNDATION LEADERS CALL FOR THE SECTOR TO BETTER POLICE ITSELF; WASHINGTON FORUM TO FOCUS ON FOUNDATION ACCOUNTABILITY

A Dec. 29 Boston Globe article (see item #4 below) reported that even the foundation world is “crying out” for more oversight of its work. Indeed, two foundation leaders have recently written that it would be better if policing came from within the sector rather than from outside. Ralph Smith of the Annie E. Casey Foundation thinks a separate entity should be spun off from the Council on Foundations with the authority to develop standards for ethical practice and effective governance and to provide oversight and certification. In an interview in the latest issue of McKinsey & Co.’s McKinsey Quarterly, Smith said this independent but government-recognized standards board must also have the power to impose sanctions up to and including de-certification and, in extreme cases, refer problem cases to the IRS and state attorneys general for further investigation. Emmett Carson of the Minneapolis Foundation, meanwhile, argues for both national and regional membership organizations to sanction members in violation of principles. Writing in the Minnesota Council on Foundations’ Winter Giving Forum, Carson said in his commentary that national, state, and regional groups must put in place enforceable standards of accountability and sanction members who don’t live up to them, as both a confirmation to the public that the sector doesn’t tolerate unethical behavior and as an incentive to boards and staffs to practice ethical behavior.

Both Smith and Carson are board members of the Council on Foundations, whose president suggests that “radical action” to improve the field is needed. Dorothy Ridings wrote in the November/December issue of the Council’s Foundation News & Commentary about her uncertainty as to what role her organization should play in better policing the field, soliciting advice from her members. Should the Council take disciplinary measures against its egregious members or establish a separate entity to do that, she asked in her President’s letter.

Both Ridings and Smith will speak at a Jan. 29 Issue Forum in Washington on the topic of foundation accountability. The Georgetown Public Policy Institute’s Center for Public & Nonprofit Leadership is organizing this Issue Forum, for which all attendees must register in advance.


2.    TWO WORKING GROUPS LED BY FOUNDATION PRESIDENTS CONSIDERING NORMS FOR FOUNDATION PRACTICE; ONE IDEA: ZAGAT’S-LIKE GUIDE TO ENCOURAGE FOUNDATION ACCOUNTABILITY

Establishing a sort-of Zagat’s guide to foundations is an idea that one working group is considering as it seeks to establish norms of behavior for grantmakers to make them more accountable. An article in the Winter issue of the Stanford Social Innovation Review reported on plans of this group, led by the Surdna Foundation’s Edward Skloot, to offer principles of “pretty good behavior” that foundations should follow, as well as a consumer guide to identify those foundations that are, and aren’t, following mutually, voluntarily agreed on principles of good foundation behavior.  The same article reported that another working group is looking at ways to encourage foundations to cover general operating costs of grantees and perhaps establish standards specifying appropriate levels of operating support. This group is led by the William and Flora Hewlett Foundation’s Paul Brest, whose essay in the Stanford Review (see link above) argues that a strategic funder can often have the most significant and sustainable impact through general operating support grants.


3.    AFTER FORTY YEARS OF TRYING, FOUNDATIONS HAVE STILL FAILED TO ADDRESS CONCERNS OVER THEIR ACCOUNTABILITY AND EFFECTIVENESS, ACCORDING TO TWO REPORTS FROM THE HUDSON INSTITUTE

Foundations are in the midst of a crisis brought about by their failure to solve deep-seated questions regarding their effectiveness and accountability that have plagued them at least since the 1960s, according to a new Hudson Institute monograph by Peter Frumkin.  In his report, Trouble in Foundationland: Looking Back, Looking Ahead, Frumkin, of Harvard University, highlights the irony that the high overhead costs that foundations are now being attacked for are largely the product of the regulation of the field that Congress itself initiated 30 years ago.  Frumkin writes that the “intellectual laziness” of the field in confronting the past year’s heightened scrutiny has been stunning: foundations never articulated a clear and compelling argument for spending money on professional salaries rather than grants. Instead, foundations have retreated even more into “technocratic language and procedures”; they’ve avoided real, “radical” measures to be more accountable; and they’ve grown complacent and lacking in passion, rarely disagreeing with one another about the best way to address complex social problems.

The rise of grantmaking as a profession is the single most significant development in the field of philanthropy in recent decades, Frumkin argues.  And it is this “professionalism” and other aspects of “traditional philanthropy” that should now be reexamined, according to the Hudson Institute’s Jay Hein. The “unprofessionalism” that has long characterized the nonprofit sector is responsible for much of the real progress that has been achieved, Hein wrote in the Fall issue of the Hudson’s American Outlook. Hein suggests in his article that top-down “Progressive-era philanthropy” should become more community-rooted and democratic through the same kind of reform effort that revamped its Progressive-era counterpart, the government welfare program, during the last decade.

4.    TWO NEWSPAPERS ADD TO GROWING CALLS FOR NEEDED FOUNDATION OVERSIGHT AT FEDERAL, STATE LEVELS; ONE CALLS  THIS ‘LONG OVERDUE’

Two leading daily newspapers have contributed to the ever louder call for increased oversight of foundations. A Dec. 26 Wall  Street Journal editorial said that Congressional scrutiny of foundations is “long overdue,” calling on Congress to investigate whether foundations, established through the public tax code, are subsidizing attacks on American interests. But, according to the editorial page, the larger question before Congress is whether tax laws intended to encourage charity have had the unintended effect of creating a “foundation priesthood” funded into perpetuity and insulated from public accountability. The Journal editorial page also argues that other branches of the federal government should look into specific instances in which foundations are alleged to have funded anti-American interests.

Meanwhile, the Boston Globe concluded its months-long, hard-hitting investigation into foundation abuses with a Dec. 29 article reporting that “inadequate hardly describes” oversight of foundations both at the Internal Revenue Service and in all 50 states, even among those most vigilant. The article quoted the chief of the New York bureau overseeing charities as saying that “there appears to me to be more abuse in the private foundation area” than among public charities which receive more attention from regulators. The problem often lies in the fact that many benefactors are no longer overseeing foundation activity, according to the newspaper, but even more, there is a problem of “conflicted or passive” boards of directors.


5.    FOUNDATIONS NEED TO CRITICALLY EVALUATE THEIR CONTRIBUTIONS TO SOCIETY TO REGAIN PUBLIC TRUST, FOUNDATION LEADER, CONSULTANT ARGUE

Harvard’s Peter Frumkin is by no means alone in calling on foundations to improve their effectiveness and accountability, to take seriously the challenge of doing good work that leads to visible outcomes. Carl Schramm, president of the Ewing Marion Kauffman Foundation, says foundations should ask themselves searching questions such as: Have foundations outlived their usefulness to society? Writing in a Dec. 18 op-ed in the Christian Science Monitor, Schramm suggests that foundations need to recommit themselves to the entrepreneurial spirit that has guided the foundation sector from its inception. Foundations today too easily follow rather than initiate activities that lead to social change, or support incremental change rather than great advances.  Both of these qualities – of followership and incremental change agent – work to erase the unique value foundations bring to society, according to Schramm.

Even more in line with Frumkin is foundation consultant Brad Rourke, formerly of the Institute for Global Ethics, who contends that foundations are fueling an “anti-philanthropy backlash” by avoiding the real questions about their work. Rourke posted a Dec. 17 commentary to his Web site arguing that foundations have “circled the wagons,” with marketing and advocacy campaigns and clever management strategies, instead of critically examining their practices and funding motives, which would regain the public’s trust.


6.    FOUNDATIONS MAY SOON RIVAL GOVERNMENT IN CARRYING OUT PUBLIC RESPONSIBILITIES, A CALIFORNIA HISTORY PROFESSOR SUGGESTS

Foundation-based philanthropy may come to rival, if not overtake, tax-supported government in carrying out public responsibilities and overseeing public services, according to a Jan. 4 op-ed in the Los Angeles Times. University of Southern California history professor Kevin Starr cited in his op-ed several large California foundations that are increasingly taking unprecedented, “sweeping and bold” action on public concerns, most notably in acquiring land to create open-space preserves free from development. As governmental resources remain scarce and foundation assistance grows increasingly necessary in the future, Starr contends, Californians may regard foundations as established governance structures and grow more critical of their efforts, which some construe as contributing to the privatization of public life. The February issue of the San Francisco Magazine takes this critical tact in questioning how one such foundation, the Gordon and Betty Moore Foundation, will advance environmental concerns when the foundation is headed by “business titans” who aren’t likely to criticize fellow corporate executives in order to improve their environmental records.


7.    BLURRING BOUNDARIES AMONG FOR-PROFITS, NONPROFITS AND GOVERNMENT MAY REQUIRE FOUNDATIONS TO ADJUST STRATEGIES, REPORT SAYS

The field of technical assistance for nonprofits may need to be readjusted to account for the rise in nonprofits generating their own revenue, according to a recent W.K. Kellogg Foundation report examining the implications of the blurring of traditional boundaries separating the nonprofit, for-profit, and government sectors. Blurred Boundaries and Muddled Motives: A World of Shifting Social Responsibilities explores the rise of social-purpose businesses and nonprofit revenue-generating enterprises. This report also points out some changes foundations may need to make to their funding and investment strategies in response to the development of these new models.


Of Related Interest

Article: Grantmakers Should Be More Flexible In Funding for Indigenous People
Grantmakers must be flexible in their funding criteria for indigenous people worldwide and be willing to act as funding incubators with some groups, funding them longer than just a few years to help them truly establish themselves, one foundation leader told colleagues at the second annual conference of the International Funders for Indigenous Peoples. A recent article in the AllianceBulletin highlighted some key messages from this conference, including the need for funders of indigenous programs to educate other funders on the unique dynamics of indigenous communities; support capacity building within this increasingly global community; and commit to close partnerships with their grantees through site visits and joint planning. Less than one-twentieth of one percent of funding from U.S. foundations goes for indigenous development efforts, according to the article.


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.