Philanthropy Information Retrieval Project

Report #120: February 2004

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 Foundation, the  Northwest Area Foundation, 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. FEC ACTION COULD IMPACT ALL NONPROFIT AND FOUNDATION ADVOCACY IN WHAT WATCHDOG GROUPS CALL AN UNPRECEDENTED MOVE

Leading organizations focused on the issue of nonprofit advocacy are concerned that all nonprofits and foundations could be affected in a slippery-slope fashion by future Federal Election Commission regulation.  Five such groups, including the Alliance for Justice, Charity Lobbying in the Public Interest, and OMB Watch, issued a Feb. 19 email update reporting on an Advisory Opinion from the FEC. The FEC ruled the day before that certain tax-exempt political organizations, or federal political committees, would have to use “hard money,” or funds raised under federal election law restrictions, to pay for any activity that promotes or opposes any federal candidate, including praise or criticism of an officeholder’s official actions or policies.

The update says that at a March meeting the FEC may consider applying similar language to all nonprofits classified under the 501(c) category of the tax code. According to the groups concerned with protecting nonprofit advocacy, this would prohibit a nonprofit from supporting or attacking a federal candidate, in broadly defined ways, in an election year, unless the nonprofit registers with the FEC as a political committee. So, for example, a nonprofit would not be permitted to criticize the Bush administration’s environmental policy without registering with the FEC.  When the FEC first raised in January the possibility of extending the restrictions to all nonprofits, OMB Watch and 300 other nonprofit signatories called the idea “one of the most fundamental attacks on the freedom of speech and freedom of association of American citizens ever contemplated by a governmental agency.”

2. GEORGETOWN UNIVERSITY PANEL DISCUSSION ON FOUNDATION ACCOUNTABILITY FOCUSES ON IDEAS FOR REFORM; WEIGHS SELF-REGULATION VS. GOVERNMENT OVERSIGHT

Federal regulators could use help from foundations to better understand the work of foundations, including the role of trustees, according to remarks by a senior congressional staff member at a panel discussion on foundation accountability last month. Instead, he indicated, “I see too many foundations taking a defensive stance toward legislative activity,” even though the intent of recent legislative proposals is to pluck out the “bad apples from the barrel.” The Center for Public and Nonprofit Leadership at Georgetown University hosted this Jan. 29 discussion that attracted an audience of several hundred in Washington to consider the central issues in the current debate over foundation oversight from the perspective of foundation boards, the foundation field as a whole, and state and federal governments. Greater self-regulation in the sector is needed, all seven panelists - representing foundations, media, academia, and government - seemed to agree, and most also agreed that foundations need greater Internal Revenue Service oversight. However, Ralph Smith of the Annie E. Casey Foundation questioned the desirability of IRS oversight. “A decade from now, I think folks who [are sitting] here are going to find it remarkable that the field was asking for more IRS enforcement; I just want you to think about what we’re saying here,” he said.

The discussion at the forum touched on several aspects of accountability: board governance, the adequacy of the IRS reporting form for foundations, self-regulation in the sector vs. government oversight, and specifically IRS oversight, and media scrutiny. We will issue a special supplement to PIRP summarizing these key points in the next week. And a transcript and video are expected to be posted to the forum sponsor’s web site in the next month.

3. MAGAZINE PROFILES ‘TAKE-NO-PRISONERS’ CAMPAIGN OF NEW YORK’S NONPROFIT REGULATORS, INCLUDING WILLIAM JOSEPHSON

New York State Attorney General Eliot Spitzer and William Josephson, the Assistant Attorney General charged with regulating nonprofits, are taking a high-profile approach to their work as they push for greater enforcement powers, according to the January issue of City Limits, a magazine for New York grassroots organizations. The magazine profiled the “new, take-no-prisoners” approach to regulating nonprofits of Spitzer and Josephson, highlighting their support of a nonprofit-oriented, state-based version of the federal Sarbanes-Oxley Act that cracked down on publicly-traded companies in the wake of corporate scandals. The magazine reports that the bill itself is not expected to become law any time soon for political reasons, but that its existence may spur some nonprofits to consider its self-regulation proposals, including the formation of an audit committee to review financial reports.

4. SURVEY OF FOUNDATION EXECUTIVES FINDS THAT MANY HAVE CHANGED BOARD GOVERNANCE PRACTICES IN LIGHT OF SCRUTINY

Some foundations have already formed audit committees and instituted other changes in reaction to the past year’s media and legislative scrutiny of foundation practices, according to a new survey. The Center for Effective Philanthropy this month released a report on its survey of the presidents of 250 of the largest foundations concerning their attitudes about board governance. The study found that more than three-quarters of foundations have discussed their own practices in light of heightened scrutiny, and a third have actually instituted changes; among community foundations, 56 percent have made changes. The majority of the CEO respondents said they were satisfied with their own relationships with their boards and with the effectiveness of the boards. Those boards perceived as most effective are highly proactive and deeply engaged in guiding and evaluating the substantive work of the foundation, according to the report, Foundation Governance: The CEO Viewpoint, which derives from the first phase of the Center’s Foundation Governance Project. A final report, which will be issued later in the year, will include the perspective of foundation board members and other experts and stakeholders.

5. ARTICLES HIGHLIGHT FOUNDATIONS’ FUNDING OF LARGE, WEALTHY INSTITUTIONS; COLUMNISTS OFFER IDEAS TO CHANGE CURRENT GRANTMAKING PATTERNS

Several articles in the past month have highlighted foundations’ support of large, elite institutions, and several columnists have offered their advice on how to address what they see as an unsatisfactory pattern of foundation grants. Philanthropy Journal’s publisher Todd Cohen wrote in a Jan. 19 column [http://www.philanthropyjournal.org/more.asp?ID=3293] that foundations need to “change the club rules” and give more grants to help nonprofits run efficiently and especially to support smaller nonprofits. Cohen based his claim about “club rules” - of big foundations funding mostly big nonprofits - on a Jan. 11 Boston Globe article. The newspaper commissioned the Foundation Center to study foundation grantmaking trends for the article, which reported on study findings that big foundations give a majority of their grants to colleges, universities, and other major, well-endowed institutions, not to programs serving the disadvantaged. A Jan. 18 Washington Post op-ed writer commented on similar findings for grantmakers in that region. Nonprofit consultant Zahara Heckscher offered in this op-ed several ways for foundations and legislators to modify this funding pattern, including making it easier for low-income people to apply for grants and giving smaller grants. She also called on Congress to extend foundations’ payout requirement to donor-advised funds.

But one foundation leader doesn’t think these kinds of exhortations for foundations to act differently are enough, writing that he has begun to question the institution of philanthropy in light of the widening disparity in wealth. Frank Phoenix of the Fenwick Foundation, a small private foundation in North Carolina, wrote in a Jan. 28 letter in the Philanthropy Journal that he has come to believe that increasing foundation payout and ending foundation’s ability to exist in perpetuity are key to making philanthropy better promote human welfare. He suggested these changes would force foundations to go after root causes of social problems rather than just support elite institutions.

6. GRANTMAKERS FOR EFFECTIVE ORGANIZATIONS COMPLETES FIRST PHASE OF PROJECT TO HELP FOUNDATIONS, NETWORKS BE MORE COLLABORATIVE

Grantmakers for Effective Organizations has just completed the first phase of an ambitious “Mapping the Field of Funder Networks” effort to help foundations better understand opportunities to leverage their own grantmaking. GEO’s research finds that there are over 300 funder networks, such as regional associations of grantmakers or groups focused on one grantmaking concern. A forthcoming research report from GEO finds that over half of all of these networks have one or fewer staff members, and over three-quarters of the networks are organized around a common geographic area. Also, while these networks were generally created to help funders with common goals share knowledge or collaborate, the networks themselves, by and large, don’t share knowledge or collaborate with each other. GEO has just posted to its Web site the Executive Summary of this report, which was developed in partnership with the Forum of Regional Associations of Grantmakers and the Council on Foundations, with funding from the David and Lucile Packard Foundation. Based on its research, GEO has also identified nine elements that make an effective funder network. GEO will also establish an online directory of these networks.

7. MACARTHUR FOUNDATION SEEKS TO LINK POLICYMAKERS TO USEFUL SCIENTIFIC INFORMATION, EXPERTS ON NATIONAL SECURITY MATTERS

The John D. and Catherine T. MacArthur Foundation has funded a project to link scientists and academics to federal policymakers on matters of research into terrorism and national security issues. The Feb. 9 Washington Post reported on the MacArthur Foundation’s $2.25 million grant to the American Association for the Advancement of Science (AAAS), the world’s largest general scientific society. The article reported that the grant is aimed not at funding science but at communicating science to those who need it, allowing AAAS to bring experts quickly to Washington to brief lawmakers and their staffs. The new arrangement fills a void that was created when Congress abolished the Office of Technology Assessment, and it would help to fix the growing problem of governmental security policy being divorced from scientific understanding of what is truly needed, according to several experts quoted by the newspaper.

8. NEW REPORT OFFERS INSIGHTS INTO AND RECOMMENDATIONS TO BETTER ADDRESS NEW DONORS’ NEEDS

New donors creating foundations quickly encounter the eternal dilemmas of how much to give, how often, and to whom.  But a new report cautions that too often these donors make initial, long-term decisions about giving when they have the least amount of information about their options. The National Center for Family Philanthropy commissioned a first-ever survey of new California-based donors to analyze the motivations, hopes, disappointments, and attitudes of these donors towards philanthropy. The report, What California Donors Want: In Their Own Voices finds that new donors are often confused by documents that explain their charitable options and often have no knowledge of national and regional resources and support groups that exist to help them. The report offers several possible strategies to assist new donors, including developing a guide that’s really useful and comprehensive.

Of Related Interest

NCRP Develops Excise Tax Formula It Says Congress Should Use to Fund IRS Oversight
The National Committee for Responsive Philanthropy has developed a formula that it says Congress should adopt to rededicate revenue from the private foundation excise tax to oversight of foundations and the nonprofit sector. According to a Jan. 20 release, NCRP would split total revenue from this tax into five categories, including funding for the oversight needs of the Internal Revenue Service and the charity investigations of state attorneys general. NCRP also reiterated its support for making the foundation excise tax a simplified, consolidated 1 percent of investment income, though it also wants any money foundations “save” from this alteration to be distributed in the form of grants and not used for administrative expenses.

North Carolina Regional Association to Address Ways to Increase Funding for Race and Poverty
Philanthropy representatives in North Carolina will gather next year as part of a new initiative to address the issues of race and poverty. The North Carolina Network of Grantmakers and the Ford Foundation - through its Race and Equity in the American South initiative - have created a working group that will meet this month to begin a discussion about ways to increase funding for these related issues, according to a Jan. 19 article  in the Philanthropy Journal.

New Resource

Grantmakers in Health Offers Information on Eliminating Racial and Ethnic Health Disparities
Grantmakers in Health has released a new resource for funders concerned with racial and ethnic health disparities. Each of twelve short monographs in this compendium, called Erasing the Color Line Compendium: Philanthropy’s Role in Eliminating Health Disparities, provides a description of an issue, including relevant data, and outlines how grantmaking organizations of differing missions, sizes, and approaches are tackling these persistent social problems. Monographs range from far-reaching issues of race and poverty to health care for minority elderly and the specifics of mental health care for people of color.

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.