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. CONGRESS, SEVERAL STATE NONPROFIT REGULATORS CONSIDERING ACTIONS TO CURB FOUNDATION ABUSES

Both houses of Congress and several state regulators are considering greater enforcement of nonprofits and foundations in light of continuing media scrutiny of these institutions. Senate Finance Committee Chair Charles Grassley (R-Iowa) is considering adding to Internal Revenue Service funds to increase its audits of foundations, as well as strengthening penalties for failing to file complete and timely tax returns, a March 1 Boston Globe article reported. Meanwhile, the nonprofit OMB Watch reported March 8 on plans by House Ways and Means Committee Chair Bill Thomas (R-Calif.) to take a “broad” look at practices at all tax-exempt organizations. Representative Thomas is considering hearings to help assess “just what is it that taxpayers are getting for their money” through tax-exemption, the OMB Watcher article reported. There’s also discussion in at least four states about increasing scrutiny of nonprofits along the lines of federal legislation aimed at curbing corporate abuses. The California, Massachusetts, and New York Attorneys General have drafted legislation based either directly or indirectly on the federal Sarbanes-Oxley Act, and the Feb. 28 St. Paul Pioneer Press quoted Minnesota Council on Foundation’s Bill King calling for nonprofits in the state to use that legislation as a model for their own governance practices.


2. NCRP: MAINSTREAM FOUNDATIONS SHOULD CONSIDER EMULATING STRATEGIES OF SMALLER, CONSERVATIVE COUNTERPARTS

Conservative foundations have funded public policy advocacy so generously at the state and local levels of government that it may be impossible for mainstream or liberal foundations to catch up, according to the National Committee for Responsive Philanthropy. NCRP discussed the findings from its latest study of politically conservative foundations at two forums in Washington, including one organized by the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal.
According to the report, Axis of Ideology: Conservative Foundations and Public Policy, mainstream foundations have taken an approach to grantmaking that is very different from their conservative counterparts, who have had far greater successes. In the seven years since NCRP’s widely discussed first survey of conservative foundations, these foundations’ influence has contributed to the Republican Party’s dominance of politics, the report says. NCRP writes that while it doesn’t celebrate this success, the work of the conservative foundations “is certainly to be admired,” especially considering their paltry endowments relative to the larger mainstream foundations. They represent models for mainstream foundations to examine and potentially emulate, NCRP’s Rick Cohen said at the Hudson Institute forum, where surprisingly little disagreement was voiced about the findings.

We will issue a special supplement next week detailing some of the practices of conservative foundations that Cohen suggests mainstream funders could consider adopting.


3. FOUNDATIONS USUALLY WELCOMED IN DISCUSSIONS BY POLICYMAKERS FOR THEIR NEUTRAL PERSPECTIVE, FOUNDATION LEADER SAYS

While some commentators admire the influence of ideologically-oriented foundations, others suggest that it is foundations’ neutral voice which is appreciated by legislators.  The Philanthropic Initiative’s latest issue of its Initiatives newsletter focuses on comments during a recent panel discussion held by the organization on the subject of public policy, politics, and philanthropy. One panelist, Andrew Dreyfus of the Blue Cross Blue Shield of Massachusetts Foundation, said in his experience policymakers “are very used to” hearing from the usual crew of policy advocates from labor and business, and that foundations are generally welcomed because they don’t have a specific agenda other than to educate. But engaging in public policy advocacy is not easy, it was repeatedly stressed at the discussion, and it’s important that a foundation’s staff and board are entirely clear about the purpose and the potential risks involved. Plus, it can take years to show any impact, according to comments included in the newsletter, which also offers examples of foundations that have engaged in public policy at all levels of government, and advice for donors wishing to get started.


4. FOUNDATIONS HAVE SHIRKED DUTIES TO INFLUENCE CORPORATE BEHAVIOR FOR TOO LONG, ACCORDING TO REPORT

Foundations have a special role to play in helping corporations improve their management practices, according to a new publication. The publication, which advocates for foundation shareholder activism, also sees it as a necessary role for foundations, since it’s the corporate financial system that sustains foundation endowments. Released by the nonprofit As You Sow Foundation along with the Rockefeller Philanthropy Advisors, the publication is intended as a wake up call for foundations to consider the importance of active proxy voting, or taking a direct position on shareholder resolutions. The practice is a “double win” for foundations, the report continues, as it supports actions designed to promote strong management that protects foundation endowments, and it can advance foundation missions by encouraging stronger corporate social and environmental responsibility. The lack of active proxy voting from foundations and others helped foster the “business as usual” culture that led to the recent spate of corporate abuses, according to the report, Unlocking the Power of the Proxy: How Active Foundation Proxy Voting Can Protect Endowments and Boost Philanthropic Missions. The report offers a step-by-step guide for foundations interested in voting their proxies, a practice not as costly or as cumbersome as many believe it to be. It also offers examples of foundations that practice active proxy voting.


5. LACK OF TRANSPARENCY IS FOUNDATIONS BIGGEST PROBLEM, ACCORDING TO POLL, DISCUSSION

The nonprofit sector sorely needs to improve its level of transparency, according to both Peter Karoff of The Philanthropic Initiative and a majority of poll respondents at a March 9 TPI panel discussion. Karoff wrote in a paper issued in advance of the conference that, for too long, there has been an “appalling lack of public conscience, or awareness” at foundations. Foundations need to be more open and accessible about their activities, he continued. The March 9 discussion in Boston and by teleconference featured seven panelists, including Dorothy Ridings of the Council on Foundations, who all spoke with some sense of inevitability about greater scrutiny of the foundation sector, due to a decreasing level of trust. Among a list of potential culprits, members of the audience voted a lack of transparency as the single greatest ill eroding public trust, and they voted more transparency as the most important action the sector could take to improve trust. A video of the discussion is available online.

But there were other concerns, and remedies, identified as well. Peter Goldmark, formerly of the Rockefeller Foundation, chided foundation and nonprofit leaders for rampant “self-righteousness” and for ignoring the sector’s bad behavior until the media came calling. Marion Fremont-Smith of Harvard University’s Hauser Center views the problem as partly the result of a loosening of standards for foundation and nonprofit boards in the past few years. Scott Harshbarger, formerly the Massachusetts Attorney General, said that foundations need to unite to push Congress to step up the enforcement ability of the IRS, just as they’ve so effectively united on past occasions to fight against Congressional activity. He went on to say that, even more than greater enforcement, what is needed is far greater peer pressure exerted in the sector, so it better regulates itself. Alex Jones, a former New York Times media reporter, said that there should be greater communication, both within the field and to outsiders, including improved efforts to reach out to journalists to help them better understand the field.


6. COMMENTATOR PUSHES FOR WIDER ATTENTION TO PROBLEM OF UNDERMINING OF DONOR INTENT AT MANY FOUNDATIONS

Absolute certainty that a foundation lasting in perpetuity will honor its donor’s intent is an “unattainable ideal,” and at times “the only recourse is to the courts,” according to William Rusher, a syndicated columnist and fellow of the Claremont Institute and a former publisher of the National Review.  In a recently released monograph, Keeping Faith: Donor Intent in the 21st Century, Rusher provides advice for wealthy benefactors as they consider establishing private foundations. In the Lynde and Harry Bradley Foundation-funded monograph, Rusher offers historical examples of foundation “takeover artists” and “business bureaucrats known as ‘foundation executives,’” who he says have violated their founders’ intentions for giving. Limiting the life of a foundation is the chief way of avoiding similar problems, he writes, as is working with foundation advisory services, such as the Foundation Management Institute, on whose board Rusher sits. Rusher acknowledges that a great deal has been previously written on the subject, “to surprisingly little effect.” So, he plans to make a real push to ensure wide circulation of his monograph by appearing on various radio and television talk shows. The problem, he continues, is “too important, and too urgent, to continue to suffer from inattention.”


7. FEDERAL PROPOSALS NEGATIVELY AFFECT INTERNATIONAL GIVING, FOUNDATION LEADER SAYS

Several measures adopted by the federal government implicitly suggest its goal is to reduce international giving, and anecdotal evidence suggests they are succeeding, according to one foundation executive. Barnett Baron of the Asia Foundation writes in the latest issue of The International Journal of Not-for-Profit Law about the three main anti-terrorist financing measures the government has proposed, including the USA Patriot Act. The most worrisome measure for international giving, according to Baron, is the “voluntary best practices” guidelines issued in November 2002 by the Treasury Department. American philanthropy is only beginning to become aware of the Treasury guidelines’ implications, Baron said. He writes that some of the guidelines are “actually inconsistent with or contrary to” existing laws governing grantmaking. Baron quoted Congressional testimony from Treasury’s general counsel that suggests the goal is to frighten foundations away from funding internationally. The increased administrative costs of following the best practices guidelines may be enough, by themselves, to frighten away grantmakers, Baron says. And preliminary evidence finds that smaller charities abroad are seeing a reduction in U.S. private support, as are U.S. Muslim charities and other immigrant rights groups, Baron writes in his article.


8. FOUNDATION TAKES RARE PUBLIC STEP TO REPORT ITS GRANTMAKING SHORTCOMINGS, HOPING OTHERS WILL FOLLOW SUIT

Peter Goldmark, in the Philanthropic Initiative’s conference on trust, stressed, among other activities, the importance of a foundation client survey, which is a review by an independent organization of how a foundation’s grantees and vendors assess its performance. The Center for Effective Philanthropy has conducted about 60 such surveys, and the William and Flora Hewlett Foundation last month became the first to post online the results of the Center’s survey of its grantees. Other surveyed foundations are considering doing the same, according to the Center. This Grantee Perception Report found Hewlett grantees largely satisfied with the foundation’s approach, but there were obvious areas for improvement. Grantees’ rated the foundation’s “community impact” as less than that of similar foundations, and its grant application process more difficult than others. As a result, the foundation is changing its application process and considering ways to increase its commitment to its community.

The Hewlett Foundation’s Paul Brest stresses the importance for foundations of transparency and the value of owning up to and learning from failure. In a Q&A in the January/February issue of the Philanthropy Roundtable’s Philanthropy magazine, Brest discusses the foundation’s first-ever contest at its board meeting to identify the “worst grant from which we learned the most.” One lesson from the contest: “almost always when the grant failed, we and the grantee shared responsibility,” Brest said.


9. FOUNDATIONS NEED TO ENCOURAGE GRANTEES TO TELL THEM ‘UNVARNISHED TRUTH’ FOR GREATER EFFECTIVENESS, BOOK SAYS

Foundations can have an authentic, healthy relationship with grantees unhindered by a power dynamic on account of money, so long as foundations are willing to tolerate nonprofit honesty, according to a new book from Grantmakers for Effective Organizations. This book, Funding Effectiveness: Lessons in Building Nonprofit Capacity, serves as a guide for foundations in funding nonprofit effectiveness, with chapter contributions from various foundation leaders. One of the key ways foundations can improve their evaluation efforts, according to Melinda Tuan of the Roberts Enterprise Development Fund, is to encourage grantees – by not punishing or withdrawing support – to produce accurate social outcome reports, especially when the results shown by a program aren’t especially flattering. Tuan writes that foundations have become so accustomed to only seeing successful outcomes reported that they’re prone to turn evaluation efforts into a punitive system when results aren’t as stellar as they hoped. National Committee for Responsive Philanthropy’s Rick Cohen, in his afterword, agrees, writing that “most nonprofits tell the unvarnished truth only to one another.” Effectiveness can be achieved when nonprofits and foundations know what works and especially what doesn’t, he writes.


10. FOUNDATION ORGANIZATION TAKING MORE ACTIVE ROLE IN EDUCATION, THE ENVIRONMENT; PERHAPS OTHER CONSERVATIVE CAUSES

The Philanthropy Roundtable, serving more than 600 foundations and corporate giving programs that prioritize private approaches for addressing society’s needs, appears to be taking a more active and entrepreneurial stance in the field. The National Committee for Responsive Philanthropy’s report on conservative foundations suggested that the Roundtable is poised to move beyond merely acting as a membership organization to one more active in directly promoting conservative organizations and causes. At a Hudson Institute discussion, Adam Meyerson of the Roundtable said that probably the single highest priority of his organization is to help donors “solve the problem of education,” particularly elementary and secondary education for low-income children. If the education problem isn’t solved in the next decade, he continued, at least major headway can be made on the issue, such that its success will “capture the imagination” of other donors to work to solve other big problems in the country. In his President’s Note in the last Philanthropy magazine, Meyerson says the organization is this year “embarking on a major investment in environmental philanthropy.” He proceeds to lay out the Roundtable’s guiding principles, which strike a balance between public and private sector solutions.


Of Related Interest

Philanthropy Being Made an Issue Against Democratic Presidential Nominee
The March 7 Pittsburgh Post-Gazette reports that the philanthropy of likely Democratic nominee John Kerry’s wife, Teresa Heinz Kerry, is likely to be an issue in the coming Presidential campaign.  Heinz Kerry helps guide the giving of the Heinz grantmaking entities, including the Heinz Endowments and Heinz Family Philanthropies.  The newspaper reported that several conservative groups, including the Capital Research Center, are noting the foundations’ ties to what they consider “radical,” even “anti-American” groups. The article reported on personal attacks expected against Heinz Kerry, and also the tentative connections conservatives are making to implicate Heinz Kerry’s philanthropies. It quoted one conservative admitting that she seems an “unfair target.”


New Resource

Report Offers Funders Advice on Supporting Successful Nonprofit Collaborations
The Arthur M. Blank Foundation has released a lessons learned report based on a half-million dollar initiative it recently conducted to support nonprofit collaborations. Some of the lessons discussed in Getting Better Together include: thinking through the ideal strategy of working together, whether in person or through other means; preparing for staff turnover that can remove critical players in the partnership; and building in mid-point evaluation discussions so problems can be identified without one partner having to "squeal" on the other.


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.