1. SENATE OFFICIAL SUGGESTS CLEARER PENALTIES FOR NONPROFITS' INACCURATE REPORTING; NEW CONGRESSIONAL REPORT OFFERS ADDITIONAL REFORM IDEAS

The senior counsel to the Senate Finance Committee has been "very discouraged" to hear nonprofit leaders say that simply better enforcement of current law is the answer to recent problems in the sector. At a Feb. 1 panel discussion about nonprofit accountability at the Urban Institute in Washington, DC, Dean Zerbe said that what's needed instead are clearer penalties for misreporting. According to Zerbe, nonprofits should be allowed less wiggle room in reporting their activities to the IRS through annual Forms 990. Zerbe also suggested that nonprofits report their performance goals and how well they've met them on their IRS forms. He stressed that it would not be up to the IRS to determine these goals. Publicizing a nonprofit's established goals would allow the IRS and the public to assess how well an organization is living up to them, he said, without elaborating on whether any IRS enforcement activities should be involved.

Meanwhile, the Joint Committee on Taxation has identified actions Congress could take to increase revenue and crack down on tax abuses, including those involving nonprofits. Released Jan. 27, the Joint Committee's 435-page report offers dozens of recommendations to curb potential abuses by nonprofits and foundations, including insider dealing and excessive compensation and administrative expenses. Most significantly, the report echoes the Senate Finance Committee's recommendation that the IRS should review all exempt organizations every five years, as a means of answering questions about potential abuses or conflicts of interests within the exempt organizations.

2. DEMOCRATIC CONGRESSMAN SUGGESTS FOUNDATIONS MIGHT 'QUICKLY DISAPPEAR' AS A RESULT OF PRESIDENTIAL TAX REFORM PROPOSALS

While Congress considers ways to crack down on tax abuses, the Bush Administration is developing plans for broad-range reform of the federal tax system, which would affect the nonprofit sector in both direct and indirect ways. President Bush has established an Advisory Panel on Tax Reform that will offer ideas, by July 31, to simplify and possibly even replace the current national income tax, the Feb. 7 Wall Street Journal reported. The panel will consider a $12 billion tax break to encourage charitable giving for taxpayers who don't itemize their taxes, and other provisions that will affect foundations and the entire nonprofit sector.

Is it possible that private foundations could "quickly disappear" altogether as a result of tax reform? As drastic as it sounds, a key Democratic Congressman suggests this might happen. U.S. Rep. Charles Rangel, the ranking Democratic member on the House Ways and Means Committee, explained his concern in a Feb. 3 Chronicle of Philanthropy op-ed, written with the committee's chief Democratic tax counsel John Buckley. Rangel and Buckley write that some expected administration tax reform proposals would encourage Americans to hold on to their money rather than make irrevocable gifts to charity and to turn to taxable trusts that have none of the restrictions which apply to foundations but many of their benefits. Additionally, the Democrats argue that if the estate tax repeal becomes permanent, making a bequest to a private foundation "would be extraordinarily foolish."

3. FOUNDATIONS AVOID OBJECTIVE EVALUATIONS OF THEIR OWN EFFECTIVENESS, ACCORDING TO URBAN INSTITUTE REPORT

Foundations are not practicing what they preach to nonprofits about the need for effectiveness, suggests a survey from the Center on Nonprofits and Philanthropy at the Urban Institute. According to interviews with 61 leaders at 42 diverse foundations, many foundations consider it a valuable service for their grantees to gain outside feedback about their effectiveness as well as to adhere to accountability requirements. However, many of the same foundations don't think their organizations should be subjected to external evaluations or objective review. Foundation Effectiveness: Definitions and Challenges is the latest report in a foundation-funded study of effective philanthropy conducted by the Urban Institute's Francie Ostrower. All too often, foundations have not clarified what they mean by effectiveness within the context of their own institution, according to the report. And they have failed to institutionalize a regular process by which they establish standards and evaluate themselves in relation to these standards. As such, foundations are not holding themselves accountable, the report says.

4. PANELISTS IN HUDSON INSTITUTE SYMPOSIUM DISCUSS STRATEGIES FOUNDATIONS CAN USE TO INCREASE CONSERVATIVE MOVEMENT'S CULTURAL INFLUENCE

How can philanthropy help conservatives build on their current dominance of politics to have greater influence on American culture? This was a major question discussed by 20 conservative panelists at a Feb. 16 Vision and Philanthropy symposium in Washington organized by the Hudson Institute's Bradley Center for Philanthropy and Civic Renewal. Linda Chavez of the Center for Equal Opportunity started off the conversation by arguing that conservative foundations have devoted too few resources to counter what she called the "sexualization" of the culture. However, subsequent speakers disagreed somewhat on the proper role of the state in righting the culture, with some arguing that government has an important role to play in enforcing moral behavior and others wanting the state to stay largely out of people's way.

There were also some differences of opinion in recommendations regarding the proper stance of conservatives toward higher education. Most panelists seemed to agree with Stephen Heyward of the American Enterprise Institute. Heyward argued that conservative philanthropists need to help establish semi-autonomous centers at universities, so that they aren't beholden to the liberal ideology that predominates in academia. But Stephen Moore of the Free Enterprise Fund disagreed, saying that foundations should stop funding universities altogether - that's the only way they'll change course, he said.

Robert Woodson Sr. of the National Center for Neighborhood Enterprise asked what conservatives are prepared to do for the "least of God's children." Several panelists suggested that the best way to help the poor is to fix the public education system by instituting school choice and vouchers. Woodson also called on conservatives to really help minorities by funding community or grassroots leaders who agree with them in principle, even if they don't explicitly identify as conservative. That would undermine the left, he said, exposing how little liberals have helped the people they claim to care about. A transcript of the discussion seminar as well as a series of background essays will be posted to the Center's Web site soon.

5. WHAT IS THE SOURCE OF THE PROGRESSIVE MOVEMENT'S DECLINE: 'NONPROFIT CAREERISM' OR FOUNDATION-FUNDED FRAGMENTATION?

What has brought about the decline of the progressive movement? Not surprisingly, given the outcome of the 2004 elections, that's become a hotly debated issue. According to one activist, "nonprofit careerism" is partly to blame. In the Dec. 27 issue of the liberal newsletter Counterpunch, regular contributor Michael Donnelly writes that the decline of progressive activism was accelerated by the rise of "corporate-funded grantmaking foundations" and the development of a collective, "nonprofit sector" identity sometime in the 1970s. Now, he says, citing Independent Sector's Panel on the Nonprofit Sector, Congress and the sector establishment are out to reign in "real, bottom-up grassroots, anti-corporate groups." Once a cause morphs into a permanent part of the public scene with careers at stake, the movement is over, Donnelly says - concluding that the "sector" needs to go.

Meanwhile, James Piereson of the John M. Olin Foundation argues that the decline in liberalism grew out of the '60s-era push by foundations for "advocacy philanthropy." This, he says, replaced the Democratic Party's New Deal voting blocs with a "maze" of special-interest advocacy and litigation groups focused on specific, disparate policies. In an address at the Philanthropy Roundtable's annual meeting last fall, Piereson contrasted the faulty strategies of liberal foundations with his and other conservative foundations' advocacy philanthropy that has focused, and succeeded, on developing broad ideas and institutions. A transcript of his talk, in a session that also included Rebecca Rimel of the Pew Charitable Trusts, is included in the January/February issue of the Roundtable's Philanthropy magazine.

6. PROGRESSIVE NONPROFITS SHOULD BREAK 'GRANT HABIT': THEY'D BE STRONGER WITHOUT FOUNDATIONS, ACCORDING TO THE NATION

To revive the progressive movement, funders that are truly progressive should help nonprofits break their "grant habit," according to the Jan. 24 Nation. Michael Shuman, a self-proclaimed "grantaholic," and Merrian Fuller write that the progressive movement would be "considerably healthier" today if foundations did not exist. They encourage nonprofits to become self-sufficient through their own business practices. Shuman and Fuller argue that enterprising nonprofits are no more corrupt in their values than the vast majority of nonprofit organizations which are consumed with fundraising and dependent on foundations. Foundations, they write, despite admirable intentions, discourage the long-term, systemic thinking progressives so desperately need by offering only "small, single-year, single-issue, project-oriented and 'action-over-thinking grants.'" According to Shuman and Fuller, the problem is exacerbated by the fact that too many foundations invest their assets in businesses that go against foundations' missions and work to negate the work of foundation grantees. "It's time to grow up, move on and strike out on our own," they conclude.

7. IN LIGHT OF TSUNAMI EFFORTS, CALLS MADE FOR PHILANTHROPIC HELP TO IMPROVE DISASTER-RELIEF INFRASTRUCTURE

8. POST-TSUNAMI CALLS MADE FOR FOUNDATIONS TO SUPPORT POVERTY-FIGHTING EFFORTS WORLDWIDE AND TO PUSH GOVERNMENT TO OFFER DEBT RELIEF

Another aspect of discussion about post-tsunami international philanthropy focuses on the need for greater funding for development activities generally. David Hamburg of the Carnegie Corporation and human-rights advocate Nancy Langer co-wrote a Jan. 20 Chronicle of Philanthropy op-ed calling on grantmakers to explain to the American public and demonstrate through their actions the value of long-term investments in support systems to combat poverty. And not just in Southeast Asia, or just for disaster relief, they write. Meanwhile, Rick Cohen of the National Committee for Responsive Philanthropy argued in an article in the Winter Nonprofit Quarterly that foundations should go beyond their own charitable giving to the tsunami-stricken regions. Cohen writes that foundations should push the U.S. government to offer more significant relief to affected nations, such as temporary debt moratoriums or permanent debt forgiveness, like other nations.

Foundations should also support vibrant civil societies around the world and fund long-term, strategic social change, according to panelists at a Grantmakers Without Borders seminar last month that focused on the international impact of the 2004 U.S. elections. An Alliance Extra report from the seminar highlighted the calls for greater foundation investments in the developing world as a means of countering the various threats posed by debt, poverty, and disease. Naila Bolus of the PloughShares Fund, in particular, told seminar attendees about the need for foundations to fund civil society efforts in Iran and Iraq.

9. FOUNDATION-FUNDED ENVIRONMENTAL CONSULTANTS STIR DEBATE WITH CALL FOR FOUNDATIONS TO STOP FUNDING 'THE ENVIRONMENT'

Two political consultants have generated significant debate in recent months with their call for foundations to stop funding the environmental movement, at least as it is currently conceived. Michael Shellenberger and Ted Nordhaus write in their intentionally provocative paper The Death of Environmentalism that foundations have very little to show for their 15 years of environmental funding. Peter Teague of the Nathan Cummings Foundation, which funded the paper, writes in its foreword that foundations need to engage with each other and with the groups they fund in an "honest evaluation of our present situation." In their paper, the authors quote Teague as calling on foundations to rethink their separating out the category of "the environment" as one programmatic area because this approach is too narrow and limiting. Essentially that's the same argument the authors make, that the movement needs to move beyond only those issues currently tagged as "environmental." And former Sierra Club leader Adam Werbach - and friend of Shellenberger and Nordhaus - agrees. Werbach called on foundations in a recent speech to shift toward efforts to change the public's values about environmental concerns and away from merely protecting the "failed" status quo of the movement.

10. IRS CLARIFIES FOUNDATIONS' ABILITY TO ENGAGE IN PUBLIC POLICY; FOUNDATION LEADERS ENCOURAGE COLLEAGUES TO ENTER THE POLITICAL FRAY

One of the very best ways for a foundation to substantially increase its impact is to fund groups that engage in public policy, according to Thomas Layton of the Wallace Alexander Gerbode Foundation. Layton praised a recent letter from the IRS reiterating the legality of doing so. The organization Charity Lobbying in the Public Interest issued a Jan. 25 release reporting on the IRS's response to its query requesting clarification on the rules that govern foundation funding of grantees' public policy activity and foundation participation in such activity themselves. The letter provides guidance about the "broad leeway" that foundations have in funding public policy, according to Layton, also a member of the CLPI board.

And another foundation leader also called on foundations to enter the political fray. The A.J. Fletcher Foundation's Barbara Goodmon wrote in a Jan. 11 op-ed in the Philanthropy Journal, that her foundation is expanding its focus from funding the arts to fighting for public policy change in North Carolina. All foundations should lend their considerable weight to fight for changes in public policy to better help society's needy, Goodmon says.

11. FOUNDATIONS LAUNCH RESEARCH CENTER FOR CHARTER SCHOOLS; OTHER EDUCATION DEVELOPMENTS CITED IN CONFERENCE AUDIO FILES

A group of foundations has helped establish a national network of researchers to analyze the somewhat controversial charter school education reform movement. According to its Web page, the National Charter Schools Research Center is administered by researchers at the University of Washington with $1.5 million annual funding from eight foundations, including the Bill & Melinda Gates, Ewing Marion Kauffman, and the Walton foundations and the Daniels Fund. Launched last fall, the Center aims to produce objective research assessing student achievement in charter schools and serve as a resource for those working to improve and expand charter schools. The Center was mentioned during a session at last fall's annual meeting of the Philanthropy Roundtable, which recently posted to its Web site audio files of all conference sessions. In addition to a session on charter school philanthropy, audio files from several other education-related sessions are also available. At one session, about civic education on campus, a panelist discussed the success some grantmakers have had in helping conservative academics gain faculty positions, thus "opening up the intellectual marketplace."

Of Related Interest

Panel on the Nonprofit Sector Releases Initial Recommendations for Congress
Late last month, Independent Sector's Panel on the Nonprofit Sector released its initial draft recommendations on nonprofit accountability issues. Focused largely on the Senate Finance Committee recommendations that the Panel believed were the least controversial, there were, nonetheless, some of these issues that were not yet decided by the Panel in its initial draft. Among the issues left unresolved was a recommendation to set a specific asset threshold for nonprofits and foundations that would require an independent audit of financial statements. Further recommendations on more difficult matters, such as excessive compensation, will come in a Spring report.

The Philanthropic Initiative Releases Publication, Announces Webcast on Big-Change, Big-Picture Philanthropy
The Philanthropic Initiative has posted to its Web site a recent paper from its founder and chairman Peter Karoff on the topic of transformational philanthropy. In Transformation Through Philanthropy - Theory, Fact and Fiction, Karoff offers an expansive definition of this type of giving which is focused on creating big change. He provides examples ranging from the John Templeton Foundation's early monetary recognition of Mother Teresa's work to the nonprofit Ashoka's funding of thousands of "social entrepreneurs" worldwide. The paper was originally disseminated as part of the organization's most recent Tuesdays@TPI Web-cast panel discussion. And the organization has just announced its next discussion, "The World We Want." To be held May 17, with specific time and registration details to be announced shortly, the discussion will explore several big philosophical and provocative questions, including "How much of philanthropy, including the foundation world, is worth saving?" And, "Could philanthropy actually be hindering the development of an advanced and progressive society?"

Related Reading

Economist: Corporate Philanthropy, Even for Tsunami Relief, is a 'Morally Dubious' Practice
The Jan. 22 Economist editorialized that gifts from publicly-traded companies to aid tsunami relief efforts - like all corporate philanthropy - are "tainted," even "morally dubious." And it's not actually philanthropy anyway, according to the weekly news magazine, because the managers authorizing the generous donations are giving away other people's money, not their own. The magazine featured in-depth editorial criticism of corporate social responsibility. The magazine disapproves of the practice, but reports that it is an industry in its own right, and a flourishing profession as well.

New Resource

Publication Says Funding with a Focus on Women Can Help Grantmakers Be More Effective
There is enormous untapped potential for philanthropy to make the most of women's ability to create change in the future - and tapping this potential will help grantmakers "become more powerful and more effective at accomplishing their missions." That's according to The Case for Better Philanthropy: The Future of Funding for Women and Girls, a new publication from the affinity group Women & Philanthropy and available for $25 at its Web page. The report cites the issues of fairness, effectiveness, and human rights as rationales for focusing funding on women and girls, and it introduces the concept of a "gender impact statement" that it says can help grantmakers better measure their accomplishments.