1. HOUSE COMMITTEE HOLDS HEARING ON SECTOR; INITIAL SENATE COMMITTEE LEGISLATION EXPECTED THIS MONTH

Both chambers of Congress are taking action this month to address concerns about abuse in the nonprofit sector. House Ways and Means Committee Chair Bill Thomas, R–Calif., held what was largely an informational hearing examining the legal history and the current economic relevance of the tax–exempt sector, as well as measures Congress could take to increase its oversight. The April 20 hearing focused exclusively on legal experts' testimony, with no sector representatives present. Representative Thomas repeatedly asked the assembled panel of legal experts for advice on what Congress' next steps should be in reforming the sector, and he didn't seem encouraged by several of the time–consuming steps witnesses suggested. He concluded by asking committee staff members to meet with the witnesses to explore the issue further.

Sen. Charles Grassley, R–Iowa, chair of the Senate Finance Committee, is expected to introduce initial legislation affecting the sector by the end of this month. This timetable would beat the Panel on the Nonprofit Sector, which is not expected to issue its final recommendations until June. In his closing statement at an April 5 Senate Finance Committee hearing on abuses in the sector, Senator Grassley asked the Panel to concentrate on offering the Committee “serious reform proposals quickly.” He specifically asked for proposals addressing problems of self–dealing, governance, and compensation in the sector. At the Council on Foundations' recent annual conference, Diana Aviv, the Panel's executive director and president of Independent Sector, said that recommendations the Panel makes in its final report could be incorporated later as amendments to the coming legislation from Senator Grassley. An additional Senate hearing may be held to discuss these recommendations, she suggested.

2. SENATOR SEEKS ADVICE ON REFORM FROM PHILANTHROPY ROUNDTABLE, ENSURING CONGRESS HEARS FROM CONSERVATIVES

Sen. Rick Santorum (R–Penn.), another member of the Senate Finance Committee, has asked the conservative–leaning Philanthropy Roundtable to convene its own group to respond to the various proposals for charitable reform, an apparent effort to get a different perspective on reform. In a March 15 letter, Senator Santorum, a leading proponent of increasing charitable tax incentives as well as government outreach to faith–based charities, praised the experience of the Roundtable. He asked for its “prompt” guidance in reviewing proposals from Congressional bodies as well as those from the Panel on the Nonprofit Sector. Senator Grassley had tapped Independent Sector to form the Panel late last year. Senator Santorum doesn't spell out in his letter why he thinks another independent review group is needed. Two possible reasons, though, are that the Roundtable has had no direct involvement with the Panel, and that the Panel's participant roster includes relatively few obvious conservatives.

Prior to Senator Santorum's request, the Roundtable had already established the Alliance for Charitable Reform, which has set as its goal to push for sector reform while “protecting the freedom of foundations to operate.” Led by Washington tax lobbyist Sandra Swirski, the Alliance seeks to produce one strong sector–wide voice promoting common–sense laws and regulations, and representing all donors. Membership is not limited to members of the Roundtable.

3. IRS COMMISSIONER SUGGESTS NONPROFITS ARE RESPONDING TO ABUSES MORE APPROPRIATELY THAN CORPORATIONS; FORMER STATE OFFICIAL DISAGREES

Though he sees many parallels between abuses in the corporate sector in the 1990s and problems in the nonprofit sector today, Internal Revenue Service Commissioner Mark Everson noted one key difference in his April 12 plenary speech at the Council on Foundations annual conference. While businesses seemed to be in denial about their sector's problems, Everson believes there is a real conversation going on in the nonprofit sector about confronting abuses. Still, he told the audience that there needs to be more rigor in practicing self–enforcement in the sector.

However, another former regulatory official isn't as convinced as Everson that the nonprofit sector is responding better to allegations of abuse than businesses. To Scott Harshbarger, a Boston lawyer and former Massachusetts Attorney General, the leadership of the nonprofit sector seems to be following the lead of the for–profit sector in resisting regulatory reform, insisting that greater self–regulation will do the job. In a commentary in the special supplement, “Regulatory Landscape 2005,” to the Spring Nonprofit Quarterly, Harshbarger, who's also helping shape the Panel on the Nonprofit Sector's recommendations, said that sector leaders are also further limiting the discussion on needed reform by only talking with fellow “‘insiders and true believers.'” Leaders, he said, should be seeking counsel from others, including those from outside the sector, who could contribute to developing substantive, carefully considered recommendations.

4. NEW EBAY–INSPIRED 'MICRO–PHILANTHROPY' EXPERIMENT COULD EXPAND NOTION OF PHILANTHROPY BEYOND LARGE–SCALE DONORS

A software developer and blogger is currently incubating, through online discussions, an idea that could expand the notion of philanthropy as well as the definition of a philanthropist. The Micro Philanthropy Network of Tom Munnecke focuses on “micro donors,” whom he distinguishes from foundations and other large–scale, “macro” philanthropists. Micro donors, to Munnecke, don't necessarily contribute money— and when they do it's on a small scale. More important than giving money, micro donors contribute by drawing attention to and inspiration from each other and each other's causes, as part of an online network through which all philanthropic activities, successful or not, are shared and discussed openly. Similar to eBay founder Pierre Omidyar's “bottom–up” giving approach – as well as eBay itself – Micro Philanthropy's approach, with an everyone–can–be–a–philanthropist ethos, will soon be tested as part of an Omidyar Network–funded experiment. In addition, the Fund for New Philanthropy Studies at Donors Trust, a self-described community–style foundation that seeks to minimize government intervention in individuals' lives, will help co–sponsor a Micro Philanthropy Workshop that Munnecke has tentatively planned for early June to discuss how to activate the Network and how macro–donors might help propel it.

Munnecke says his experiment is similar in spirit to the disjointed, chaotic beginnings of the World Wide Web, when there was no organizing structure to the medium. He has intimated that it could take shape in a similar style to that of the mutual–fund industry in the stock market. And he's also suggested that micro philanthropy could “tip” the nonprofit sector to become less hierarchical and more horizontal, focusing on individuals and activities, and not on organizations and their need for fundraising.

5. TREASURY DEPARTMENT RECONSIDERING ITS GUIDELINES ON ANTI–TERRORIST FUNDING; SHOULD FOUNDATIONS PROTEST THE GUIDELINES?

Because they are voluntary and not mandatory, foundations should protest the Anti–Terrorist Financing Guidelines issued in late 2002 by the Treasury Department, according to one questioner at an April 11 session at the Council on Foundations annual conference. Foundations would have the support of their grantees and many others disturbed by the guidelines if they were to publicly resist checking grantees’ names against the U.S. government’s list of suspected terrorist organizations, according to the unidentified questioner. In response to the questioner’s call for foundation resistance, Barnett Baron of the Asia Foundation, a session presenter, said the political risks are greater in not complying, and that foundations can follow the guidelines in a reasonable way that isn’t too obtrusive or condescending to grantees. Marcus Owens, a DC lawyer and former senior IRS official, said at the session that Treasury is currently reconsidering its guidelines, taking into account suggested revisions from the Council as well as the Council’s new Principles of International Charity. (A CD–ROM featuring audio files and handouts from all Council conference sessions is available for purchase.)

6. FOUNDATIONS THREATEN VALUES BY BEING SILENT ABOUT GOVERNMENT ACTIVITIES, CRITIC SAYS

Foundations and other nonprofits are threatening society’s core values as well as those of the nonprofit sector by remaining silent as the government cuts funding for social programs and attacks progressive causes, according to Rick Cohen of the National Committee for Responsive Philanthropy. Cohen has written recently on the willingness of foundations and nonprofits to simply “turn a blind eye” in the political realm to social issues they care about, instead engaging only on technical political matters. In the Winter issue of his organization’s Responsive Philanthropy, Cohen wrote that he is disturbed that foundations have not only failed to counter conservative challenges to progressive causes, such as gay rights, or to counter “unfettered corporate domination” of society. He said they’ve also thrown their support behind Congressional leaders partly responsible for these challenges in the first place, all because of “pragmatic politics” that he argues may help the sector make short–term gains but threatens core principles of fairness in society, as well as the interests of the sector itself.

7. CONCERNS EXPRESSED ABOUT FOUNDATION–FUNDED NONPROFIT ADVOCACY; ONE COLUMNIST CALLS ON CONGRESS TO INVESTIGATE

The Internal Revenue Service Commissioner Mark Everson said in his speech at the April 5 Senate Finance Committee hearing that one of his concerns is the increasing political activity of nonprofits. And several conservative commentators have recently expressed the same concern, specifically criticizing foundation funding of campaign finance reform. For example, the Wall Street Journal’s online–only OpinionJournal.com ran a March 21 column by John Fund that took aim at the allegedly secretive nature of foundation support for campaign finance reform. Fund, a member of the Journal’s editorial board, suggested that the successful effort by foundations to reform campaign finance may serve as a model for future attempts to influence Social Security and legal reform debates. The lack of transparency of foundation and nonprofit advocacy activities is something that Congress should investigate as it seeks further election reform, Fund wrote.

8. TWO EXPERTS FAULT POPULAR MEANS FOR IMPROVING FOUNDATION AND GRANTEE EFFECTIVENESS

In his opening remarks at a March 17 Center for Effective Philanthropy seminar, the Center’s Phil Buchanan told seminar attendees that too much emphasis has been placed on providing “precise assessment” of overall foundation performance, something that is not achievable. What is needed instead, according to Buchanan, are practical measures for assessing foundation impact that can be used by a broad range of foundations. Developing improved – and practical – common, evaluation measures will help foundations respond more forcefully to current media and legislative scrutiny about their accountability, as well as prevent the assessment of foundations from falling back on benchmarks, such as low administrative costs, that are easy to measure but not very useful.

In another commentary on effectiveness, Francie Ostrower of the Urban Institute’s Center on Nonprofits and Philanthropy suggests that foundation practice of encouraging or requiring grantees to partner with other nonprofits is not the panacea to improving performance that it’s often claimed to be. Ostrower wrote in the Spring 2005 Stanford Social Innovation Review that too many foundations see collaboration or partnership as an end in itself, not merely as just a grantmaking tool or method, and they tend to ignore the evidence when partnerships aren’t producing the outcomes desired. Based on recent analyses of research that she and her colleagues at the Urban Institute have conducted, Ostrower reported that foundations may be over prescribing partnerships, sometimes even requiring grantees to form partnerships that they wouldn’t have otherwise established. She also offered lessons on how to form partnerships, and suggestions on when partnerships are warranted.

9. SYMPOSIUM PARTICIPANTS DISCUSS HOW FOUNDATIONS CAN ADAPT BUSINESS STRATEGIES TO ENHANCE THEIR PERFORMANCE

Foundations in Europe should be preparing themselves for the same kind of scrutiny from journalists and governmental officials that U.S. foundations are now receiving, warned Duke University’s Joel Fleishman at a March 13–15 Bertelsmann Foundation Symposium in Berlin, Germany. To improve their performance and their standing with key stakeholders, foundations should borrow strategies from the commercial sector, suggested several presenters who spoke to the 30 foundation experts from the U.S., Germany, Italy, Spain, and Switzerland who attended the symposium. Nina Fritsch of the Marketing Centrum Munster in Germany reported on her study which found that foundations see a “good reputation” as the second most important factor for completing their projects successfully. To enhance their reputations, Heribert Meffert, head of the executive board of the Bertelsmann Foundation, recommended that foundations create a brand identity for themselves, following common practice in the business sector. A report on the symposium is currently available only in German.

10. MEDIA CONSOLIDATION IS BIGGEST DOMESTIC POLICY ISSUE, FCC COMMISSIONER SAYS, CALLING ON FOUNDATIONS TO RAISE AWARENESS

Federal Communications Commissioner Michael Copps has called on foundations to help host public forums on the subject of media consolidation and commercialization and to support media literacy and journalism efforts at schools. At an April 11 session at the Council on Foundations conference, Copps indicated there is no bigger issue right now on the domestic policy agenda than declining interest in journalism and increasing monopolistic practices at media companies. He argued that the increasingly superficial coverage by the news media of all important domestic issues, from media ownership to social security reform, has significant – though largely unrecognized – influence on domestic policy. Other presenters at the session, organized in part by the affinity group Grantmakers in Film and Electronic Media said foundations should support regional and local journalism, such as journalism schools at community colleges. Foundations may also want to consider funding an independent commission to study the issue, according to one presenter, the journalist John Nichols. And a questioner suggested that foundations holding shares in media companies should push them to pass resolutions committing to responsible ownership practices. (A CD–ROM featuring audio files and handouts from all Council conference sessions is available for purchase.)

Of Related Interest

Report: Foundations Benefit by Participating in Funder Collaboratives, a Growing Trend
Funder collaboratives are growing in number, size, and sophistication, according to a new report that focuses on local collaboratives. The Association of Baltimore Area Grantmakers released the report, Local Donor Collaboration: Lessons from Baltimore and Beyond, last month. The report identified the rewards for foundations of participating in funder groups, including the advantages of being part of a learning laboratory, indirect benefits for a foundation’s work in other programs not affiliated with the collaborative, and opportunities for more focused networking with other grantmakers.

Amazon.com Establishes Award to Recognize Innovative, Popular Nonprofit
Amazon.com has announced that the corporation, with help from customers, will recognize an innovative nonprofit. Essentially a popularity contest, Amazon’s Nonprofit Innovation Award will match up to $1 million in customer donations to one nonprofit working on an urgent and relevant problem that also has popular appeal. But 10 nonprofits will each earn customer donations and have the chance to compete for corporate matching funds. Representatives from Stanford University Business School’s Center for Social Innovation will first narrow the initial slate of candidates to those meeting established criteria, and then an eclectic field of judges will further narrow the list to 10. The winner will be announced in October.

Related Reading

Foundations Have Inadvertently Helped Conservatives Win ‘War of Ideas,’ Article Says
Mainstream and liberal foundations have, inadvertently, helped conservatives win the “war of ideas” by refusing to fund ideological think tanks that actively work to influence policy, according to an article in the Spring 2005 Stanford Social Innovation Review. In his cover story article, Andrew Rich of the City College of New York, whose earlier research on think tanks was supported by the Aspen Institute, contrasted the approach of mainstream and liberal foundations with that of their conservative counterparts. Rich wrote that conservative foundations are much more eager to fund ideological think tanks active in marketing their ideas to policymakers and the public. The difference, Rich reported, is in part explained by the fact that researchers at mainstream and liberal think tanks often come from academia, while those at conservative think tanks frequently have more direct political and policy experience. Similar differences in background may exist among foundation officials as well.