Report #125: July/August 2004

1. NONPROFIT LEADERS CRITICIZE PROPOSALS FOR NEW REGULATIONS THAT THE SENATE MAY CONSIDER THIS YEAR

Congressional recommendations regarding new regulations for government oversight of nonprofits and foundations have been criticized by nonprofit leaders, many of whom place a higher priority on increasing the IRS's capacity to enforce existing laws. Nineteen papers were submitted in advance of a July 22 Senate Finance Committee roundtable discussion that explored committee recommendations for improving government scrutiny of the sector. Despite the criticism from nonprofit leaders, Senate Finance Committee Chair Sen. Charles Grassley, R-Iowa, showed little sign that lawmakers would back down from considering major legislative changes "quickly, perhaps even this year," the Chronicle of Philanthropy reported in a July 23 online article. These could include curbs on foundation compensation of trustees and staff, the most controversial foundation-specific topics of debate.

Georgetown University's Pablo Eisenberg was one of the few commentators who agreed with most of the committee's recommendations. He called for corrective action "without delay" in light of "widely spread problems" in the sector that have recently come to light (and which inspired the committee's discussion draft of recommendations in the first place). Harvard University's Marion Fremont-Smith, however, said that many of the abuses in the sector would have been avoided if the IRS had had adequate funding and personnel. And both Eisenberg and Fremont-Smith appealed for more funds to support state-level nonprofit oversight than the committee's discussion paper has recommended.

Beyond universal calls for increased funding for government oversight, there was near-unanimous agreement that improvements to the Form 990 reporting form are needed. Betsey Buchalter Adler of the American Bar Association suggested that greater disclosure through the form, particularly about foundation compensation, might actually deter abuse. Eisenberg argued that foundations should be required to go beyond the Form 990 and provide additional information to the public through an annual or biennial report and a listing in the Foundation Directory.

2. SENATE PROPOSALS MIGHT ADD TO 'POLITICIZATION' OF SECTOR, ACCORDING TO COMMENTATORS IN PHILANTHROPY MAGAZINE

Several recommendations in the Senate Finance Committee's discussion draft would have the effect of enhancing the capacity of political leaders to favor and disfavor nonprofits and foundations depending on their politics, according to Adam Meyerson of the Philanthropy Roundtable. Meyerson writes about the "enormous collateral damage" the draft's ideas would have on the sector in the just-released July/August issue of the Roundtable's Philanthropy magazine. In a separate Philanthropy article, Tim Walter of the Association of Small Foundations and Georgetown's Pablo Eisenberg essentially disagreed, saying that they are not fearful of the government overreaching or over-stepping its power. Walter and Eisenberg were among 12 nonprofit leaders and legislators Philanthropy convened to comment on the discussion draft and related nonprofit regulatory matters.

Meyerson's concern about politics impeding nonprofit activity is already being realized, according to Charles Hamilton of New York's Clark Foundation. Hamilton wrote in his contribution to the Philanthropy symposium article that conservative and liberal critics have made unintentional "common cause" to promote the notion that all problems in philanthropy (e.g., foundation perpetuity) can only be solved by political action and legislation. This "politicization" of the sector diminishes the charitable spirit, according to Hamilton.

3. SURVEY: FOUNDATIONS SHOULD HELP STEM CRISIS COMING TO NONPROFIT SECTOR BY ADVOCATING FOR MORE EQUITABLE TAX POLICY

There's a financial crisis brewing in the nonprofit sector, a result of drastic federal and state budget deficits, but foundations are unaware of this, according to the watchdog group OMB Watch. The Spring issue of the National Committee for Responsive Philanthropy's Responsive Philanthropy newsletter features an article from OMB Watch officials on the impact of government deficits and budget cuts, which have been exacerbated by tax cuts, poor economic performance, and increased defense spending. Nonprofits are being called on to fill the gap resulting from government cutbacks at the same time they have less funding from government to provide services, according to the article. Government budget and tax cuts will threaten the mission of foundations, not to mention affect the level of charitable giving (e.g., through the elimination of the estate tax), but foundations haven't been active in fighting recent developments or proposing alternatives, according to OMB Watch. In a recent online survey from the watchdog group - results have not been posted yet, four out of every five respondents agreed that foundation leaders and trustees need to be active in stemming this coming crisis in the sector, which the group says will be especially devastating to nonprofits in the long-term. Beyond grants to nonprofits to advocate on tax issues, foundations, through their trustees, could use their community influence to help bring about more responsible and equitable tax policy, OMB Watch argues.

4. FOUNDATION ENGAGEMENT IN BOLD SOCIAL EXPERIMENTS HINDERED BY RISK-AVERSE BOARDS, FOUNDATION LEADER SAYS

Foundations today are far more timid about engaging in bold social experiments than in the past, according to Minneapolis Foundation's Emmett Carson, who was a panelist in a June 15 forum on philanthropic leadership that was sponsored by The Philanthropic Initiative (TPI). Carson stressed that risk-averse board members are the source of problems in foundations today, while moderator Peter Karoff of TPI said that foundations should accept failing as part of a crucial learning process. Respondents to one poll taken during the conference thought that the biggest problem in philanthropy is lack of collaboration; by far the most important issue on which philanthropy could and should play more of a leadership role, according to another poll, is poverty and inequity in society. There was also near-unanimous agreement that board governance is more of an issue than staff leadership in recent concerns about foundation practice.

Meanwhile, TPI has just released a new volume in its Venturesome Donor Series that serves as a primer for philanthropists to inject passion into their giving. Passion: Discovering the Meaning in Your Philanthropy includes exercises that aim to help funders develop a vision and a mission for their giving.

5. PHILANTHROPY OBSERVERS: SECTOR NEEDS A REFEREED JOURNAL TO HELP IT GROW BEYOND ITS CURRENT 'COTTAGE INDUSTRY' STATUS

Philanthropy will remain a "cottage industry and primitive craft," and its practitioners will continue to be unrecognized for and a bit insecure about their contributions - not to mention those of their colleagues - if the field remains without a peer-reviewed journal, according to two philanthropy observers. Frank Karel, formerly vice president for communications at both the Robert Wood Johnson and Rockefeller foundations, argued at a Duke University foundation research seminar earlier this year that the sector needs a refereed journal incorporating the best features of other similar journals, such as Science, Health Affairs, and the Harvard Business Review. More expansive than the Stanford Social Innovation Review, this journal should present scholarly studies as well as offer independent, investigative journalism and share information from academic presentations and discussions, according to Karel. His prepared text can be requested from the author by email, with "Request for Duke paper" as the "subject" line.

Peter Karoff of The Philanthropic Initiative made a similar recommendation in his chapter of TPI's recently released book, Just Money: A Critique of Contemporary American Philanthropy . For Karoff, a "Journal of Philanthropy" would incorporate reflective pieces and discussions of practice in the field, and would be equivalent in value and influence to the New England Journal of Medicine or Foreign Affairs.

Karel echoed his call for greater information about philanthropy at a May gathering of Florida philanthropy leaders organized by the University of Florida's Askew Institute on Politics and Society. He also called on philanthropy to help "reduce the anger, hostility and contentiousness that so mars public discourse in our society." A summary of Karel's keynote speech, as well as other speeches and recommendations from the gathering, has just been published in a report from the Askew Institute.

6. FOCUS ON 'NEW' HAS HELPED KEEP FOUNDATION SUPPORT OF THE HUMANITIES FROM MAINTAINING PACE WITH OVERALL GIVING, ACCORDING TO SCHOLAR, STUDY

Foundations' "principle of compulsory newness" has limited their support of the humanities, according to philanthropy scholar and adviser James Allen Smith of Georgetown University and The J. Paul Getty Trust. Smith's historical analysis is contained in a June Foundation Center report, which was published in collaboration with the American Academy of Arts & Sciences. According to the report, foundation support of the humanities - including fields as varied as art history, archeology, languages and linguistics, and the social sciences - more than doubled between 1992 and 2002, from $134.1 million to $335 million. But this support grew more slowly than overall foundation giving, and its share of total foundation giving slipped from 2.5 percent to 2.1 percent in the same period. In the humanities, as in many other fields, a relatively small number of foundations, including a handful of new funders, contribute the bulk of support. Smith cites foundation support for the study of foreign languages in the 1930s and after to show how funders can match their focus on the new and critical with support of the humanities.

7. GOVERNMENT SHOULD BE MAIN PROVIDER OF ESSENTIAL SERVICES, PHILOSOPHER ARGUES; FOUNDATIONS, CORPORATIONS RENDER SOCIETY 'PASSIVE,' DEPENDENT

An Australian philosopher has released a paper that questions what he describes as a commonly shared preference for philanthropy over government in delivering essential services. Neil Levy of Australia's Charles State University offers an argument that could gain traction among the non-academic political left, with its emphasis on the notion that government and political entities are more representative of the citizenry and more responsive to community pressure than philanthropic organizations. Foundations and nonprofits in general "render a large part of the community they serve passive," since beneficiaries cannot participate in their operations, at least not on an equal footing with other key stakeholders, such as funders, boards, and staff. And fluctuations in the economy are far more challenging for nonprofits and philanthropy than government, so the poor are at greater risk relying on the private sector, he argues. It's "morally problematic," then, according to Levy, to have private, non-governmental entities providing essential services, such as health care delivery and emergency accommodation, to the public. Though his paper is titled "Against Philanthropy," Levy stresses that he's not opposed to all philanthropy. He says his main purpose in writing the essay is to stir debate about the "provenance" and role of philanthropy, too often thought of as inherently good and beyond question.

8. SEVERAL FOUNDATIONS HELPING DEVELOP BETTER K-12 CURRICULA TO COMBAT TODAY'S 'GLITZY,' POLITICALLY-CORRECT, ERROR-PRONE TEXTBOOKS

Developing better curricula is the most fundamental element in elementary and secondary education reform, according to several foundation leaders, who are funding efforts to draw attention to and help meet this need. The May/June issue of the Philanthropy Roundtable's Philanthropy magazine featured an article profiling a number of foundations, most of a conservative, free-market bent, that are funding efforts to study textbook quality, create alternative teaching materials, and disseminate the materials to schools. According to the article, there's a spate of "glitzy" textbooks today that are "hobbled by political correctness, shallowness, incoherence, even factual errors." The article - no longer available online - reports on one curriculum producer offering "free-market environmentalist" guidelines and lesson plans to combat the "inherently anti-market" outlook of teacher education.

Of Related Interest

Los Angeles Times Lauds Grantmaker-Led, Politically-Motivated Initiative to Insure Children
A coalition of foundations in Los Angeles is working to persuade the California government to insure children statewide for the long term, according to a laudatory editorial in the June 22 Los Angeles Times. The three-year, $112 million Children's Health Initiative of Greater Los Angeles will offer medical, dental, and vision coverage for 150,000 children. The California Endowment is the leading grantmaker behind the initiative, which the newspaper editorial reported aims to keep the state from failing to insure underprivileged children, as it did last year, and to encourage other areas in the state to expand their children's health coverage as well.

Silicon Valley Philanthropist Launches Company to Produce 'Socially Relevant' Films
One Silicon Valley billionaire philanthropist has started a film-production company to make widely available films that focus on people and activities around the world working on social change. The June 18 San Jose Mercury News reported on former eBay president Jeff Skoll's Participant Productions that will fund "socially relevant, commercially viable" feature films which document efforts to protect the environment, fight for human rights, and show the cultural effects of gun proliferation. Skoll told the newspaper that through his work with his Skoll Foundation, "I kept meeting these really interesting people in the world who are doing amazing things [and whose] stories are every bit as dramatic and entertaining as anything you'd see in the movies."

New Resource

Database Documents 318 Foundation Capacity-Building Programs
A foundation-funded database has been updated so that it now includes a total of 318 foundation programs that work to strengthen nonprofits across the U.S. and the world. Foundations can learn about capacity-building grantmaking and direct service work of other funders through the Philanthropic Capacity-Building Resources Database, a project of the Human Interaction Research Institute.