Foundation Transparency: The More Things Change, The More They Stay The Same

As I reviewed “Foundation Transparency: What Nonprofits Want,” the latest publication from the Center for Effective Philanthropy (CEP), I had an overwhelming sense of déjà vu. So I dug deep into the archives to find reports on the subject produced by the organization I now lead, the National Committee for Responsive Philanthropy (NCRP).

In May 1980, NCRP released Foundations & Public Information: Sunshine or Shadow? It was a scathing report that took foundations to task for their reticent approach to sharing information, and it launched a decades-long commitment by NCRP to promote increased transparency. The report explored why foundations should be accountable and transparent, and also the inadequate government requirements at that time. It ranked and scored 208 of the largest philanthropies using a rigorous methodology and found that 60 percent of foundations in the sample did not meet an acceptable standard of transparency. Just 4 percent were found to be “excellent.”

The methodology included a heavily weighted assessment of whether foundations provided the kinds of information that nonprofits most desired, including information about grantmaking interests and policies, and how grant applications were evaluated and decisions made about which organizations to fund.

I see many parallel findings between that report and CEP’s excellent new report. A full 33 years later, nonprofits are still clamoring for more information about how foundations make funding decisions and they want clear and open communication about priorities. They want to know whether it’s worth their time to cultivate a relationship and pursue funding. And despite an explosion of glossy annual reports and fancy websites, leaders of grant-seeking organizations are still highly frustrated by the lack of clear communication about a central element of foundation activity, namely how foundations decide which organizations to fund.

Foundation Transparency surveyed 138 nonprofit leaders, and I was unsurprised to see many of the respondents reference a desire to know how foundations assess their own performance and the impact they have. It only seems fair that since foundations are requiring this from grantees, that they be willing to be accountable for articulating impact, too.

Some of the findings suggest to me that nonprofits really want foundations to function as true partners. For example, the fact that an overwhelming majority of respondents wanted to know more about what foundations are learning indicates that grantees want learning to go both ways.

The CEP report doesn’t explore the regulatory framework for foundation transparency, nor does it explore in-depth the arguments for why greater transparency may be warranted. But another report released this year does revisit those questions. The Philanthropy Roundtable published in March 2013 Transparency in Philanthropy: An Analysis of Accountability, Fallacy, and Volunteerism.

As I reviewed Foundations & Public Information in light of the Roundtable’s current offering, I was struck by how little the arguments in favor of greater foundation transparency have changed since 1980. The original NCRP report looks at the partially-public nature of philanthropy, which is revisited by the Roundtable (though our organizations obviously come down on different sides). The partially-public dollars argument asserts that because of the preferential tax treatment afforded to foundations, a high level of transparency and accountability is owed to the public and grantees. NCRP repeated and expanded on this argument in our 2009 publication Criteria for Philanthropy at Its Best: Benchmarks to Assess and Enhance Grantmaker Impact.

In 1980, NCRP devoted some attention to why greater transparency is in the self-interest of foundations and how it might improve their effectiveness. This topic is explored robustly in the Roundtable’s new report, Criteria, and is touched on in the CEP report. Because I see additional regulation as unlikely in the near future, the link between effectiveness and voluntary transparency merits further exploration.

Speaking of regulation, there has been some increase in activity around this in recent years, though nothing has actually changed for more than 20 years in terms of mandated disclosures. Most philanthropy insiders are familiar with efforts by the Greenlining Institute to pass AB624, which would have required new disclosures for the largest foundations in California. Fewer are aware of quieter efforts by the Philanthropy Roundtable to pass legislation in several states banning efforts similar to AB624.

The last substantive change that shaped the current required information disclosure in the IRS form 990-PF can be traced to when NCRP worked with Senator Dave Durenberger (R-Minn.) to influence the IRS to change what it required in the form. Those changes contributed to helping the Foundation Center produce the best data available about the sector. An abbreviated version of how NCRP’s efforts on transparency evolved, including the Durenberger intervention with the IRS, can be found on page 10 of this look back at NCRP’s history.

What I’m left with is a sense that, on the issue of transparency, the more things change, the more they stay the same.

Coincidentally, around the same time as I was reviewing the new CEP publication and beginning to think about crafting this blog post, Bob Bothwell invited me to join him on a Friday evening for a baseball game at Nationals Park. Bothwell was NCRP’s executive director from its inception in 1976 until 1998. I am reminded again of how important it is for those of us from a new generation who are leading nonprofits and foundations to intentionally nurture connections to our history, even while we attempt to take our organizations in new directions.

And in case you’re wondering, the Washington Nationals beat the Cincinnati Reds 1-0, and Jordan Zimmerman pitched a one-hitter.

 

Aaron Dorfman is executive director of the National Committee for Responsive Philanthropy (NCRP). He frequently blogs about the role of philanthropy in society. Follow NCRP on Twitter @ncrp.

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