The Wall Street Journal is out with its year-end philanthropy package, and long-time observer/critic of the sector Pablo Eisenberg steals the show with a section-heading article entitled "What's Wrong With Charitable Giving and How to Fix It?"
Those who know Eisenberg or follow him in the Chronicle of Philanthropy (where he's had a column for the past seventeen years) will recognize his concerns: "Much of current philanthropic giving, by foundations and individuals, neither meets the needs of...charitable organizations nor addresses some of our most urgent public needs." Foundations are "too bureaucratic, inflexible and cautious, and too focused on short-term objectives." Grantmaking processes and procedures "are more tailored to the needs of foundations and their trustees than to the requirements of nonprofits." And the depressed economy is making matters much, much worse.
To address these problems, Eisenberg offers nine recommendations that "would go a long way toward making philanthropy do what we all claim we want it to do":
1. Increase the payout rate. Currently set at 5 percent of foundation net assets (calculated on a rolling mutliyear basis) for grants and administrative expenses. Eisenberg would like to see it raised to 6 percent and limited to grants, which he says would add $10 billion to the roughly $40 billion awarded in grants by foundations annually.
2. Increase general operating support. Foundations allocate roughly 20 percent of their grant dollars to general operating (a/k/a unrestricted) support; Eiesenberg would like to see foundations up that to 50 percent.
3. Increase multiyear funding. Most foundations award grants on an annual basis, renewable for a year or two. But, says Eisenberg, excellent organizations pursuing long-term goals require financial commitments of five, ten, even twenty years.
4. Award grants on a rolling basis. Limiting grant decisions to biannual or quarterly board meetings serves trustees' interests first and foremost, says Eisenberg, not grantees'.
5. Allocate more funds to the truly needy. Most individual and institutional giving is directed to established charities and tax-exempt institutions in higher education, health, and the arts, while only "a small slice goes to those who require the greatest assistance." We can do better, says Eisenberg.
6. Reach out to local groups and underserved regions. Large parts of the country (e.g., the Mississippi Delta, rural areas) "are underserved by philanthropy." There are ways to remedy this, and Eisenberg mentions a few in his piece.
7. Simplify application and reporting procedures. Time is money, says Eisenberg, and time spent filling out "lengthy, exhaustive proposals with great detail" is money not spent on programs and advocacy.
8. Improve public accountability. Government doesn't have the resources to do the job and the collapse of the daily newspaper model means that soon no one will be around to hold nonprofits and foundations accountable. One answer, says Eisenberg, is to convert failing or at-risk newspapers into nonprofits. (Don't hold your breath, he adds.)
9. Fund watchdog groups. "Foundations," says Eisenberg, "are reluctant to fund activities that are controversial, generate inordinate publicity and create too much criticism" -- in other words, the very things that are the hallmark of a "healthy and vibrant democracy." If the public sector can't, or won't, fund them, philanthropy must.
As I say, a classic Pablo piece chockful of good ideas (general operating and multiyear support, more of a focus on underserved regions), a few controversial ideas (payout, diversity benchmarks), and a non-starter or two (foundation subsidies for newspapers).
But here's the question that has been nagging me all afternoon. Do his recommendations really address the problems of nonprofits and charitable giving in 2009? Or are they more of a backward-looking prescription for the problems of a sector that, like so many other industries, is in the midst of a fundamental restructuring and in five years, ten at the most, won't look anything like it does today?
Where are the recommendations related to what LaPiana and Associates, in a new report (30 pages, PDF), argue will be the trends that shape the nonprofit sector of the future (generational and other demographic shifts, the rise of social media and other new technologies, the growing importance of networks, the changing nature of volunteerism and civic engagement, and the blurring of sectoral boundaries)?
And is his critique too one-sided in its focus on the shortcomings of funders? In other words, isn't this crisis an opportunity for nonprofits willing and able to surf the five key trends outlined in LaPiana's report? Or are they forever fated to rely on the kindness of deep-pocketed strangers?
Use the comments section to share your thoughts.
-- Mitch Nauffts
