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43 posts categorized "author-Brad Smith"

Apocalypse Later? Philanthropy and Transparency in an Illiberal World

March 02, 2017

The following post by Foundation Center president Brad Smith introduces a new, year-long series here on PhilanTopic that will address major themes related to the center’s work: the use of data to understand and address important issues and challenges; the benefits of foundation transparency for donors, nonprofits/NGOs, and the broader public; the role of storytelling in conveying the critical work of philanthropy; and what it means, and looks like, to be an effective, high-functioning nonprofit or changemaker. As always, we welcome your thoughts and feedback.

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Open-Data-470x352How long will it be before nonprofit transparency takes its place alongside diceros bicornis on the endangered species list? Hopefully never, but in a world that's growing more technologically sophisticated and more illiberal, I'm beginning to think that if it's not Apocalypse Now, maybe it's Apocalypse Later.

The value of transparency

Transparency has been a boon to the philanthropic sector, making it possible for organizations like Foundation Center, Guidestar, the Urban Institute, Charity Navigator, and others to create searchable databases spanning the entire nonprofit and foundation universe. Our efforts, in turn, contribute to responsible oversight, help nonprofits raise funds to pursue their missions, and fuel online platforms that enable donors to make better giving choices. Transparency also enables foundations to collaborate more effectively, leverage their resources more efficiently, and make real progress on critical issues such as black male achievement, access to safe water, and disaster response. The incredibly rich information ecosystem that undergirds the American social sector is the envy of others around the globe — not least because it gives us a clear view of what nonprofit initiative can accomplish, how it compares and contrasts with government, and how social, economic, and environmental issues are being addressed through private-public partnerships.

Where we are today

Federal law — U.S. Code, Title 26, Section 6104 — stipulates that public access to Form 990, a federal information form that tax-exempt organizations are required to file annually, must be provided promptly on request at the exempt organization's office or offices, or within thirty days of a written request. However, exempt organizations don't have to provide copies of their Forms 990 if they make these materials broadly available through the Internet, or if the IRS determines that the organization is being subject to a harassment campaign.

In 2015, Carl Malamud, the Don Quixote of open data, dragged transparency into the digital age when he brought suit against the Internal Revenue Service to force it to make the 990s of a handful of organizations that had been filed electronically available as machine-readable open data. Malamud won, and, somewhat surprisingly, the IRS then did more rather than less to comply with the order: as of June 2016, all Forms 990 filed electronically by 501(c)(3) organizations are available as machine-readable open data through Amazon Web Services. As such, they can be downloaded directly in digital form and processed by computers with minimal human intervention. The development represents a victory not only for Malamud but for the Aspen Institute’s Nonprofit Data Project, which has toiled for years to make 990s more accessible. The idea, of course, is that free, open data on nonprofits will enable more innovators, researchers, and entrepreneurs to use the data in ways that help make the sector more effective and efficient. Since Malamud won his case, the IRS has posted some 1.7 million Forms 990 as machine-readable open data.

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Philanthropy as if Democracy Really Mattered

October 19, 2016

Infographic-foundation-funding-for-democracyI've been doing quite a bit of traveling overseas recently, and everywhere I go people seem to be scratching their heads at the U.S. presidential election.  Living through it day-to-day via television and radio is challenging enough, but trying to explain it in a rational way to people who know little about the United States but somehow expect more from the self-proclaimed "greatest nation on earth" is close to impossible.

Fortunately, I head an organization in a sector, philanthropy, that is trying to do something to "fix" American democracy. That work has nothing to do with the candidates of the moment, Donald Trump and Hillary Clinton, and everything to do with the system that produces, funds, promotes, nominates, and elects candidates for national office. Even better, that work can be explored in depth through Foundation Center's Foundation Funding for U.S. Democracy, a data visualization platform for funders, nonprofits, journalists, and anyone interested in understanding philanthropy's role in supporting and improving U.S. democracy. Produced with the support of a group of foundations — Carnegie, Hewlett, Rita Allen, JPB, MacArthur, Open Society, Rockefeller Brothers, and the Democracy Fund (a creation of Omidyar Network), among them — the platform captures more than $3 billion in foundation grants made since 2011 and is refreshingly free from the rhetoric, factoids, and outright lies that have dominated news coverage of this election cycle. It focuses, instead, on important structural issues such as campaign finance, civic participation, open government initiatives, and journalism education and training.

Here are a few examples of what you can find there:

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'Business of Giving': Brad Smith, President, Foundation Center, Chats With Denver Frederick

October 13, 2016

The following is the transcript of a conversation between Bradford K. Smith, president of Foundation Center, and Denver Frederick, host of "The Business of Giving." In their conversation, which aired September 18, Frederick and Smith talked about the next frontier of philanthropy — managing information and producing and sharing knowledge. The transcript has been lightly edited for length and clarity. "The Business of Giving" can be heard every Sunday evening between 6:00 and 7:00 p.m. on AM 970 The Answer in New York City and on I Heart Radio. For an audio version (running time: 45:38) of Denver and Brad's chat, hop on over to the BofG site.

Denver_fredericks_brad_smith_vertical (2)Denver Frederick: The rate of change is increasing in every field of endeavor, including philanthropy. And in order to be a true leader in the field, a person can't be 100 percent consumed with just the well-being and state of their own organization; one also must leave some space and time to contemplate what all these changes mean for the entire sector. One individual that fits that description perfectly is my next guest. He is Bradford K. Smith, president and CEO of the Foundation Center. Good evening, Brad, and welcome back to the Business of Giving.

Bradford K. Smith: It's great to be back.

DF: For those listeners that are not familiar with the Foundation Center, tell us about the work you do.

BKS: I think the easiest way to understand us is what Bloomberg does for the financial markets, we do for philanthropy!  Basically, we publish data and information about the transaction of philanthropy. In other words, these endowed foundations that make grants to support organizations in the social sector to make the world a better place — we track all that information. We put it out there in an unbiased way so that you can search it; you can find it; you can understand who's funding your cause, who's not funding your cause, what foundations are doing, and what they're not doing.

DF: Let's talk about foundations for a moment. When we look at philanthropy in the U.S., last year about $375 billion was made in contributions. What percentage of that comes from foundations?

BKS: It's roughly 16 to 17 percent,  and this is a common misunderstanding. A lot of people look at nonprofits in America, and they assume that their larger supporters are wealthy foundations and maybe individuals. But the largest source of income for American nonprofits in the aggregate is actually government. Foundation money is very important because it's one of the few sources of income that nonprofits have that usually is not earmarked; it's very flexible.

DF: Well, let's talk a little bit more about that. I think foundations are pretty abstract to most people. It's kind of a big idea out there, and I think you have a wonderful way of explaining it by talking about the sources of influence that they hold.  There are three of them, and let's pick up on each. I'm going to start with the one you just mentioned. The one that is obvious to everybody: money. But as you say, it's a very special kind of money, right?

BKS: Correct. Foundations have a really important role in American history and American society. Basically, our government has created a kind of social pact in which wealthy individuals are given a tax incentive for creating a charitable foundation. They make a donation of a portion of their assets to the foundation. They no longer control those assets. They can't take them back for personal use. They get a tax exemption in exchange for creating a stream of charitable giving in the future. Now, there are a lot of ways to look at the size of the philanthropic sector in the U.S. There are a lot of foundations. I  know when the Foundation Center was created in 1956, there weren't near as many. In fact, when the Foundation Center published the first print directory of American foundations, there were about four thousand foundations. And today there are well over eighty thousand foundations. And the assets they manage — their investments — surpass $800 billion. And it's the earnings on those investments, which are tax-free, that are used to actually fund grants and fulfill their charitable purpose.

DF: Right. The second source of influence that foundations have is "convening power."

BKS: Well, there are not a whole lot of people in this world whose job is to give away money. And people always were sort of perplexed about that. They said: "Gosh, how do you find the organizations to be worthy of getting the support of the foundation?" And I used to tell them: "Look, when you are in the business of giving away money, you don't have to go looking for people; they find you." So, one of the things that gives a foundation virtually a seat at any table is the fact that they're giving away money.

And the other thing is, they're giving away money that, unlike congressional money or city money, isn't earmarked by elected officials for their pet causes. It's very flexible, long-term, risk-taking money. But this also gives them the ability to "convene." And we find that the foundations that are having the greatest impact on the issues that are working — whether it's criminal justice reform, or climate change, or job creation — are not just giving away grants in a retail kind of way. They're actually creating tables to which policy makers, academics, activists, and others can come and really think about what the long-term solutions are to these serious problems that our society and world face.

DF: And it would seem, in an era of collaboration, they do have that special role. They don't have a dog in the fight; they're neutral….

BKS: Correct.

DF: They give money away, and they have an incredible ability to get everybody to come when they call a meeting.

BKS: Yeah. When I worked with the Ford Foundation, the two jokes they always tell you when you start to work there is that all your phone calls get returned. And immediately, it seems like all of your ideas are brilliant.

DF: That's right, and you also become a little funnier and better looking, too.

BKS: That's right. Two of the perks.

DF: And finally, and this is so important: the accumulated knowledge that foundations hold. Speak to that.

BKS: I think this is really the frontier for foundations. Roughly, I think we can say that — and I know you've had a lot of speakers come on this program — foundations have moved from the notion of just giving away money, a charity approach, to what a lot people call social investment. The idea that even though you're making a grant, you're investing in a solution, and you're expecting return in the form of impact.

But another way to look at foundations is — I gave a presentation on this recently, and I said: "When it comes to knowledge and information, foundations are like black holes, and they need to become supernovas."

So what do I mean by that? The average foundation receives hundreds, if not thousands, of proposals from nonprofit organizations — different kinds of social sector organizations filled with ideas about how to make the neighborhood, the community, the city, and the world a better place. Some portion of those get approved. As part of the process, the groups that get the grants provide written reports periodically — progress reports — full of information also. Then there's also the foundation staff themselves. When you’re sitting in a foundation, let's say you're working on early childhood issues, on any given day you probably talk to four or five different people who are the best in their field, who have fantastic ideas about how to solve all the issues around early childhood learning. And you accumulate all that knowledge; that knowledge is in your head; it's in your notes; it's on your hard drive. All these documentations are  flowing in to foundations. If we weren't philanthropy — if we were Google or we were Facebook — we would have data scientists crawling all over that stuff!

DF: Tagging everything.

BKS: Tagging everything, looking for correlations, trying to extract [information]. This is a tremendous source of potential knowledge about how we can make this world a better place. And I think the next frontier for philanthropy is going to be managing information, and producing and sharing knowledge.

DF: Let's talk a little bit about that frontier. A few years ago, the Foundation Center launched a site called Glasspockets.  The tagline was: "Bringing transparency to the world of philanthropy." And, when it comes to the world of foundation transparency, there is a [recent] development which you believe will have a profound effect: the machine-readable 990. Tell us what that is. And what is the significance of it?

BKS: I think that phrase, "machine-readable 990s" — if we went out onto Broadway here and we asked a bunch of people what they think about machine-readable 990s, we'd get a lot of blank stares.

First of all, the whole notion of transparency is in the DNA of the Foundation Center. We were created during McCarthyism when foundations were being investigated for support of un-American  activities. And a group of foundation leaders felt that the best way to deal with that kind of suspicion was to create a public information service about philanthropy. And part of that is, we're not an advocacy organization; we're not a membership organization. We're neutral.

But there is one thing we advocate for, and that is transparency; that's why we were created. And in fact, the name of the site, Glasspockets.org, comes from a quote that was used at the founding of the Foundation Center. "We think foundations should have 'glass pockets'."  That was coined by the chair of the Carnegie Foundation board at the time. So we've been promoting foundation transparency. And for years, the tax return that foundations file, which is called a 990-PF — it's what endowed foundations file in exchange for their tax exemption — has been open information. What that means, or what it has meant until very recently, is that that document, if you request it, should be available from the foundation itself and available from the Internal Revenue Service. 

Now, what a lot of people don't understand is that those documents, or some portion of them, are filed electronically online by foundations. But many of them are still filed in written form —

DF: The old-fashioned way...

BKS:  — and some of them — because we see this all the time — are still filled out in pencil. But until very recently, regardless of how they were filled out, the Internal Revenue Service was fulfilling its public information requirement by making them available as image files, something called a .tiff file. Probably the easiest way for people to understand it is that it's just like a .pdf.

But even if you file it digitally, anybody who requests it essentially gets a picture of it. Now if you've ever tried to edit a .pdf, or do anything with a .pdf — you can't do anything with it, right? It's not like a Word document. It's not digital. It's a picture; it's like a photograph. So, we and GuideStar and other organizations that work a lot with these tax returns in order to get information from them, basically had to create a pretty significant infrastructure to try to extract data from these documents — which is largely a manual process. But as of just a few months ago, the Internal Revenue Service surprised everyone by releasing all the tax returns — the 990-PFs  that have been digitally filed — as machine-readable open data.

So, what is machine-readable open data? What that means is, it's actually released in a form where it can be automatically harvested by a computer with no human intervention. Basically, if you think of the computer as like a vacuum cleaner — it sucks in all the information, and then using algorithms and other kinds of computer programs, you can manipulate and begin to do all sorts of things with that information. All of a sudden, the barriers to actually creating something useful out of information have been drastically lowered and made much cheaper.

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Foundation Transparency: Game Over?

June 16, 2016

Data_unlockedThe tranquil world of America's foundations is about to be shaken, but if you read the Center for Effective Philanthropy's new study — Sharing What Matters, Foundation Transparency — you would never know it.

Don't get me wrong. That study, like everything CEP produces, is carefully researched, insightful, and thoroughly professional. But it misses the single biggest change in foundation transparency in decades: the release by the Internal Revenue Service of foundation 990-PF (and 990) tax returns as machine-readable open data.

Clara Miller, president of the Heron Foundation, writes eloquently in her manifesto Building a Foundation for the 21St Century: "the private foundation model was designed to be protective and separate, much like a terrarium."

Terrariums, of course, are highly "curated" environments over which their creators have complete control. To the extent that much of it consists of interviews with foundation leaders and reviews of their websites — as if transparency were a kind of optional endeavor in which foundations may choose to participate, if at all, and to what degree — the CEP study proves that point.

To be fair, CEP also interviewed the grantees of various foundations (sometimes referred to as "partners"), which helps convey the reality that foundations have stakeholders beyond their four walls. However, the terrarium metaphor is about to become far more relevant as the release of 990 tax returns as open data literally makes it possible for anyone to look right through those glass walls to the curated foundation world within.

What Is Open Data?

It is safe to say that most foundation leaders and a fair majority of their staff do not understand what open data really is. Open data is free, yes, but more importantly it is digital and machine-readable. This means it can be consumed in enormous volumes, at lightning speed, directly by computers.

Once consumed, open data can be tagged, sorted, indexed, and searched using statistical methods to make obvious comparisons while discovering previously undetected correlations. Anyone with a computer, some coding skills, and a hard drive or cloud storage can access open data. In today's world, a lot of people meet those requirements, and they are free to do whatever they please with your information once it is, as open data enthusiasts like to say, "in the wild."

Today, much government data is completely open. Go to data.gov or its equivalent in many countries around the world and see for yourself.

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Foundations Will Contribute $364 Billion to SDGs

May 24, 2016

And that's a conservative number. Though they may not have internalized all seventeen Sustainable Development Goals yet, foundations will contribute more than $360 billion toward their realization between now and the year 2030. Estimates as to the total volume of resources required to succeed on the ambitious global agenda run as high as $3.5 trillion, a sum far too large for bilateral and multilateral aid to cover alone. The remainder will have to come from private investment and philanthropy — and according to initial Foundation Center projections, foundations will do their part.

What are the Sustainable Development Goals?

Commonly known as "the SDGs," they are a set of seventeen universal goals for global dignity, prosperity, cooperation, and justice covering the period 2016-30. Different than their predecessors, the Millennium Development Goals, the SDGs address additional challenges such as climate change, growing inequality, and sustainable use of the oceans and are goals to which all nations, rich and poor, should aspire.

SDGs

Why are there seventeen SDGs?

The goals are the product of a United Nations-led negotiation process culminating in approval by 193 member nations last September. The goal process was further informed by the direct participation of over eight million people around the world through an online campaign. Beyond the seventeen goals, there are 169 targets and more than 200 indicators (i.e., "proportion of population using safely managed drinking water services") by which to measure progress. Skeptics often complain that seventeen goals is way too many, but think about it for a moment. If you put 193 foundations in a room, could they agree on as few as seventeen goals? Any way you look at it, the SDGs are remarkable: as a global consensus-building process, as one of the most participatory processes in human history, and as an integrated, future-oriented roadmap leading to a better world.

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The Three Sources of Foundation Influence

March 09, 2016

Infleunce_magnetMoney, convening power, and knowledge give philanthropic foundations enormous influence and underlie their unique position in our socioeconomic ecosystem. Endowed by a wealthy family or individual, foundations are blissfully free from the kinds of pressures that drive short-term behavior in other sectors. They don't have to raise money from venture capitalists, the financial markets, or other foundations. They never awake to the terrifying news that that their business is threatened by a new competitor. And they don't have to kiss babies in order to garner votes.

Like grizzly bears, lions and tigers, foundations have no natural predators.

Despite this enormous freedom, many foundations traditionally have professed humility and maintained a low profile — either because of their donor's wishes, a belief that it's their grantees that do the real work, or because of the personality of their leader. Increasingly, however, foundations are waking to the enormous potential they have to wield influence in their home cities, countries, and around the world. And encouraging others to adopt their causes, strategies, and ways of working is coming to be seen as the way foundations can increase their impact many-fold.

Let's look more closely at the three sources of foundation influence.

Flexible money

First and foremost is money. Foundations have an abundance of what nonprofit organizations, social entrepreneurs, and the social sector writ large chronically lack. Nonetheless, they tend to be conflicted about their wealth: foundations will tell you without much prompting how many millions or billions in assets they have, only to claim in the next sentence that their resources are small in relation to the world's problems. Collectively, the nearly $800 billion held by American foundations pales in significance to the hundreds of trillions coursing through the international capital markets. But that misses the point.

Foundation money is one of the last remaining sources of capital on earth without a significant claim on it. As a result, the dollars granted, loaned, or invested in social and environmental causes have tremendous potential for leverage. Public institutions may have large budgets, but in most cases those funds are so thoroughly earmarked that they are left with virtually no "risk capital." Talk to any foundation professional who has answered a call to form a partnership with a government agency, the World Bank, or any other large multilateral institution and she inevitably will express surprise about being asked for a grant. Indeed, many of the private-public partnerships that are viewed as the key to impact and bringing an initiative to scale began with a small foundation grant that served to lever more significant public funding.

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Disaster Philanthropy: What Matters

January 12, 2016

Few foundations think of themselves as disaster funders … until the next disaster strikes. Their desire to be strategic and have impact leads them to shun program areas and ways of working that are reactive in nature. But the desire to help those in need is so hard-wired into foundations' DNA that many cannot help making emergency grants when news is dominated by coverage of the next big disaster. So they act quickly as the situation demands, though frequently with little knowledge of who the experienced funders are, what approaches work best, and how their giving fits into what Bob Ottenhoff of the Center for Disaster Philanthropy calls "the mosaic of funding," formed by the collective (but uncoordinated) efforts of corporations, governments, online givers, and other foundations.

Disaster-philanthropy-2015And that is precisely what makes Measuring the State of Disaster Philanthropy from the Center for Disaster for Philanthropy and Foundation Center so valuable. Rich in data and trends, this new online data dashboard, funding map, and report (PDF, 28 pages) frames disaster philanthropy as an emerging field mobilizing billions of dollars around the world. In them we learn that there are different types of disasters (natural, man-made, and humanitarian) and different strategic approaches to addressing them (resilience, preparedness, relief, and recovery). These and the accompanying sub-categories provide funders with an essential framework that enables them to be intentional and strategic about disasters in much the same way they are about their other funding priorities.

The report, my own long experience as a funder, and, more recently, as president of Foundation Center, sparked a few thoughts about foundation giving in response to disasters and what matters.

Media matters — Every year disasters occur around the world that we hear little or nothing about. But the ones that strike in or near our own backyard and dominate the news media are the ones that drive the lion's share of philanthropic giving. It's impossible to fund something about which you never hear and difficult to fund that which, because of lack of information, you can't understand.

Disaster type matters — The report shows that the overwhelming majority of U.S. foundation giving for disasters, some 68 percent, goes toward natural disasters, primarily storms. That makes sense. Storms strike quickly, are often devastating, and their victims did nothing to deserve the death, suffering, and havoc they create. The need is clear and funders respond. This contrasts with complex humanitarian emergencies, which are difficult to understand and frequently progress from emergencies into the types of long-term crises foundations feel they cannot effectively address. Even less support is given to what the report refers to as "man-made accidents" because when it comes to oil spills or factory disasters, foundations understandably feel that the primary burden for response should lie with the companies, governments, or others responsible for the accident in the first place.

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Serving the Public Good (by Invitiation Only)

November 18, 2015

Private_party_inviteAmerica's foundations are not particularly interested in receiving your proposal. Earlier this year I did a quick search on Foundation Directory Online (FDO) of the 96,042 independent, company-sponsored, and community foundations based in the U.S. The results were pretty shocking: only 26,663 are willing to accept unsolicited proposals. That's right, 28 percent. True, many of these are the larger, staffed foundations that hold the bulk of the sector's assets. So I took a look at the 967 foundations that have $100 million in more in assets and account for close to half of all foundation giving by U.S. foundations. The results are more encouraging, but only somewhat — 568 (58 percent) of them accept unsolicited proposals.

I find this troubling, on two counts. The first is because of the grand public policy bargain that makes institutionalized philanthropy possible in America: wealthy donors are given significant tax incentives to create and maintain foundations in exchange for providing a demonstrable, long-term contribution to the public good. As much as I understand how small foundations (especially) might not want to spend their resources on creating a bureaucracy whose primary task is to turn down the overwhelming majority of proposals they receive each year, it still bothers me. Somewhere in my heart I believe that, when it comes to foundations, the public good is best served when the public (in the form of social sector organizations) can freely apply for support. I can understand how a foundation may want to have a program or two that does not accept open applications, but to shut out the public entirely from any unsolicited inquiries is something I have trouble accepting.

Moreover, this can further isolate foundations, institutions that are already insulated from the kinds of market, electoral, and fundraising pressures that lead to standardization, transparency, and accountability in other sectors. This is also the source of foundations' most precious asset — the philanthropic freedom that allows them to take risks, stick with difficult issues over the long-term, and make leaps of faith that can spark whole new ways of solving the world's most pressing problems. To the extent that foundations put more emphasis on creating elaborately designed strategies while shutting themselves off from unsolicited proposals, their work can become a kind of endowed activism.

So, what can foundations do?

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Don't Call Us, We'll Call You

September 22, 2015

Rotary_phonePhilanTopic is on vacation this week. While we're away, we'll be sharing some of our favorite posts from the last year or three. This post was originally published in March 2011. Enjoy.

Okay. You're working at a great nonprofit, you've got a wonderful idea that's going to change the world, and all you need is a grant to get you started. Guess what? The majority of America's foundations don't want you to send in a proposal.

Of the more than 86,000 independent, community, and corporate foundations in the United States, 60 percent state that they do not accept unsolicited proposals. Together they represent 32 percent of total assets and 34 percent of annual giving. Nearly $16 billion of the $46 billion distributed every year is not up for grabs; you need an invitation.

Foundations in America are private institutions and have the right to decide how, when, and on what terms they will accept proposals and make their grants. At the Foundation Center, we respect that right and clearly indicate in our databases when a particular foundation does not want to receive unsolicited proposals. But people seeking foundation grants find this more than a bit frustrating. One of their most common questions is, "Why won't foundation X let me send in my proposal?"

There are at least two reasons. The first is foundation size. Dealing responsibly with requests for funding requires significant effort, time, and people. Yet in one Foundation Center survey of 11,000 foundations, 76 percent of respondents had fewer than four staff. Foundations are frequently inundated with proposals. My own experience working in philanthropy has taught me that for every grant approved by a foundation, eleven more are declined. The ratio can be much worse. One year at the Ford Foundation -- which accepts unsolicited proposals and has hundreds of staff -- we decided to count every letter of inquiry, e-mail, and actual proposal and came up with something on the order of 144,000. The number of grants actually made that year? Fewer than three thousand. The situation could be helped if foundations were clearer about their grantmaking priorities and nonprofits were more careful in targeting their proposals, but the reality is one of greater demand than supply. From a foundation's perspective, not accepting proposals can be like building a dyke to hold back the flood.

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Philanthropy’s Difficult Dance With Inequality

June 16, 2015

Inequality-304America's foundations do not easily use the word "inequality." This may seem surprising in the wake of the Ford Foundation's recent announcement that it will refocus 100 percent of its grantmaking on "inequality in all its forms," but perhaps it shouldn't. Out of close to four million grants made by American foundations and recorded by Foundation Center since 2004, only 251 use the word "inequality" in describing their purpose. Moreover, the geographic focus of many of those grants is countries such as El Salvador, Nigeria and Malaysia -- or it's simply "global," which in the parlance of most foundations means the rest of the world. More common are terms like "opportunity" and "poverty," which can certainly be viewed as related to "inequality" but hardly are synonyms for it.

Nevertheless, inequality is an inescapable fact of our world: while extreme poverty in many regions of the globe may be declining, recent research suggests that the gap between rich and poor is fast becoming a growing threat to peace, economic prosperity, the environment, public health, democracy and just about any other major challenge you can name. Indeed, one of the 2030 Sustainable Development Goals developed by seventy nations (with the direct participation of 7.5 million people around the world) is to "reduce inequality within and among nations." So, why don't more foundations embrace the term?

Inequality is controversial. In most camps, the word "inequality" is not neutral. It is a concept that implies a search for causes rather than the treatment of symptoms. It requires the kind of work that Carnegie Corporation board chair Russell Leffingwell so eloquently described in his McCarthy-era testimony to Congress: "I think [foundations] are entering into the most difficult of all fields....They are going right straight ahead, knowing that their fingers will be burned again, because in these fields you cannot be sure of your results, and you cannot be sure that you will avoid risk." It is also difficult for a single foundation, or even a coalition of foundations, to know where to begin. Oxfam reports that eighty-five ultra-high-net-worth individuals hold as much wealth as the poorest half of the world’s population. How do you tackle such a challenge? Besides, this simply isn’t the kind of work that most foundations do. More than 60 percent of the giving by U.S. foundations goes to mainstream causes in the fields of health, education, and the arts.

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Foundation Strategy...the Enemy of Collaboration?

February 19, 2015

Chrysalis_imageIn today's world, it is almost obligatory for any self-respecting foundation to describe its work as "strategic." At the same time, a growing number of foundations are coming to the realization that, if they hope to scale their work and achieve lasting impact, they need to collaborate with each other and across sectors. I fear, however, that the way many foundations approach strategy is erecting barriers rather than building bridges to collaboration. This post is my attempt to explain why that is and to offer some practical solutions to the problem.

My thoughts on this matter were sparked by remarks originally made by Larry Kramer, president of the Hewlett Foundation, and elaborated on by Heather Grady in the Stanford Social Innovation Review. For the record, I believe that foundation strategy is a critical element in achieving impact, but like so many things it is best practiced in moderation.

The fetishism of strategy

It used to be that people made a point of saying they practiced philanthropy rather than charity. That distinction gradually fell by the wayside as younger generations of philanthropists began to introduce ideas and practices from the business world related to impact and metrics, liberally peppering their discourse with phrases like "social return on investment." In their eyes, the way many practiced philanthropy was not much of an improvement over charity, which they saw as dealing largely with symptoms and driven by donors and staff who valued heart over head and had no clear way to articulate hoped-for outcomes — let alone measure them. The more the term philanthropy became devalued, the more it came to be modified by adjectives of choice. Suddenly, if your philanthropy wasn't tactical, effective, catalytic, high-impact, or, at a minimum, strategic, it wouldn't be taken seriously.

Many foundations, particularly the larger staffed ones, responded to this change by immersing themselves in protracted strategic review processes, frequently under the guidance of prestigious consulting firms. Often triggered by a change in foundation leadership, these exercises tend to follow a pattern, one aspect of which is well-known to nonprofits frustrated by the all-too-familiar refrain of program officers who cite "our deep internal review process" as the reason that "no new requests for funding can be entertained at this time" and who encourage you to get back in touch "when our new priorities have been defined."

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How Much Do Foundations Really Give to Detroit?

December 03, 2014

Spirit_of_Detroit-2560x1600It is no secret that the once-great city of Detroit has fallen on hard times. In response, philanthropic foundations, while wisely insisting that they can never replace government, have stepped up their levels of giving in the city in an effort to save its key institutions and civic infrastructure from collapse. So it seems perfectly logical to ask, as the Detroit News did recently, "How much are funders giving to Detroit?"

In turns out there are at least three answers to that question, depending on how one interprets "give to Detroit" and how the numbers are crunched. According to the Detroit News, eleven top funders "awarded Detroit $512 million in grants from 2008-2012." That number is based on Foundation Center data and is a solid one, but it only tells part of the story.

To understand why, let's look at one of the eleven funders — the Ford Foundation — mentioned in the Detroit News story. The News reports that the foundation provided $27.8 million in grants to Detroit from 2008-12. That's true, with two important clarifications. First of all, though not made explicit in the story, the News was only interested in grants to organizations located in "Detroit proper," as opposed to the Detroit metropolitan area. The second clarification is that the Ford Foundation number intentionally omitted a series of grants totaling $13.7 million to the Community Foundation for Southeastern Michigan. Large, national foundations like Ford frequently make the equivalent of block grants to community foundations, which have the on-the-ground presence, networks, and expertise to re-grant those funds effectively to community-based organizations. Foundation Center researchers took that $13.7 million out of the Ford totals and counted whatever portion had been re-granted as part of the "grants awarded Detroit" by the Community Foundation of Southeast Michigan. This was to avoid something called "double counting"; still, it would not be inaccurate to say the Ford Foundation provided $41.5 million ($27.8 million + $13.7 million) in grants to organizations in "Detroit proper" from 2008-12.

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Ferguson and Foundations: Are We Doing Enough?

November 25, 2014

Blackmalestudent_301X400Like many Americans, I was glued to my television set last night as I watched the streets of Ferguson, Missouri, erupt in violence. This is not a post about the merits of a grand jury's decision not to indict police officer Darren Wilson in the shooting death of 18-year-old Michael Brown. Rather, it is my attempt to make sense of a very complicated situation and to ask whether philanthropy is doing enough to address the fact that there are too many Michael Browns in America, too many angry and frustrated communities like Ferguson, too much real and perceived injustice in our society, and too much polarization in the way these difficult issues are covered and discussed.

You don't need me to tell you that nearly every major indicator of social and physical well-being underscores the fact that black men and boys in the United States do not have access to the structural supports and educational and economic opportunities they need to thrive. More than a quarter of black men and boys live in poverty. Black fathers are more than twice as likely as their white counterparts to live apart from their children. Young black males have the highest teen death rate, at 94 deaths per 100,000, and 40 percent of those deaths are homicides. Black males between the ages of 25 and 39 are more likely to be incarcerated than any other demographic group, leading author and civil rights advocate Michelle Alexander to note that "More African American adults are under correctional control today — in prison or jail, on probation or parole — than were enslaved in 1850, a decade before the Civil War began."

Is philanthropy doing enough to address this appalling state of affairs? In a word, "no" — though in some ways that should not be surprising. Foundations are endowed, private institutions required to serve the public good in a way approved as "charitable" by the Internal Revenue Service and in accordance with their donors' intent. They are fiercely independent, idiosyncratic, and, at times, risk averse and short-sighted. A foundation executive once told me he and his colleagues had given up on access to safe water as a program area because "it was too complicated and we couldn't have any impact." Yet foundations have the choice to be different, not least because they represent one of the few remaining sources of un-earmarked capital in the economy. It is precisely this independence and autonomy that gives them the freedom to take risks and work on long-term solutions.

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Tips for End-of-Year Foundation Fundraising

November 18, 2014

End_of_year_fundraisingThis is the time of year when every nonprofit CEO sinks or swims. Either you secure the last of the grants needed to balance your organization's budget or risk running a deficit and ruining its balance sheet. But while you might think it's too late to save 2014, the last six weeks of the year are actually an excellent time to pursue foundation grants. Here are a few tips to help you do so:

Foundations are like people. At the end of the day, whether it's a small family foundation or a large independent foundation,
it takes people to make a grant, and, when it comes to deadlines, most people procrastinate. In other words, an awful lot of grants get made in the last quarter of the year, and a surprising number of those grants are made in December.

Meeting the payout requirement is trickier than you think. Foundations are required by law to spend 5 percent of their assets annually for charitable purposes. This can include a portion of their own operating costs, but most of it tends to be paid out in grants. Many foundations base this 5 percent minimum on a rolling three-year average of the value of their investments. With the fairly constant oscillations of the stock market, you can imagine this is something of a moving target for most foundations. Add to that the fact that grants sometimes don't materialize, organizations implode, and stuff happens, and foundations often have to scramble to make last-minute grants to achieve their mandated 5 percent payout.

The stock market is on a tear. Though 2014 has been a bit bumpy, the markets are up and have been very good to foundations over the past three years. This means that foundations will be calculating their 5 percent payout on an asset base that is larger than at any time since before the Great Recession. It's the reason why U.S. foundations will pay out nearly $60 billion in grants in 2014.

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World Cup Soccer, World-Class Philanthropy

July 11, 2014

2014-world-cup-logoAnn Coulter may hate soccer, but America's philanthropic foundations love it. For those who missed it, a recent nativist diatribe by Coulter claims that only immigrants care about the sport and that "No American whose great grandfather was born here is watching soccer." Foundations don't seem to have paid any attention to her critique, much less that of the Russian priest who, citing the brightly colored shoes worn by many soccer players, labeled the World Cup competition "a homosexual abomination."

A quick search of Foundation Directory Online found that some 80 foundations have made 2,000 soccer-related grants, the vast majority to U.S. organizations. They include a large grant from the Greater Houston Community Foundation to support construction of a soccer stadium at Texas Tech. A smaller grant of $20,000 was awarded by the Philadelphia Foundation to the Association of Graduates of the United States Military Academy for the Army Men's Soccer Endowment. Many of the grants have a social purpose, like the Oregon Community Foundation's support for Adelante Mujeres, which uses soccer to improve the health and self-esteem of Latino girls in its programs, while here in the Northeast the Anderson Foundation made a $1.5 million program-related investment (a kind of low-cost loan) to the Players Development Academy in New Jersey for youth soccer promotion activities.

Some grants have been directly related to the World Cup itself. The Nike Foundation funded GlobalGirl Media to train South African girls to report on the 2010 World Cup in their country. And more recently, a Ford Foundation grant to a Brazilian organization supported in-depth reporting on the impact of stadium construction projects on the urban poor in advance of the 2014 World Cup.

Philanthropy is a global phenomenon with deep roots in the norms, values, and political culture of the United States.  America's foundations fund a wide range of issues, from the arts to zoology research and everything in between. Soccer is of interest to many foundations on account of its ability to attract national and global attention, spur economic development, provide opportunities for youth, and imbue in young people the values of tolerance and teamwork. And, as the Ford Foundation grant above demonstrates, foundations are not afraid to support critics of a mega-event like the World Cup when the business of global sport clashes with the rights of the poor.

Through the generosity of foundations, the lives of countless Americans have been touched by the sport known as soccer.  For two hours this Sunday, many of them will join a global community of some 600 million people that will be glued to their televisions for the World Cup final.  Philanthropy has helped make that possible.

– Brad Smith is president of Foundation Center. In his previous post, he wrote about soccer, democracy, and philanthropy.

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