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PABLO EISENBERG

Where is the leadership of the foundation community?

AMID ALL the furor raised by media revelations of foundation excesses -- high trustee fees, self dealing, excessive compensation and other improprieties -- the silence of the foundation community has been deafening. That is, perhaps, the greatest philanthropic scandal of all.

 

Numerous news stories continue to reveal the seamy underside of the foundation world. It turns out that foundation improprieties are not just the story of a few rotten apples in the barrel. There are too many that have been exposed to permit such a facile explanation.

The sad fact is that foundations -- more than 70,000 -- are largely unaccountable, despite their dependence on substantial federal tax benefits.

Of the 16,000 largest foundations, those listed in the Foundation Directory, only about 2,200 issue an annual public report with information about their programs and finances. Many of these aren't detailed or substantial enough to give the public a real sense of what their foundations do or accomplish. All foundations are required to submit an annual report to the Internal Revenue Service -- called a 990 PF -- but here again these documents are not user-friendly, contain little program information, and do not demand sufficient financial details that can easily uncover self-dealing activities, conflicts of interest, and inappropriate expenses.

The IRS does not have the staff or resources to oversee and police foundation activities, let alone review more than a small fraction of the reports they receive each year. Last year agency officials audited fewer than 120 foundations. Congress must bear a heavy responsibility for this; it has repeatedly denied the agency the money and mandate to do its job properly. Attorney general offices have even fewer resources with which to supervise the nonprofit organizations in their states.

Against this backdrop of nontransparency, the escalating number of scandals and growing public uneasiness with foundation practices, one would have expected foundations themselves, at least the large ones and their trade associations, to take remedial measures to clean up their sector. Instead, they have formed a solid "green line" of defensiveness and defiance.

No major foundation CEO or board of directors has issued a strong statement denouncing foundation malpractices and suggesting concrete steps to remedy the situation. Neither the Council on Foundations nor the Philanthropy Roundtable has issued such a pronouncement. The best that the council could do was an editorial by its president, Dot Ridings, in a recent issue of Foundation News and Commentary, entitled "The Sins of the Few."

Emmett Carson, executive director of the Minneapolis Foundation, has written several articles urging foundations to clean up their act. And in an interview with The Boston Globe, Paul Grogan, president of the Boston Foundation, harshly criticized foundations that were endangering the field by their abusive practices. Notably, both are CEOs of public charities, not private foundations. But that's pretty much the extent of philanthropy's publicly voiced concerns.

Where is the leadership of the foundation community?

During the debate on the congressional measure, HR-7, which would have increased the amount foundations give annually to nonprofits by excluding administrative costs from the calculation of their minimum payout rate, the large foundations and the Council on Foundations sent thousands of letters, hired a high-priced lobbyist, intimidated nonprofits, and spent a huge amount of time and energy to defeat the bill.

Yet, when the stakes are really high, namely the health and future of foundations, where are the great defenders of the faith? Why haven't the CEOs of the Ford, Rockefeller, MacArthur, Hewlett, Pew, and Lilly foundations, the Carnegie Corporation, and others spoken out strongly for ending the abuses and initiating reforms?

If they, their colleagues, and the Council on Foundations had devoted one-10th of the money and staff time spent in lobbying the payout issue to improving the oversight and policing of the nonprofit sector, they could have achieved an important and commendable reform. They should be lobbying the Congress to allocate a significant portion of the excise tax collected each year from private foundations -- today approximately $600 million -- to expand the resources of both the IRS and the state attorneys general.

Compared to past outstanding foundation leaders, such as John Gardner and Alan Pifer of Carnegie, James Shannon of the Minneapolis Foundation, David Hunter of the Stern Fund, Michael Joyce of Bradley, and McGeorge Bundy of Ford, the current crop of foundation CEOs pale in comparison. They appear to be institutional managers, not visionary leaders possessed with courage and a commitment to improving the performance of the foundation sector.

Simply, they are not exercising their leadership responsibilities. Instead, they have chosen to circle the wagons in silence.

Pablo Eisenberg is a senior fellow at Georgetown Public Policy Institute and a columnist for the Chronicle of Philanthropy.

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