Transparency Talk

Category: "Brad Smith" (15 posts)

How Philanthropic Is the Trump Cabinet?
January 11, 2017

(Brad Smith is president of Foundation Center.)

Here are the facts, decide for yourself. That may sound like a radical proposition in what some–after a bitter election season dominated by spin, lies and fake news–are calling a "post-truth world," but it is what we do at Foundation Center. In releasing "Eye on the Trump Cabinet" as the newest feature of Foundation Center's Glasspockets website, our goal is track the charitable giving related to Cabinet nominees and their nonprofit Board service.

Explore Eye on the Trump Cabinet

Eye on the Trump Cabinet shows that, taken as a whole, the Cabinet nominees are by no means strangers to philanthropy.

There has been a lot of speculation among philanthropic foundations about what the new Administration might mean for the sector. Will lower tax rates reduce charitable giving? If government retreats from social programs will foundations be expected to take up the slack? Will new regulations be introduced to somehow influence the kinds of priorities foundations support? At the extremes I have heard people assert: "these people (the new Administration) don't know anything about philanthropy," and fielded a question from a Danish reporter who wanted to know if the controversy over the Clinton and Trump foundations would lead to the end of transparency in the sector. But what do the data tell us?

Explore Eye on the Trump Cabinet

"Eye on the Trump Cabinet" shows that, taken as a whole, the Cabinet nominees are by no means strangers to philanthropy. Between them, they are related to 25 different foundations. By "related" we mean foundations run by cabinet nominees or family members, in addition to ones in which they might have been affiliated or served as Board members. To learn more about those foundations, click on the links to their profiles in Foundation Directory Online and their 990 tax returns to learn about their operating expenses, specific grants and investments. Similarly, the data show that Cabinet nominees have served on the boards of nearly 50 nonprofit organizations focusing on education, veterans' affairs, health, and children, to mention a few.

Explore Eye on the Trump Cabinet

Through this lens, perhaps most notable among the Cabinet nominees is Betsy DeVos, someone who comes from a strong family tradition of philanthropy and has a significant foundation (the Dick and Betsy DeVos Family Foundation) together with her husband. Moreover, until recently, she served as Board Chair for the Philanthropy Roundtable, a membership organization of foundations and donors that is a critical part of the infrastructure that upholds institutional philanthropy. Among the core beliefs of the Roundtable are that philanthropic freedom is essential to a free society and that voluntary private action offers solutions for many of society's most pressing challenges.

Explore Eye on the Trump Cabinet

Foundations and nonprofits cannot (and should not) take the place of government primarily because their resources, while significant, are dwarfed by federal and state budgets in addition to those of the business sector. On the contrary, their limited resources are valuable precisely because it is their non-profit, independent status that gives them the freedom to innovate, take risks, support controversial causes, stick with tough challenges for the long term, and provide core support to critical societal institutions.

Explore Eye on the Trump Cabinet

The relationship between government and the philanthropic sector can be one of collaboration, disagreement, or both, but it has been part of the fabric of American democracy for more than 100 years. Foundation Center, itself a nonprofit, was born in 1956 out of McCarthy-era hearings accusing foundations of supporting un-American activities. The sector's response was to create Foundation Center as a trusted public information service that could prove it had nothing to hide. We believe that transparency will, in the long run, always prove its value. How philanthropic is the new Administration? Explore Eye on the Trump Cabinet, come to your own conclusions, wait, watch, and, above all, participate.

-- Brad Smith

Free Webinar: What Story Does Your 990 Tell About Your Foundation?
September 22, 2016

What does your foundation’s 990 say about the organization? 

Now that the IRS has started releasing e-filed Forms 990 and 990-PF as machine-readable, open data is available to the public. While this move will spur transparency and openness in the philanthropy field, foundation leaders may be uncertain of how open data and potential public scrutiny of philanthropy may impact foundation programs, staffing and investment management. 

Glasspockets recently partnered with the Communications Network to offer an insightful webinar on the Form 990’s potential risks and vulnerabilities, as well as how to use Form 990 to share the work of your organization. 

The webinar highlights the types of information included on the 990-PF, how the 990-PF data is being used now and in the future, and recommendations on how to communicate your foundation’s work through the 990-PF.

Check out this great webinar!

IRS Releases 990 Forms as Machine-Readable Data
June 16, 2016

Editor's Note: Last month, Transparency Talk featured a blog post by Foundation Center president, Brad Smith on the coming of open 990 data and its implications for philanthropy. Read here for additional perspective on the news story below that the IRS has now formally started its release of 990 Forms, including 990-PFs, as machine-readable, open data.

Irs-logo-250 Amazon Web Services has announced that the Internal Revenue Service has made more than a million electronic 990 tax forms available as machine-readable data through its Amazon Simple Storage Service.

Released Wednesday, the public data set includes certain Forms 990 filed by nonprofit organizations with the IRS since 2011, Forms 990-EZ filed by smaller nonprofits, and Forms 990-PF filed by private foundations. The data from each 990 is provided in an XML file that includes the main 990 form, other filed forms and schedules, and any information detailing how the document was filed; some non-disclosable information is excluded.

The release of 990 filings as machine-readable data by the IRS, which plans to add new 990 data on a monthly basis, will make it easier for anyone to search the forms digitally for information about an organization's finances, trustees, lobbying activities, and salaries. Even when nonprofits or foundations filed them electronically, the IRS previously had stripped the forms of confidential information, converted them to TIFF (image) files, and released them as PDF documents. But in response to a lawsuit filed by open-records activist Carl Malamud in 2015, a federal judge ordered the IRS to release machine-readable Forms 990 from nine nonprofits. The IRS's Advisory Committee on Tax Exempt and Government Entities subsequently called for the agency to require nonprofits to file their financial data electronically, and the agency announced that it would begin releasing electronic versions of the forms this year.

This post originally appeared on Philanthropy News Digest.

Foundation Transparency: Game Over?
May 23, 2016

(Brad Smith is president of Foundation Center).

BradfordKSmithThe tranquil world of America's foundations is about to be shaken, but if you read the Center for Effective Philanthropy's (CEP) 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 imminent 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."

Terrarium photo 2Terrariums, of course, are highly "curated" environments over which their creators have complete control. The CEP study, proves that point, to the extent that much of the study 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.

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 will literally make 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.

"The release of 990 tax returns as open data will literally make it possible for anyone to look right through those glass walls to the curated foundation world within."

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.

The theory behind open data, increasingly born out in practice, is that making information available leads to significant innovation for the public good while the demand for and use of such data also improves its accuracy and quality over time. And some open data is just fun: one of my personal favorites is the White House visitors list!

What is the Internal Revenue Service Releasing?

Irs-logo-250Thanks to the Aspen Institute's leadership of a joint effort - funded by foundations and including Foundation Center, GuideStar, the National Center for Charitable Statistics, the Johns Hopkins Center for Civil Society Studies, and others - the IRS has started to make some 1,000,000 Form 990s and 40,000 Form 990PF available as machine-readable open data.

Previously, all Form 990s had been released as image (TIFF) files, essentially a picture, making it both time-consuming and expensive to extract useful data from them. Credit where credit is due; a kick in the butt in the form of a lawsuit from open data crusader Carl Malamud helped speed the process along.

The current test phase includes only those tax returns that were digitally filed by nonprofits and community foundations (990s) and private foundations (990PFs). Over time, the IRS will phase in a mandatory digital filing requirement for all Form 990s, and the intent is to release them all as open data. In other words, that which is born digital will be opened up to the public in digital form. Because of variations in the 990 forms, getting the information from them into a database will still require some technical expertise, but will be far more feasible and faster than ever before.

"Over time, the IRS will phase in a mandatory digital filing requirement for all Form 990s, and the intent is to release them all as open data."

The Good

The work of organizations like Foundation Center-- who have built expensive infrastructure in order to turn years of 990 tax returns into information that can be used by nonprofits looking for funding, researchers trying to understand the role of foundations and foundations, themselves, seeking to benchmark themselves against peers—will be transformed.

Work will shift away from the mechanics of capturing and processing the data to higher level analysis and visualization to stimulate the generation and sharing of new insights and knowledge. This will fuel greater collaboration between peer organizations, innovation, the merging of previous disparate bodies of data, better philanthropy, and a stronger social sector.

The (Potentially) Bad

The world of foundations and nonprofits is highly segmented, idiosyncratic and difficult to understand and interpret. GuideStar and Foundation Center know this.

But many of the new entrants who are attracted by the advent of open 990 data will not. They will most likely come in two forms: start-ups claiming their new tools will revolutionize the business of giving, and established, private sector companies, seeking new market opportunities. Neither of these is intrinsically bad and could lead to some degree of positive disruption and true innovation.

The negative potential could be two-fold. Funders will inevitably be intrigued by the start-ups, their genius and their newness and divert funding towards them. Foundations are free to take risks and that is one of their virtues. But while needs grow, funding for the data and information infrastructure of philanthropy is limited, technology literacy among foundations relatively low, and many of these start-ups will prove to be shooting stars (anybody remember Jumo?).

"Once the 990 data is 'in the wild,' conclusions may be drawn that foundations find uncomfortable if not unfair."

The second category of new entrants is far more complex and will come in the form of for-profit data analytics companies. Some of these have business models and immensely sophisticated black box technologies that rely heavily on government contracts for defense and national security. They will be lured by the promise of lucrative contracts from big foundations and mega-nonprofits and the opportunity to demonstrate social responsibility by doing good in the world.

But these for-profit analytics companies will quickly discover that there is only one Gates Foundation among the 87,000 private foundations and only a handful of richly-resourced nonprofits among the 1.3 million on the IRS registers. And those who choose to contract the services of "Big Analytics" will need to consider the potential reputational consequences of aligning their "brands" with the companies behind them.

Sound defensive? Not at all: Foundation Center welcomes the competition, has been building for it since 2010, and knows the challenge can only make us and the social sector better.

The Ugly

Once the 990 data is "in the wild," it is possible if not probable, conclusions will be drawn that foundations find uncomfortable if not unfair. Those who are new to the field and relatively uninformed (or uninterested) in its complexity, may make claims about executive compensation based on comparisons of foundations of wildly disparate size and scope.

The same could be done with overhead rates, payout, or any other figure or calculation that can be made based on information found in the 990-PF. Some foundations already chafe when responsible sector advocates like the National Committee for Responsive Philanthropy (NCRP) use Foundation Center data to rank foundations according to their Criteria for Philanthropy at Its Best. Imagine claims coming over the transom from individuals and organizations whose core values do not include a belief in the practice of philanthropy and a normative vision for how it could be better.

"Another potential consequence lies at the intersection of the open 990 data and the growth of impact investing."

Another potential consequence lies at the intersection of the open 990 data and the growth of impact investing. This was the spirit in which Clara Miller introduced her terrarium analogy to highlight what she sees as the artificial disconnect between the controlled, strategic, and curated world constructed by the grants side of foundations and the sometimes contradictory forces at work in the larger economy in which their assets are invested.

Foundations like Heron are striving to put 100% of their assets toward mission, while others like Rockefeller Brothers Fund are divesting their investment portfolios from fossil fuels and re-investing those assets in ways that further the goals of their climate change grantmaking, rather than exacerbate the problem.

A recent (and as of yet unpublished) Foundation Center survey found that 60% of foundations were not engaged in impact investing and had no plans to do so. That is their choice, but open 990 data may well put them in a position of having to publicly explain it.

For example, using Foundation Center databases, I searched across several hundred thousand foundation 990-PF tax returns and found 37 foundations that held Corrections Corporation of America stock in their investment portfolios. These foundations may well believe, as the majority of foundations insist, that the purpose of the investment arm of the foundation is to generate the highest sustainable return possible in order to fund the mission through grants. But if a foundation holding that stock is striving to work on juvenile justice or improve the lives of black men and boys, an investigative reporter or activist might well ask why they are investing in a corporation that runs private, for-profit prisons

It's 10:00pm, Do You Know Where Your 990 Is?

With the game over for foundation transparency, the big takeaway is to know your 990-PF (or 990 for community foundations). Suddenly, it will be transformed from a bureaucratic compliance document into one of your foundation's key communications vehicles.

"Regardless of how each of us may feel about the greater transparency required of foundations, it is increasingly inevitable."

Right about now, you may be thinking: "What about the website re-design we spent all that money on, with our new logo, carefully crafted initiative names, and compelling photos??" It's still important, and you can follow the lead of those foundations guided by the online transparency criteria found on Foundation Center's Glasspockets website.

But for the sector as a whole, while fewer than 10% of all foundations have websites, they all file 990 tax returns. As the IRS open data release unfolds and mandatory digital filing kicks in, the 990-PF will become one of the primary sources of information by which your individual foundation will be known and compared to others.

I recently asked a group of foundation CEOs whether they ever had an in-depth discussion about their 990-PFs among their board members and was met with blank stares. In a world of digital transparency, this will have to change. As 990s become a data source and communications vehicle, the information on them will need to be clear, accurate and above all, a faithful representation of how each individual foundation makes use of the precious tax exemption it has been granted to serve the public good.

A few simple tips for starters:

  • Take advantage of Section 15 (block 2) to talk about your priorities, grant process, limitations, and restrictions.
  • In Section 15 (block 3) write the correct, legal name for each grantee organization and add its EIN or BRIDGE ID
  • In the same section, write clear and compelling descriptions for the purpose of each grant (more than you might think, people look at foundations by what they fund).
  • Make sure all numbers on the form add up correctly (you'd be surprised!).

Regardless of how each of us may feel about the greater transparency required of foundations, it is increasingly inevitable. Philanthropy is essential to American society and a positive source for good in a challenging world.

As the terrarium walls insulating individual foundations fall, we will surely face a few moments of anxiety and discomfort. But greater transparency, fueled by open IRS data, can only make us more conscientious stewards of our resources, more effective decision-makers, and better collaborators on our way to achieving greater and greater impact in the world.

Game over? It's just beginning!

-- Brad Smith

The Next Generation of Nonprofit Data Standards
May 2, 2016

(Jacob Harold is president and CEO of GuideStar and Brad Smith is president of Foundation Center. Join Harold and Smith for their webinar, How Data Standards Can Help Save the World, on May 12 at 2:00 pm EDT. In the webinar, Harold and Smith will discuss the ways data standards are already improving the grantmaking process for both funders and grantees. They'll also address how foundations can participate in these initiatives and promote a better information system for the sector. See you there! This post first ran in PhilanTopic.)

Our current moment in the human story is often called the age of information. And indeed, we are too-often overwhelmed by the torrent of data coursing through our lives. As a society, we have developed many tools to organize the information we rely on every day. The Dewey Decimal System helps libraries organize books. UPC codes help stores organize their products. Nutrition labels help to present information about food ingredients and nutritional value (or lack thereof) in a way that's consistent and predictable.

Data Standards Image-600wi
The nonprofit sector has also relied on data standards: we use the government's Employer Identification Number (EIN) to identify individual organizations. The National Taxonomy of Exempt Entities (NTEE) is used by many — including GuideStar, Foundation Center, and others — to help reveal the diversity of the nonprofit community, guide funding decisions, and foster collaboration.

But just as other information systems have continued to evolve so must ours. When the Dewey Decimal System was developed in 1876, Melvil Dewey could not have imagined Amazon.com, e-readers, or Goodreads.com. Similarly, the EIN/NTEE framework is simply not enough to explain, organize, and share the complex story of nonprofits.

So we are glad to share the news that a new generation of social sector data standards is emerging. These can help us all do our work better, making smarter decisions while saving time to focus on that work.

There a several standards that are important, but we'd like to direct your attention to four:

Standard

Description

History

BRIDGE

A unique identifier for every nonprofit organization in the world.

A joint project among GlobalGiving, Foundation Center, GuideStar, and TechSoup Global.

Philanthropy Classification System

A taxonomy that describes the work of foundations, recipient organizations, and the philanthropic transactions between them.

Led by Foundation Center, with significant input from hundreds of stakeholders.

GuideStar Profile Standard

A standardized framework for nonprofits to tell their own stories. Used by more than 100,000 nonprofits.

Includes the five Charting Impact questions (developed in partnership with Independent Sector and the BBB Wise Giving Alliance). GSPS feeds the GuideStar for Grants system that was developed as part of the Simplify Initiative in partnership with the Technology Affinity Group.

eGrant/hGrant

An easy way for foundations to share the grants they make in near-real time.

Over 1,200 foundations use eGrant to report their grants data to Foundation Center and 19 foundations publish their data in open format through the Reporting Commitment.

This list is by no means comprehensive — other standards are also important, including but not limited to IATI and PerformWell. Others, such as XBRL or LEI, could become important for the field. But for now, we urge the nonprofit sector to understand these four standards and, where possible, to adopt them for your own use.

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It is worth noting that we in the nonprofit sector use the word "standards" in two distinct ways. First, there are "practice standards" that work to define excellence. The BBB Wise Giving Alliance Standards for Charity Accountability or Independent Sector's Principles for Good Governance and Effective Practice fit this definition. Practice standards are a powerful way to help define and promote good practices.

But here we're pointing to "data standards" that are simply a way of organizing information in a consistent format to make it more useful. Both practice standards and data standards exist to help us do our work better. Neither guarantee excellence, but in different ways they help us drive toward excellence.

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As a field, we need to absolutely minimize the amount of time we spend managing data — and maximize the time we spend solving problems. Think of these standards as enablers to help us do just that, and do it at scale.

--Jacob Harold and Brad Smith

Serving the Public Good (by Invitiation Only)
November 30, 2015

(Brad Smith is president of Foundation Center. This post originally appeared on Philantopic.)

Board_smithb_180_180_s_c1America'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?

Somewhere in my heart I believe that, when it comes to foundations, the public good is best served when the public can freely apply for support.

Keep the door open, even if it is just a crack. No matter how bright a foundation's trustees or staff might be, their networks are necessarily limited. And, as I can attest from long years of experience as a foundation professional, no matter how good your own ideas are, there are many people in the world with better, more creative ones. So it's just good business for a foundation to maintain at least one program area that freely allows organizations to apply for funding. Think of it as a kind of venture window or idea lab for your foundation. Failing that, foundations can signal their willingness to accept brief letters of interest, after which staff can decide whether or not to invite a formal proposal.

Create a website. While a remarkable 93 percent of American foundations do not have a website, there are some countries like the Netherlands where a Web presence is required of all foundations. (But that's a topic for another blog post.) In terms of numbers, the majority of American foundations are very small and have little or no infrastructure. They figure: "If we put up a website, we will be flooded by proposals that far exceed our grantmaking budget and most of which do not respond to our priorities." A simple website can actually help and gives you the chance to be crystal clear about what your foundation will fund and what it will not. Foundation Center has a service that designs and hosts (more than two hundred) foundation websites to make this process as simple and painless as possible.

Do a good job filling out your 990-PF tax return. For that huge majority of foundations that do not have websites, the 990-PF is the principal source of information about them for the public. It is also used by Foundation Center and others to build databases that describe foundation interests, priorities, and limitations. The Internal Revenue Service, in coming years, will require digital filing of 990s and will make them available as machine readable open data for use by anyone with a computer and a good algorithm. In other words, information about your foundation will be everywhere, and it will be based primarily on what you say about yourself in the tax return.

What can nonprofits do?

InviteOnlyI once gave a live Web chat with the seemingly contradictory title "How to get a grant from a foundation that doesn't accept proposals." This is one of the most frequent questions posed to Foundation Center staff and the professionals who staff some four hundred and fifty Funding Information Network affiliates in all fifty states. The answer basically boils down to what my mother told me when I was growing up: "It's who you know that counts." In more modern parlance this means networks. If a foundation says it will not accept unsolicited proposals, look for a connection that could lead to an invitation to the party. Use Foundation Directory Online to scour its board and staff lists (if they have staff). Look at all their grants and who is getting them for what purpose. If you or one of your trustees has a connection with someone on the grants list, see if that organization will introduce you to the foundation. Remember, foundations that do not accept unsolicited proposals still make grants. Your task is to find a way on to the invitation list. The good news is that foundations tend to fund organizations consistently over time, so once you get that first grant (and perform well) there is a strong chance that future grants will follow.

Foundation Center sits at the nexus — or, to use the postmodern term, "interstices" — of foundations and the nonprofits they support. Though we know both types of organizations extremely well, we strive to remain religiously neutral by not picking winners or losers or otherwise classifying organizations as good or bad, worthy, or unworthy. Nevertheless, we do see trends, and some of those are worth noting, exploring, and perhaps going public about. As one who has committed his professional life to philanthropy and the social sector I am still wrestling with this one. Help me think it through in the comments section below.

--Brad Smith

Visualizing California Philanthropy Discussion now Available on Livestream
June 29, 2015

Recently we convened a variety of foundation leaders in our San Francisco office to discuss strategies to improve data for and about California philanthropy. During the program, Visualizing the Past, Present, and Future of California Philanthropy, president of Foundation Center, Brad Smith, moderated a discussion among representatives from a diverse array of California-based foundations: Pamela H. David, executive director of the Walter and Elise Haas Fund; Sara Davis, director of grants management at The William and Flora Hewlett Foundation; and Peter V. Long, Ph.D., president and CEO of Blue Shield of CA Foundation. The discussion focused on transparency, and how these foundations have adopted sharing, accountability, and openness into their giving practices. The funders also related how technology has impacted and enhanced their transparency practices-including the adoption of Foundation Center’s Reporting Commitment and Get on the Map campaign.

If you missed the session, or attended and would like to view it again, you can find it here. If you would like to Get on the Map, but are unsure how to do so, check out our how-to webinar.

Rethinking Transparency – It’s Not a Dirty Word
September 15, 2014

(Krystian Seibert is the policy and research manager with Philanthropy Australia. This post was originally featured on the ProBono Australia news website.)

Seibert-150At Philanthropy Australia’s 2014 National Conference last week, one of the most favourably received presentations was that of Brad Smith, President of the Foundation Center.

The Foundation Center is an US organisation whose mission involves advancing knowledge about philanthropy in the US and around the world.

Much of its work focuses on consolidating and analysing data, and it maintains a very comprehensive database on US and, increasingly, global grantmakers and their granting activity.

One of its key initiatives is ‘Glasspockets’ – which champions philanthropic transparency, and provides the data and resources which foundations need to understand the value of transparency, be more open in their own communications, and help shed more light on how private wealth is serving the public good.

Having met with Brad prior to his presentation, we knew in general terms what he would be speaking about. What we didn’t know was how the audience would respond. Would they be captivated by his message about the benefits of an open philanthropic sector which proactively shares information about what it does? Or would they be concerned by his challenge to some of the norms under which philanthropy has traditionally operated in Australia?

Brad’s message was that transparency is a good thing and should be facilitated and encouraged. But often the philanthropic sector doesn’t respond that well to the word ‘transparency’ – you could say that it’s a bit of a dirty word. To be honest, since I started with Philanthropy Australia, I have been a bit hesitant to use the word for fear of being misunderstood.

One reason for this is that for too long we have let transparency be defined for us, by others.

Transparency has been viewed through the paradigm of regulation and compliance, and associated with unwanted intrusion on the privacy of donors... But this is only one paradigm through which to view transparency, and it’s not the paradigm we should be focusing on. Put bluntly – it’s time to take back transparency.

Transparency has been viewed through the paradigm of regulation and compliance, and associated with unwanted intrusion on the privacy of donors. Applying this paradigm, transparency is viewed as necessary because it may improve ‘integrity’, prevent wrong doing and therefore maintain public confidence. It has a very negative connotation.

But this is only one paradigm through which to view transparency, and it’s not the paradigm we should be focusing on. Put bluntly – it’s time to take back transparency.

One key message which I took out from Brad’s presentation was that improving transparency in Australian philanthropy is an opportunity and not a threat.

In my view, there are three particularly important benefits from improving transparency.

Firstly, the current ‘data deficit’ in Australian philanthropy makes it much harder to plan and coordinate giving – it stands in the way of the effective allocation of limited philanthropic resources, so they tackle the issues and areas of real need.

Imagine if there was detailed information available that mapped granting across different cause areas and locations, over time? This would be a valuable tool which philanthropic organisations could use to inform their granting strategy.

Better information will enable a more strategic approach to philanthropy, helping ensure that there is less duplication and more coordination and collaboration between philanthropic organisations.

This will increase philanthropy’s impact.

Secondly, the current ‘data deficit’ in Australian philanthropy makes it much harder to understand, measure and improve performance. Whilst not yet widespread, philanthropic organisations can and do undertake evaluations of the programs and initiatives they support, with a view to seeing how things have worked or haven’t worked, and to learn from experiences.

In another presentation at our National Conference, Dr Diana Leat focused on some recent research undertaken with colleagues at the Queensland University of Technology, commenting that many of the evaluations which are done are just sitting in foundation offices around Australia – they aren’t disseminated and so nobody else is getting the opportunity to learn from them. This made me think of Brad referring to US foundations as ‘islands of information’ in his presentation the day before – a very good analogy.

Imagine if we built bridges between these islands of information? This would involve making evaluations more accessible, with philanthropic organisations sharing their evaluations more widely so that others can learn from their experiences, both good and bad. That kind of knowledge exchange could help philanthropic organisations build on the work of others. Again, this will increase philanthropy’s impact.

Thirdly, the current ‘data deficit’ in Australian philanthropy means that we aren’t sharing stories of philanthropy that show how private wealth is serving the public good as much as we could be. Therefore, the broader public but also government and media don’t fully understand the transformative work philanthropy does every day in our communities.

It’s not simply a question of ensuring appropriate recognition for philanthropy. Rather, if we want to increase giving in Australia, we need to ensure there is broader awareness about why giving is important and how it can and does lead to positive change.

Imagine if you could visit a website, and zoom in on a map showing the grants made in your local area? That would be an amazing way of demonstrating the impact of philanthropy.

When I look at the benefits from improving transparency, I think that it’s an opportunity that’s not to be missed. It’s not about regulation and compliance. It’s not about losing privacy for donors – some donors will understandably want to be discreet about their giving, and should be allowed to do so.

Rather it’s about Australian philanthropy making a decision to be more open about sharing data and information, to learn from one another and achieve better collective outcomes, and to develop the systems and frameworks to facilitate and enable this voluntary knowledge exchange.

It’s certainly an area Philanthropy Australia is actively exploring – because it’s critical to growing philanthropy’s impact across our communities. Watch this space.

-- Krystian Seibert

Glasspockets Find: Foundation Center CEO Speaks Out On Knowledge Management
March 24, 2014

(Rebecca Herman is special projects associate for Glasspockets at the Foundation Center-San Francisco.)

Herman-150

Like it or not, we live in a data-obsessed era. It can feel like we are swimming in a sea of data. Are we being swamped by data, or are we harnessing these currents to propel us along toward our objectives? Your foundation probably already gathers significant amounts of information about your programs, your grantees and your fields of interest. As foundations move toward greater transparency, it is worth considering how this data could serve a larger purpose outside of the foundation. And then this leads to the more difficult task of figuring out which internal data could be a meaningful contribution to the field.

"If philanthropy really wants to be strategic, harnessing data to purpose needs to be job number one."

Earlier this month, in the Stanford Social Innovation Review blog, Foundation Center president Brad Smith wrote about Developing a Culture of Knowledge Management.

In the SSIR, Smith argues that foundations need to learn how to manage and share information in order for philanthropy to be strategic. This may require creating a new mindset, in which data becomes "knowledge assets," and establishing new internal incentive systems for managing data effectively.

Smith also points out a number of common pitfalls in how foundations use data:

  • An over-reliance on personal networks and verbal communication to gather information about grantees and grant applicants
  • Potentially valuable contextual data lives inside foundations as static information
  • Foundations can become so obsessed with impact that they outsource data collection and proof to their grantees

Read the complete blog post on the Stanford Social Innovation Review website to learn about the importance of knowledge management and the three types of data foundations need.

-- Rebecca Herman

Are Chinese Foundations More Transparent than American Foundations?
September 13, 2012

(Bradford K. Smith is the president of the Foundation Center.)

Brad SmithOn August 29, the China Foundation Center launched its online Foundation Transparency Index a "proactive solution to set a new standard for the ethical conduct of foundations in China." Many people are surprised to learn there are foundations in China, let alone that they might be held to higher standards of transparency than their American counterparts. Could that really be the case?

First of all, there are foundations in China -- more than twenty-seven hundred of them, according to the China Foundation Center. China Foundation Transparency IndexLaunched in 2010, the CFC was created as a public information service at a time when China's economic growth increasing wealth concentration and strained social safety net were catalyzing a surge in the number of new foundations. The vision of its founders is not unlike the vision of John Gardner and others who, in 1956, created the (U.S.) Foundation Center to provide greater transparency to a rapidly expanding foundation sector in this country. In 1956, that meant stuffing the paper records of seven thousand foundations into filing cabinets. Today it means online databases, data visualization, video, social media, and digitized research reports covering some ninety thousand U.S. grantmakers and millions of their grants, research reports, news stories, and tweets. In contrast, the China Foundation Center was born digital and in just two short years has created online databases, interactive graphics, and research reports that take into account every grantmaker in China.

The CFC's Foundation Transparency Index is comprehensive, having already rated close to 70 percent of Chinese foundations.

Second, the CFC's Foundation Transparency Index is an elaborate one, carefully crafted with technical assistance from an advisory group of experts from some of China's leading universities with backgrounds in public policy, "anti-corruption studies," law, and nonprofit studies. The index comprises a checklist of sixty transparency indicators grouped into four categories: basic information, financial information, projects information, and donor information.  An elaborate algorithm produces a weighted composite score, with a maximum score of 129.4. Foundations' positions change in the rankings as their scores are adjusted weekly depending on the information they publicly disclose.  Just to be sure you don't miss the dynamic nature of the rankings, the tables for each foundation show their previous rankings, whether they are moving up or down, and their twelve-week range.  For the 1,831 foundations currently included in the index, only two (this week) get a perfect score of 129.4, while the average for all foundations (this week) is 52.98.

Third, foundations in China are regulated by the Chinese government, making the index a kind of complementary mechanism designed to further enhance voluntary transparency among Chinese foundations. If a foundation chooses not to publicly disclose the information via its own Web site, it will end up with a lower ranking. That is where a crucial difference between the Chinese and American contexts comes into play. In China, the term "foundation" is applied to both "public foundations," which are more like what we would call public charities, and "private foundations," which are akin to private operating foundations in the U.S. The former have every motivation to earn a high score in the Foundation Transparency Index because they solicit and depend on contributions from the public to carry out their work. The latter, though not technically endowed, are established with "registration capital" provided by an individual donor or corporation. Both, however, are concerned about the negative impact of scandal on the sector and know they can benefit from a positive image and general societal appreciation of their role.  Thus, the CFC' s Foundation Transparency Index is part Charity Navigator and part "Who Has Glasspockets?" -- a cross between a rating system and a transparency framework.

Fourth, American foundations, like their Chinese counterparts, are required to comply with government disclosure requirements by filing Form 990 or 990-PF. That information is made publicly available by the Internal Revenue Service in the form of unwieldy image files.  Organizations like the Foundation Center take millions of those forms and make them searchable in their entirety or, cleaned and coded, in tools like Foundation Directory Online. The cleaning and coding compensates for the missing, inconsistent, and limited information often found on those forms, but no one has ever had the temerity to actually score and rate American foundations on the information provided in the forms. Conventional wisdom has always assumed that, as endowed institutions, American foundations would be relatively impervious to any pressure a rating system might generate and, perhaps more importantly, unlikely to provide grants to whoever created and maintained such a system.

So getting back to the question that inspired this post, the answer is "maybe." The CFC's Transparency Index is geared more toward measuring to what degree Chinese foundations are disclosing compliance information, a good portion of which (43 of the 60 indicators) they are supposed to be providing to the government anyway. In addition to other types of information the CFC has deemed conducive to transparency (e.g., social media profiles, bios of board members, the foundation president's resume), a Chinese foundation wishing to attain a higher index score needs to go the extra mile by making the information available on its own Web site.

The Foundation Center's "Who Has Glasspockets?" transparency profile mixes a few compliance elements with governance indicators and features -- things like grants databases, knowledge centers, and performance assessments -- that help to illustrate a foundation's efforts to openly promote deeper understanding of the nature, impact, and quality of its work. At the same time, the FC transparency profile presumes that transparency in the digital age starts with a Web presence, thereby excluding the 74 percent of U.S. foundations that have no Web site at all. Foundations that are online can work voluntarily with Foundation Center staff to develop their individual "Who Has Glasspockets?" profiles. There is no scoring or ranking.

The CFC's Foundation Transparency Index is comprehensive, having already rated close to 70 percent of Chinese foundations, while the Foundation Center has painstakingly convinced forty-three foundations to voluntarily post transparency profiles on Glasspockets.

Philanthropy has long been a global phenomenon. But today technology gives us near real-time information by which to understand ourselves through comparison with others.  American foundations may be different than Chinese foundations in some ways, but in facing growing demands for transparency from government, media, and the public we are more alike than we realize.

-- Brad Smith

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About Transparency Talk

  • Transparency Talk, the Glasspockets blog, is a platform for candid and constructive conversation about foundation transparency and accountability. In this space, Foundation Center highlights strategies, findings, and best practices on the web and in foundations–illuminating the importance of having "glass pockets."

    The views expressed in this blog do not necessarily reflect the views of the Foundation Center.

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