Transparency Talk

Category: "Financial Reporting" (33 posts)

A Brief Analysis of the Clinton and Trump Foundations
September 13, 2016

(Jacob Harold is GuideStar president and CEO.  He has written extensively on climate change and philanthropic strategy; his essays have been used as course materials at Stanford, Duke, Wharton, Harvard, Oxford, and Tsinghua. This post first ran on the GuideStar blog.)

Nonprofits are a cornerstone of American democracy. They reflect the political diversity of the American people. That diversity is well illustrated by two institutions currently in the news: the Bill, Hillary and Chelsea Clinton Foundation and the Donald J. Trump Foundation.

GuideStar takes no position on elections and we will not comment on Hillary Clinton or Donald Trump as candidates for the presidency. We have, however, been repeatedly asked about the Trump and Clinton Foundations. Accordingly, we would like to offer a few notes of analysis on their structure, size, strategy, and transparency practices.

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Structure

Let us begin with a comparison of the basic facts. The Trump Foundation is legally categorized as a “private non-operating foundation” whereas the Clinton Foundation is a “public charity.” In simple terms that means the Trump Foundation is meant primarily as a vehicle for distributing grants from the Trump family fortune—although it also accepts funding from other donors. The Clinton Foundation is meant primarily as a vehicle for directly operating programs for the social good—while also making some grants to other organizations. 

Despite these differences, both organizations are, in a (non-legal) sense, “celebrity foundations.” They are seeded by money donated by their founders and also serve as a vehicle for members of the public to demonstrate their support of a prominent person. At their worst, celebrity foundations are vanity projects with negligible impact. At their best, such organizations channel fragmented resources and yield extraordinary impact for society. For example, the Michael J. Fox Foundation is known as one of the most sophisticated players in the fight against Parkinson’s Disease.  

Both the Trump Foundation and the Clinton Foundation are filed under section 501(c)(3) of the U.S. tax code, meaning they legally cannot engage in electoral activity. In general, they appear to have followed this requirement. There is at least one exception, though. The Trump Foundation made one donation to a political action committee associated with Florida Attorney General Bondi. It is not legal for a foundation to make a donation to a PAC; the Trump Foundation has paid a $2,500 IRS fine for this infraction. The the Trump Foundation characterized this as a clerical error although others have described it as a case of "pay-to-play politics." At the very least, this incident indicates insufficient controls and lax managerial oversight.      

Size

One thing is indisputable: the Clinton Foundation is far larger than the Trump Foundation. The latest comparable data from December 31st, 2014 shows the Clinton Foundation with assets of $354 million, compared with the Trump Foundation’s $1 million. The Clinton Foundation had total expenses of $91,281,145, versus $596,450 for the Trump Foundation. The Clinton Foundation had 486 staff compared to zero staff at the Trump Foundation.  

The Clinton family’s tax returns suggest that the majority of its charitable giving has been through the Clinton Foundation. Without access to Mr. Trump’s tax forms it is difficult to know the scale of his charitable activities outside the Trump Foundation. But it does appear that the dollars have not matched the pledges. An investigation by the Washington Post has not been able to validate that Trump has actually donated the money he pledged, instead finding, “Trump promised millions to charity. We found less than $10,000 over 7 years.” In addition, the last donation to the Trump Foundation by any of its trustees—family or otherwise—was in 2008. Indeed, David Farhenthold of the Post has suggested that the Trump Foundation has transformed over the last decade from "standard-issue rich person’s philanthropy into a charity that allowed a rich man to be philanthropic for free."

All told, the data at hand would suggest that the Clinton family has—at least over the last several years—donated more money (and at a far higher proportion of their wealth) than the Trump family.

Similarly, it appears clear that the Clintons have out-raised Trump. The Clintons’ fundraising for their foundation is one aspect of a broader fundraising portfolio totaling $3 billion over the last four decades. This is a remarkable number but they are not alone operating at this level: the Bush family raised $2.4 billion over a similar period. Trump has certainly helped raise money for both charitable and electoral efforts, but the total is undoubtedly less than the Clintons’. 

Fundraising at this scale takes place in a rarefied social circle. Each of these families—the Clintons, the Bushes, and the Trumps—must navigate a tangle of relationships with wealthy individuals. These relationships have caused some to claim that fundraising for the Clinton Foundation compromised Clinton’s role as Secretary of State. There appears, though, to be little evidence to support this claim. The Clinton Foundation signed an MOU in 2008 clarifying that Hillary Clinton would not have a role with the Foundation during her tenure at the State Department. And, indeed, funding for the Clinton Foundation decreased significantly during that period (2009-2013). A fair argument can be made that the Clinton Foundation should have been more aggressive in dealing with the perception of potential conflict. To its credit, the Foundation now proactively shares its key legal and audit documentation and has built a tool on its website to provide an additional layer of transparency about its donors (including both Donald and Ivanka Trump). 

Transparency and Strategy

Transparency is not a guarantee of effectiveness—but, in general, we believe that transparency is correlated with excellence in nonprofits. Transparency indicates an openness to questions and accountability. And, importantly, the act of transparency can force an organization to be clear about its goals and strategy.

Most nonprofits—including the Trump and Clinton Foundations—are required by law to file a regulatory document with the IRS, the Form 990. The 990 provides important baseline information but does not give a full view of the nuances of nonprofit work. Accordingly, GuideStar invites nonprofits and foundations to share additional data. Approximately 128,000 have done so. Some 34,997 organizations have provided enough to get one of GuideStar’s four “transparency seals”; of those, 1,061 have earned the highest level, Platinum. The Clinton Foundation is one of them. The Trump Foundation has provided no additional information and so has not earned a transparency seal. 

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As a part of achieving a Platinum seal, the Clinton Foundation has provided a set of quantitative metrics about its programs. For example, one metric, “number of farmers benefitting from access to improved agricultural practices, increased yields, and enhanced market access,” rose from 66,124 in 2014 to 114,825 in 2015. Another, the “number of girls and women provided access to job skills training and livelihood support,” rose from 35,587 in 2014 to 48,696 in 2015. The fact that the Clinton Foundation provides such metrics makes it far easier for donors and citizens to meaningfully analyze the institution’s value to society.

The Trump Foundation provides no such metrics. Any analysis must therefore be based on the content of publicly available tax forms. These forms appear to indicate an unfocused generosity. For example, the below sample from the Trump Foundation's 2014 tax return includes grants to the Orthopaedic Foundation, the Palm Beach Opera, the Police Athletic League, Protect our Winters, and the Ronald McDonald House of New York. There is nothing inherently wrong with sprinkling many small grants in unrelated areas. But the Trump Foundation’s approach would certainly not meet the standard of focused, proactive grantmaking commonly called “strategic philanthropy.” 

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Conclusion

Both the Clinton and Trump Foundations have been the subject of controversy while seeking to contribute to social good. They are undoubtedly different from each other in size, structure, and openness. Indeed, the two organizations reflect the perceived styles of the two candidates: one systematized, the other improvisational. Donors regularly decide which approach they prefer for their giving. Later this year voters will decide which approach they prefer for their leadership.

--Jacob Harold

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

From Cardboard to the Cloud: Grantmaking Systems in an Era of Collaboration and Learning
April 6, 2016

(Adriana Jimenez is grants manager at the Surdna Foundation and also serves on the board of directors of the Grants Managers Network.  She regularly contributes to Transparency Talk, discussing issues pertaining to transparency, data, and grants management.)

AjimenezThe Surdna Foundation’s first grants management system was made of cardboard: it was a shoebox filled with index cards. (Next there was a custom-built system, followed by an off-the-shelf installed one). For decades, this box served the foundation’s basic record-keeping needs, but technology –and transparency – eventually took precedence.  

Now in its 99th year, the foundation has since ditched the cardboard for the cloud. In 2015, Surdna transferred its grantmaking database to the workflow- and cloud-based system, Fluxx.

Moving to the cloud has helped the foundation become more open, streamlined and transparent.

These benefits were not accidental. Our decision to switch grants management platforms arose from a 2012 three-year strategic Roadmap which recommended the following changes in support of mission: 

1) Working more collaboratively with grantees.

2) Collaborating and learning within the foundation.

3) Sharing data and lessons learned with the philanthropic sector.

To implement these changes Surdna’s Roadmap suggested retooling outdated systems and processes. It was clear we’d need a new grants management system: we’d reached the limits of our next cardboard box.

Surdna’s transition to the cloud highlights how foundations are beginning to use grants management systems to inform and improve their overall strategic directions. Through the use of data- and community-driven platforms, funders can support their efforts in collecting, harnessing and sharing better information, while working more collaboratively across teams and beyond.

Here’s how our new grantmaking system is helping us advance Surdna’s strategic goals.


1)  Working more collaboratively with grantees.

Cloud-based platforms provide actionable data on-demand. This has been empowering for staff, particularly those who previously lacked direct contact with our grant information (and those with busy travel schedules).

Phil Henderson, President of the Surdna Foundation, says: “Our new system has made data accessible on the fly. I can now review and approve grants from any location and drill down to get more information.” (And by “drill,” he means literally – he recently approved a grant from his dentist’s chair.)

"Working jointly with grantees has added transparency to our processes."

Beyond its streamlining implications, this opens new channels for deepening our connections with grantee partners and empowering our senior leadership. For example, while on the road the president can now use organizational and grants data to help him strategize for site visits, or identify grantees to greet at a reception. With the aid of a mobile app a data point becomes a real person, fostering face-to-face collaboration.

Via the cloud-based grantee portal, invited applicants can now work collaboratively with program officers throughout the proposal-writing process and get feedback from staff in real time.

Working jointly with grantees has added transparency to our processes. For instance, in our previous system grantees had no way of accessing their “final” proposal (with edits made by Surdna’s program and grants management staff) online; now they can view revisions in real time, as well as access information on upcoming payments, reports, and past grants.

For Jose Garcia, Program Officer for the Strong Local Economies Program, the portal has expedited the proposal formulation process and created a new, direct line of communication between program staff and applicants. Moving to the cloud has “decreased bureaucracy in our work with grantees and prospective grantees, allowing greater responsiveness to both. It has eliminated unnecessary paperwork so we can spend time on the important stuff.”

By “important stuff,’ he means our mission, and the people working to make it happen. Streamlining our processes means grantees can spend more time on their own mission-related activities, rather than draining resources on fundraising.

In a recent survey, grantees described the portal as “accessible,” “user-friendly,” “easy” and “organized”. 85 percent of respondents were “satisfied” to “very satisfied” with the accessibility of Surdna’s application forms.

But there is room for improvement. Grantees felt ambivalent about their level of satisfaction with the portal as a tool for communicating with Surdna staff. Only a total of 23 percent were either “satisfied” or “very satisfied, while 1/3 were “neither satisfied nor dissatisfied,” and 52 percent were “unsure”.

By making future enhancements to the portal we can continue to unlock its potential as a robust communication tool.


2)  Collaborating and learning within the foundation.

Unlike many installed databases (designed primarily for grants managers), our workflow- and cloud-based system is used regularly by everyone on staff, from the receptionist to the president. Working on a single platform has reduced shadow systems while supporting a more holistic understanding of our work across programs.

Intuitive searches and dashboards provide a birds-eye view of Surdna’s grantmaking landscape, past and present. This has aided our cross-programmatic learning:

“One of Surdna’s strengths is that each program exists within a larger ecosystem of all programs. In the Thriving Cultures Program, we also think in terms of Sustainable Environments and Strong Local Economies [Surdna’s other 2 programs areas]. We can now view the arts in that broader context,” says Shin Otake, Program Associate for the Thriving Cultures Program.

Shared workflows help his team (and others) keep track of grants in the pipeline: “the grant approval process from invitation to approval is seamless. Any member from my team or the Office of Grants Management can see the status of any grant at any given moment, or create reports to map out where we’ve been and where we’re going.”

"Using data- and community-driven platforms, funders can better share information and collaborate internally and externally."

Increased collaboration among finance, grants management, and program staff has also improved our internal controls.

For example, the finance department can now reconcile grants payments by running monthly reports in the system. The timeliness of these reports is key, as it allows grants management to address errors early on, and provide accurate spending data to program staff for budgeting purposes.  

Non-grant contracts (such as fees for consultants, research, grantee convenings, etc.) have also migrated to our grants management system, where they can now be approved and monitored in a central location by Surdna’s Chief Financial Officer. For Controller Matt Walegir, “this has provided a great oversight procedure which did not exist before. We can now get a complete picture of where our contracts are at any given moment.”

Tracking non-grant contracts in a grants database has significant implications beyond internal controls and budgeting. By co-mingling contracts and grants in one space, we are reminded that our tools for impact extend beyond traditional grantmaking. At Surdna, we also have program-related investments (also tracked in Fluxx), mission-related investments, contracts, funder collaboratives, and of course, communication.

Thinking of these “tools in the toolbox” holistically is critical for foundations as they continue to look less “traditional” in the future.

3)  Sharing data and lessons learned with the philanthropic sector.

This priority has the greatest implications for advancing Surdna’s commitment to transparency.

Helen Chin, Director of Surdna’s Sustainable Environments Program, says the new system has “opened up how we interact with the grantmaking process and compliance protocols. It has allowed staff to access reports and other data without having to bypass its gatekeepers, the Office of Grants Management.” 

The “democratization of data” she describes has been a major cultural shift at Surdna, and will continue to transform the way foundations work as the boundaries between different roles are shifted. For example, if program staff can access reports and other data on their own through streamlined processes, the role of grants management can continue to become more strategic, helping foundations interpret their data (rather than merely provide it) to drive decisions. Data-driven foundations can learn from their work over time and share their lessons with the field, helping them become more transparent about their work.

A recent study by the Center for Effective Philanthropy found that most foundations’ top barriers to achieving transparency are staff-related: 31 percent do not have the time to invest in working to be transparent, and 28 percent lack consistent levels of transparency across staff.

Staff limitations such as these can be appeased by putting the right tools in the right hands (if you hired the wrong hands, that’s a different story!). Cumbersome systems – not people – are what often create stopgaps and inconsistencies.

Fortunately, technology can capture such stopgaps.

Our new system enables the sharing of data with the sector through its ability to communicate with external datasets. One example is our adoption of the Foundation Center’s GeoTree, a taxonomy to classify grants by geographic area served.  This information can now be aggregated into the Foundation Center’s repository and made available to a community of funders, non-profits, and researchers seeking to understand the broader funding landscape.

Taken further, foundations can expand the capabilities of their grantmaking systems through the integration of third-party programs to enhance data analysis, visualization, and operations.  Grants management systems are just beginning to facilitate the connection of their platforms with tools like Tableau, PolicyMap, Census Data Mapper and Foundation Maps to help funders make better sense of their data and aid them in decision-making.

We’ve only scratched the surface. For Jonathan Goldberg, Director of Grants Management, Learning, and Information Systems, “The real power could come from what we learn and share with others outside the foundation.  Consider all the data that foundations currently maintain, and all the untapped knowledge that we might extract by aggregating and sharing that information within and beyond the grantmaking community.  It’s something this platform is tailor-made for, and it could be transformative to the field of philanthropy and those who benefit from it.”

As we enter a new era of collaboration and learning, we’re excited to explore the vast possibilities of continuing to break down foundation silos through cloud-based systems.

We may not have all the answers yet, but when we do we promise not to hide them in a cardboard box.

--Adriana Jimenez

Size Doesn't Matter
March 28, 2016

(Molly Talbot-Metz is vice president of programs at the Mary Black Foundation.)

Molly Talbot-MetzWhat does the Mary Black Foundation, a small private foundation in Spartanburg, SC, have in common with some of the country's biggest and most well-known foundations like the Bill and Melinda Gates Foundation, the Robert Wood Johnson Foundation, the Ford Foundation, and W.K. Kellogg Foundation?

The Mary Black Foundation is pleased to announce that we have joined 19 other U.S. foundations that have each joined the "Reporting Commitment," an initiative managed by Foundation Center. The Reporting Commitment is intended to shed light on the flow of philanthropic dollars. Housed at Foundation Center's Glasspockets, the Reporting Commitment calls for foundations to make grant information available to each other and the public at least quarterly in a common reporting format that shares the kinds of grants we fund, including the amount, duration, and purpose.

Mary Black FoundationOur decision to participate in the Reporting Commitment is a reflection of our desire to be a transparent community partner. According to Merriam-Webster, to be transparent is to be "easy to notice or understand; honest and open; and not secretive." Having been in philanthropy for almost 15 years, I know that transparency is not a word many use to describe foundations. For most people, the work of philanthropy is a mystery. There is often confusion and uncertainty about how foundations work and what they fund. They are often disconnected and isolated from the communities they serve. Slowly, this may be changing.

The Mary Black Foundation strives to be transparent in all that we do, and our participation in the Reporting Commitment was a logical addition to our existing efforts to be open and transparent with our community partners, the nonprofit sector, other foundations, and the general public. Since its inception, the Mary Black Foundation has published its grants in an annual report in print or on our website. In 2014, we redesigned our website to more clearly communicate our grantmaking process and guidelines.

"Openness requires a culture of transparency."

Now, in addition to our annual report and listing of funded organizations, you will also find on the Foundation's website its bylaws, code of ethics, financial statements for the past five years, listing of staff and board members, strategic plan, and funding logic model. It is important to the Foundation's board and staff that we go above and beyond the required IRS disclosure of funded grants. This kind of openness is not difficult for foundations of any size, but it does require a culture of transparency. 

Our commitment to transparency goes beyond openly reporting our policies and procedures and the grants we fund. The Foundation strives to be actively involved in the community and to be equal partners in community initiatives. Our public commitment to partnership is one of the reasons we were selected to lead Spartanburg's involvement in a national competition to improve health outcomes in our community. We will ensure that lessons learned and changes in health outcomes are tracked and reported. In that way, our successes and challenges both can help others as they embark on similar efforts.

We hope other foundations - big and small - will see the importance of being more transparent and engaged in the communities they serve and make the Reporting Commitment pledge. By collectively being transparent about our work, we strengthen our credibility and increase public trust, improve grantee and community relationships, facilitate collaboration among each other and reduce duplication of efforts, and build a shared community of learning.

-- Molly Talbot-Metz

'Dark Money' Expected to Set 2016 Records
January 18, 2016

(This post first appeared in Philanthropy News Digest.)

The amount of so-called dark money, contributions to nonprofits and other tax-exempt entities that are not required to disclose their donors, backing various presidential campaigns in 2016 is expected to exceed the more than $300 million contributed during the 2012 presidential election cycle, the New York Times reports.

The troubling lack of transparency, the Times notes, is being driven by political advocacy groups that exploit a loophole in the tax code that allows them to avoid disclosing their donors while holding on to their tax-exempt status. Many of those organizations court special interest groups and wealthy donors who crave the influence that political contributions can buy but spurn any public accountability implied by those contributions. For example, almost 20 percent of the television ads touting the positions of Sen. Marco Rubio (R-FL) have been financed by dark money, the Center for Responsive Politics reports, with most of that coming from the nonprofit Conservative Solutions Project.

The biggest dark money spenders in this cycle, however, have been the U.S. Chamber of Commerce and Crossroads Grassroots Policy Strategies, a D.C.-based nonprofit organization that operates under the umbrella of the American Crossroads "super" PAC, which was co-founded by longtime Republican strategist Karl Rove. While the Federal Election Committee could force such organizations, with their heavy involvement in political campaigns, to register as political action committees, the commission hasn't shown any inclination to do so. Indeed, with Congress having effectively quashed, in the ominubus spending bill it passed at year-end, near-term efforts by the Internal Revenue Service to regulate these groups until after the 2016 election cycle and the FEC content to sit on the sidelines, the Justice Department is seen as the only federal agency that might attempt to shed some light on their activities.

Fred Wertheimer, the president of Democracy 21 and a longtime advocate of campaign finance reform, has asked the Justice Department to do just that, with an emphasis on political activities associated with Rubio's campaign. "Secret money is the formula for corruption," Wertheimer told the Times. "It's the influence buyer's dream."

Albert R. Hunt. "'Dark' Funds May Bode Ill in 2016 Election." New York Times 01/03/2016

Beyond Money: Foundations Can Create Change by Building Communities
December 3, 2015

(Mark Schmitt directs the political reform program and is director of studies at New America, an independent think tank and civic enterprise. He is a former editor of The American Prospect and has been a program director at the Open Society Foundations and worked on Capitol Hill. Follow him on Twitter at @mschmitt9. This post originally appeared on Philantopic. It is the 10th and final post in a series about U.S. democracy and civil society.)

Schmitt headshotThe world of foundations and the work they fund has for too long been shrouded in obscurity. While many foundations boast a commitment to transparency and release lists of their own grants, it has been far too difficult to see who funds an entire field, or understand how a foundation-backed policy idea made it onto the agenda. Given that foundations can be at least as influential as big political donors, driving policy initiatives such as charter schools and health reform, there should be resources that open up the sector to journalists and activists, as well as grantseekers interested in understanding the often mysterious question of who got what.

But that’s only part of the question. Even the most complete list of grantees and grant dollar amounts tells us only so much about the work and the vision: What does restoring American democracy mean, in practice? Can this mapping resource help answer that question?

Foundations do more than just give money to worthy projects. At their best, they make at least two other vital contributions: They help build a community — that is, the whole network of sustainable, adaptive organizations, from research projects to grassroots activists, that can further a cause — and they create connections, across issues and communities, in order to make each one stronger and more vibrant. So in looking at the Foundation Funding for U.S. Democracy tool, I wanted to ask those questions: Where have foundations built strong communities around democracy issues? And have they created the kinds of connections — between, for example, nonprofit journalism and efforts to reduce the role of money in politics — that strengthen these communities and the cause?

Schmitt_blog_image
The “constellations” section of the tool doesn’t fully answer these questions — to do so would require much deeper analysis and for foundations to provide more complete and plain-English descriptions of the “why” of their grantmaking — but it provides some useful clues. For example, one can see a distinct community of organizations working on election administration and access-to-the-ballot issues — a relatively small number of sizable organizations, with reliable support over several years, often in the form of general-support grants. Closely aligned to these core groups is a larger group of smaller organizations focused on a single state or a particular constituency. (This community would be even larger if the substantial and central contribution to the field made by the Pew Charitable Trusts were included. While grants to its elections project from other foundations are listed, its self-financed work is not.) It is probably no accident that despite the partisan acrimony over voting and significant setbacks to the voting rights movement, there has been significant progress and consensus on ideas such as early voting, online voter registration, and other aspects of election reform.

In a 2013 article in Democracy, Nick Penniman and Ian Simmons argued that the $45 million a year that foundations and other donors were investing in efforts to reform the role of money in politics was too little, and that if they wanted to advance progress on the causes they care about, individual and institutional philanthropists ought to commit one percent of total private giving, or $3 billion annually, to causes such as fixing the corrosive role of money in politics. This tool extends the point made by Penniman and Simmons to show that not only is total funding for campaign reform inadequate to the challenge, the community engaged in that effort is diffuse, the core organizations comprising that community are hard to identify, and the grants awarded in support of that cause are relatively small and often for specific projects rather than general support.

Moreover, in neither case does there seem to be much connection to other issues of democracy or to efforts such as improving journalism or civic education. Each of these issues, such as funding for innovations in public service journalism or for the Newseum in Washington, DC, seems to attract a unique set of funders who do little or no giving for other democracy issues.

Foundation Funding for U.S. Democracy is not the definitive answer to the questions about how funding works and whether it has built effective communities around democracy issues. To really see foundation funding for democracy and how it has worked requires a deeper investigation and the kind of real journalistic scrutiny that foundations rarely get. But much like the databases we rely on to understand the influence of money in democracy, this tool is a start and provides valuable clues and an outline for those who want to follow the money.

--Mark Schmitt

Philanthropic Dollars Also Shape Electoral Outcomes: Here’s How…
October 28, 2015

(David Callahan is founder and editor of Inside Philanthropy. Previously, he was a senior fellow at DemosThis is the fifth in a series of 10 posts about U.S. democracy and civil society that will be featured on PhilanTopic in the run-up to Election Day, and beyond. This post first ran in PhilanTopic.) 

Callahan Headshot%2c 1With another presidential campaign season under way, we’re again hearing a lot about the mega donors and Super PACs that fuel modern politics. But this isn’t the only stream of money that influences how elections unfold in the U.S.; philanthropic dollars also play a key role, with foundations supporting a range of activities that affect how our democracy functions and what happens at the polls.

Understanding the flow of these grants isn’t just helpful for nonprofits hoping to get a piece of the pie. It’s also super useful for journalists or others keen to see how foundations — which, by law must be nonpartisan — are deploying funds in ways that can sway electoral outcomes.

Let’s take the area of voter education, registration, and turnout as an example. It’s no secret that who turns out to vote, and where, can make a big difference in determining which candidates win on Election Day. If more African Americans turn out in swing states like Florida or North Carolina, for instance, that’s good news for Democrats. If the electorate tilts toward older and white voters, Republicans stand to gain.

Campaigns and Super PACs spend mightily to shape who votes. But what have foundations been doing? Well, Foundation Center’s newly launched Foundation Funding for U.S. Democracy tool offers some answers to that question.

Consider the state of Florida, a fiercely contested battleground in both presidential and off-year elections. Drilling into the data, where grantmaking can be easily segmented by the populations served, we find that five funders have given over a half million dollars in grants in recent years to seven groups that work with “ethnic and racial groups” on voter education, registration, and turnout. For example, the Florida New Majority Education Fund pulled in $200,000 in grant money from the Marguerite Casey Foundation and the Proteus Fund in 2012 and 2013. Casey has described this group as working to “increase the voting and political power of marginalized and excluded constituencies toward an inclusive, equitable, and just Florida.” Historically, these constituencies have supported Democrats at election time.

Other Florida groups that have received money for voting work, according to the database, include the Farmworker Association of Florida and Planned Parenthood of South Florida and the Treasure Coast.

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Moving to another swing state, North Carolina, we find a similar pattern: Nearly a half million dollars in grants have been made in recent years for voting work with racial and ethnic groups. The biggest recipient here was Democracy North Carolina, which has lately been at the forefront of efforts to defend voting rights amid a legislative push in that state to restrict the franchise in ways that research has found tends to reduce turnout among African Americans, Latinos, and young people.

Speaking of efforts to restrict the franchise, it’s important to note that not all grantmakers in the democracy space have sought to make voting more accessible by historically marginalized groups. Some have supported work to require voter identification at the polls and to roll back  measures such as early voting and same-day registration, which advocates have pressed for in many states as a way to expand and diversify the electorate.

In North Carolina, the John William Pope Foundation has long been known for its support of tougher voting rules that it says are needed to protect against voter fraud. What exactly has this entailed? The data shows 61 grants totaling more than $2.4 million by the foundation in North Carolina since 2011 that relate to democracy issues.

The Pope Foundation — controlled by Republican activist Art Pope — has been one of the top funders in the democracy space in recent years in North Carolina. But two other funders have given more: the Triad Foundation and the Open Society Foundations. Other big funders of democracy work in the state include the Z. Smith Reynolds and Ford foundations.

There are a lot more examples we could dig into to illustrate how funders are shaping voting work at the state level in ways that can and do affect electoral outcomes. All this grantmaking is officially nonpartisan and perfectly legal, but little of it is actually impartial.

And herein lies an important truth about how money influences America’s democracy. Yes, there is a vast and swollen river of cash flowing into political campaigns. But another, separate tributary of philanthropic money related to elections has also been growing. In fact, Foundation Center reports that funders have made grants totaling nearly $300 million since 2011 specifically for work in support of campaigns, elections, and voting.

That amount is nothing compared to the more than $6 billion that political contributors gave in the 2012 election cycle alone. But it’s still serious money that deserves close scrutiny.

 --David Callahan 

The Foundation Center and MacArthur Foundation Join IATI – Open Philanthropy Meets Open Global Development
December 23, 2013

(Jeff Falkenstein is vice president of data architecture at the Foundation Center.)

FalkensteinThe Reporting Commitment, an initiative by 15 of the largest foundations in the United States to be more transparent in how they share data on their grantmaking, launched a year ago in October. Since then, those 15 foundations have been joined by the Laura and John Arnold Foundation and the VNA Foundation. These organizations have committed to a level of transparency and scrutiny never before seen in the philanthropic sector. But why? Some foundations are interested in communicating out what good works they are doing and sharing lessons learned; some are hoping to improve their organizational intelligence through the sharing of better and more timely data, and others are hoping to be more effective, efficient and targeted in both their grantmaking and collaboration efforts. Not that these ideas are mutually exclusive.

At the heart of the Reporting Commitment is a set of standards by which the participating foundations have agreed to report their data. 1) The grant data must be reported at least quarterly; 2) the grant data must include the details of the geographic area being served using the Foundation Center’s geographic taxonomy--the Geotree--so the data can be reported consistently; and 3) the foundations must all report their data using the Foundation Center’s html-based reporting standard, hGrant.

Egrant_reporterhGrant is just one approach to joining the Foundation Center’s eReporting program; another part of the program is eGrant Reporting wherein nearly 1,000 foundations provide data in an Excel format through standard report queries via one of the Center’s grants management software partners. We are working closely with many of our partners to include hGrant as a reporting output option as well.

IATIGiven our experience with data standards, the Center was invited to join the Technical Advisory Group of the International Aid Transparency Initiative (IATI), an initiative to create an XML-based data standard to capture data on global development flows, primarily those of governments and international agencies. The goal of this work was to bring together organizations committed to working together to increase the transparency of capital flows benefitting aid on a global scale. In developing this standard, IATI has been careful not to duplicate the great work already being done by other organizations such as the Organization for Economic Co-Operative Development, which produces statistics about past aid flows. Instead, the IATI standard builds on this foundational work and tries to improve the timeliness and accessibility of such data.

Realizing that government and multilateral/bilateral data does not tell the whole story of aid flows, many NGOs have also joined the IATI community. Additionally, two foundations have joined the initiative, including early adopter the William and Flora Hewlett Foundation, and, most recently, the Bill and Melinda Gates Foundation. The Foundation Center is very excited to report that we are officially the 200th organization to join IATI, through the help of the John
D. and Catherine T. MacArthur Foundation
. The MacArthur Foundation, one of the original participants of the Reporting Commitment, realized that it wanted to have a voice in international global development, as did the Hewlett Foundation and Gates Foundation. Rather than MacArthur reporting directly to IATI, creating redundancy in their workflows, the Foundation Center worked to enable MacArthur’s Reporting Commitment hGrant feed to be simultaneously converted into the IATI XML standard and, as a result, it is now reported on the IATI registry. We are pleased to be able to help the MacArthur Foundation more fully engage in the global development conversation, and this is just one of the ways the Foundation Center is working to help philanthropy open up its data.

The Foundation Center is dedicated to increasing knowledge on philanthropy through the timeliness and transparency of data, as can be seen via our recent efforts around:

Much like the MacArthur Foundation wanting to get its information out to both peer foundations and the global development community, the Foundation Center is looking for ways to help other foundations be more strategic, gain access to more timely data, better understand where they sit in the sector in relation to their peers, and create opportunities for knowledge sharing and learning.  We'll be announcing some new foundations joining the Reporting Commitment soon. Our work with hGrant and IATI is just another step down that road to helping foundations become a part of the open data movement. Come join us!

If you want to learn more about the Foundation Center’s eReporting program, IATI or anything else in this blog, please contact me at JAF@foundationcenter.org.

-- Jeff Falkenstein


 

Glasspockets Find: Tracking the Performance of Global Impact Investment Portfolios
November 5, 2013

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

Herman-100In the Stanford Social Innovation Review blog today, Lisa Kleissner, president of the KL Felicitas Foundation, called for more transparency in impact investing and highlighted benefits of sharing impact performance data. Kleissner’s article, Creating a Better Future Through Transparency, accompanies the release of a report detailing the financial performance of the KL Felicitas Foundation’s impact investment portfolio over the past seven years. The report, titled Evolution of an Impact Portfolio: From Implementation to Results, was published by Sonen Capital and can be downloaded online (registration required).

Kleissner commented in her article that the report’s goal is to help fill the gap in performance data on impact investments. If there is more transparency in financial and impact performance, Kleissner argues, investors who are interested in positive social impact can learn from different investment approaches. Impact investors and social entrepreneurs may also be interested in exploring the Toniic network, which Kleissner co-founded as a global impact investing platform. As impact investing and social entrepreneurship continues to increase, we look forward to hearing more ideas about how to share outcomes and lessons learned in this burgeoning field.

-- Rebecca Herman

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."

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