Foundations should spend at least half of their grant dollars to help poor neighborhoods and minorities, a foundation watchdog group here said today as part of a series of recommendations on how grant makers should improve their giving and management.
The proposal by the National Committee for Responsive Philanthropy received support from a member of Congress and at least 120 charitable leaders, but several associations that represent foundations have criticized it, arguing that the approach would stifle philanthropy.
As part of a new report, the watchdog group suggested about a dozen standards.
These include pushing foundations to provide 50 percent of their grant dollars to pay for the operating expenses of charities, 25 percent to support advocacy efforts, and to give away a total of 6 percent of their assets in grants each year. Federal law requires foundations to give 5 percent of their assets in grants and for other charitable purposes, including some administrative costs.
The pressure to get more philanthropies to help the poor and minority populations has generated the most controversy and comes on the heels of similar advocacy efforts in California and other states.
According to three years of giving data from over 800 grant makers, the organization said that only 13 percent of the foundations it examined meet its criteria for giving and that 1 out of every 3 grant dollars benefits “lower-income communities, communities of color, and other marginalized groups, broadly defined.”
“This is, frankly, appalling, and it must improve if foundations are going to be relevant to addressing the most important problems facing our nation,” said Aaron Dorfman, the executive director of the National Committee for Responsive Philanthropy, during a press event to announce the standards.
He said his organization wants to trigger a debate about how foundations should operate, especially today during a recession when charities and many people are strapped for cash.
‘We Have an Obligation’
Rep. Xavier Becerra, a Democrat from California, agreed. Mr. Becerra, who is a member of the Ways and Means Committee, which oversees tax matters, said the standards will help members of Congress examine how foundations are performing.
He said he and some other lawmakers are calling for Congressional hearings that would explore whether foundations are spending their money wisely. With the busy schedule on Capitol Hill, he did not know when these hearings could happen. But given the tax benefits philanthropies receive, Congress needs to keep an eye on them, he said.
“We have an obligation to see that taxpayer money is being well invested,” he said.
Mr. Becerra said he is not considering legislation that would require foundations to make changes in their giving or governance, but wants to bring some “sunshine” on their activities.
Mr. Dorfman said that his organization is not seeking greater regulation of philanthropies, but will be sending its report to lawmakers to educate them about the issues facing philanthropy.
‘Cannot Endorse Mandates’
Several grant makers, including the Atlantic Philanthropies, endorsed the standards. But the Council on Foundations, the Philanthropy Roundtable, and other nonprofit associations oppose them.
Given the diversity of philanthropic organizations and causes, “we cannot endorse mandates, or imposed measures that seek to promote a one-size-fits-all approach,” said Steve Gunderson, president of the council, which represents about 2,000 grant makers.
The Philanthropy Roundtable, which represents both foundations and wealthy donors, said in a statement: “These benchmarks have nothing to do with measuring effectiveness. In fact, the natural consequence of these benchmarks will be to reduce the scope and diversity of the foundation sector to one that serves a more narrow set of highly politicized interests.”
The roundtable said the criteria set by the National Committee for Responsive Philanthropy would hurt charities whose missions do not directly benefit the poor or minorities, like National Public Radio and the Make-A-Wish Foundation.
Mr. Dorfman said his organization was not asking philanthropies to stop giving grants to the arts, the environment, or other causes not related to alleviating poverty. “We’re not saying an arts funder should abandon the arts and fund social services,” he said.
Instead, he said he would like all foundations, regardless of their mission, to consider how the programs they support could do more to include poor people, blacks, Latinos, and others.
“Critics will say that total, unfettered freedom is what makes philanthropy valuable and that NCRP’s criteria are somehow a threat to that freedom,” he said. “But every industry in America thinks it can operate best with total and complete freedom, and we all know that’s not true.”
The National Committee for Responsive Philanthropy’s report, “Criteria for Philanthropy at its Best: Benchmarks to Assess and Enhance Grantmaker Impact,” is available on the organization’s Web site.