Enewsletter: Improving the Practice of Philanthropy (April 20, 2005)
April 20, 2005 | Publication

These are challenging times for the nonprofit sector. An uncertain economy, unprecedented levels of scrutiny, and the continuing needs of those we seek to help are the defining characteristics of the environment in which we work. The sector is rising to meet these challenges with energy, creativity, and a heartening degree of cooperation.

The MacArthur Foundation, along with many colleague foundations, provides grant support to a small number of national and regional philanthropic organizations that serve the grantmaking and grantseeking communities. These organizations help the sector focus on professionalism and establishing best practices for governance, transparency, and accountability.

Organizations receiving such support as part of a special series of grants from MacArthur include the Council on Foundations, Independent Sector, the Donors Forum of Chicago, the Forum of Regional Associations of Grantmakers, the National Committee for Responsible Philanthropy, Philanthropic Research, Inc., and the Center for Effective Philanthropy.

In this issue of the Foundation’s electronic newsletter, we will discuss significant projects undertaken by each of these organizations in response to the current environment and measures being taken by the MacArthur Foundation itself to ensure that it lives up to the highest standards of practice in philanthropy.

As always, we welcome your comments.

Jonathan F. Fanton
John D. and Catherine T. MacArthur Foundation


Organizations Working to Improve the Practice of Philanthropy

Independent Sector
When the Senate Finance Committee Chair Charles Grassley and Ranking Member Max Baucus wrote Independent Sector to encourage it to “consider and recommend actions that will strengthen good governance, ethical conduct and effective practice of public charities and private foundations,” President and CEO Diana Aviv wasted no time in establishing a national Panel on the Nonprofit Sector and associated work groups and advisory panels consisting of the following: Financial Accountability and Transparency, Governance and Fiduciary Responsibilities, Legal Framework, Oversight and Self-Regulation, and Small Organizations. The Panel also created a Citizens Advisory Group and an Expert Advisory Group. In all, more than 175 people are giving their time and effort, and hundreds more have participated in the process. As part of the effort, Independent Sector worked with regional associations of grantmakers to hold “town hall” meetings nationwide. At hearings held by the Senate Finance Committee on April 5, Aviv offered testimony based on the Interim Report of the National Panel, with the final document expected to be ready in June. A large number of foundations are helping fund the effort, including a grant of $100,000 from the MacArthur Foundation.

Council on Foundations
For many years the Council on Foundations has been the central voice for private foundations of all types, with membership that includes more than 2,000 foundations and giving programs worldwide. A special, two-year effort of the Council is its project titled “Building Strong and Ethical Foundations: Doing it Right.” A grant of $250,000 by MacArthur was part of the support for the ambitious project, which has just issued a public draft of “Stewardship Principles for Independent Foundations.” The principles give important guidance to foundations seeking to “practice their philanthropy in ways that benefit the public good and reflect fundamental values including honesty, integrity, openness, and fairness.”  The Council has also designed stewardship principles for community foundations, family foundations, and corporate giving programs. The recent annual meeting of the Council held in San Diego, CA, on April 10-12 allowed members to learn more about the principles and to comment on them.  Other elements of “Doing it Right” include regional convenings, outreach to federal and state legislators, special workshops, peer-to-peer consultation, and special publications. “Foundations: An American Success Story” is a project designed to help foundations convey their contributions to society and shape more favorable public opinion. The campaign, with insight gained from a national survey of opinion leaders, will be implemented later this year and will be an ongoing project.

Donors Forum of Chicago
The philanthropic community and the larger nonprofit sector in Chicago—the hometown of the MacArthur Foundation—and its surrounding region, is well-served by the Donors Forum of Chicago. In response to concerns about issues facing the sector, the Donors Forum established its “Preserving the Public Trust Task Force,” consisting of representatives of foundations, corporate giving programs, nonprofit organizations, and other leaders in the field. The Task Force has produced a set of guiding principles and best practices addressing issues such as governance, legal and regulatory compliance, and responsible stewardship of resources. Another significant piece of work by the Donors Forum is its report titled “Interpreting Form 990-PF: Looking Beyond Foundation Administrative Expenses,”exploring how to make sense of this often-misunderstood public document. A grant of $100,000 from MacArthur helped support the work of the Task Force and the 990-PF project.

Forum of Regional Associations of Grantmakers
This organization, with headquarters in Washington, D.C., counts as its members 30 regional associations comprised of independent, family, corporate, and community foundations; as well as individuals and organizations that support philanthropy. With a grant of $200,000 from MacArthur and support from other foundations including Ford, Kellogg, and Charles Stewart Mott, the Forum initiated a major project called “Regional Infrastructure in Action: Building Grantmaking Effectiveness and Accountability” that emerged from the work of a national task force exploring how to improve public trust in philanthropy. It is also based on the work many regional associations of grantmakers are already engaged in to advance the issues of grantmaker effectiveness and accountability. This initiative is designed to strengthen those efforts, assist those just beginning, and build the capacity of the entire network of regional associations to be leaders in addressing accountability and the public trust. The Infrastructure in Action initiative works in four areas: improving the regional associations’ ability to deliver education and technical assistance to their members; engaging their members in the adoption of guiding principles and advancing best practices; increasing participation in policy making relating to philanthropy – most specifically at the state level; and improving the associations’ communications efforts. One result is information for grantmakers about filling out and making public use of the tax form 990 or 990-PF. Regional associations that have already adopted principles for grantmakers can be found at the Forum’s Web site.

Philanthropic Research, Inc.
Philanthropic Research, Inc. is a nonprofit organization that helps provide research and data services to the sector. Its best-known project is the Web site www.Guidestar.org that provides information about nonprofits to more than 20,000 visitors each day. MacArthur provided a grant of $20,000 in support of a special project designed to help state attorneys general be more effective in their oversight of the nonprofit sector. Philanthropic Research is working in particular with the New York State Attorney General’s office to create a replicable model of a modernized state office, including ways to improve the collection of information, its retrieval, and analysis. The New York Attorney General oversees the nation’s second largest registry of charities, so it is ideal for this project. As it is now, the registry is still paper-based and information is held in nonintegrated databases. Fulfilling even simple requests can be time and labor intensive. Attorneys general in all 50 states face similar problems. So success in New York can help improve practice nationwide. Several foundations, including the Carnegie Corporation, Ford, Surdna, and the Goldsmith Foundations, are involved.

Center for Effective Philanthropy
If foundations are going to improve performance, it is important to have reliable comparative data to inform their efforts. Based in Cambridge, Massachusetts, the Center’s mission is to provide management and governance tools to define, assess, and improve overall foundation performance. The Center pursues its mission through data collection and research that fuel the creation of assessment tools, publications, and programming. The Center has produced widely referenced research reports and case studies on foundation performance assessment, foundation governance, and foundation-grantee relationships and developed new, widely used assessment tools such as the Grantee Perception Report® (GPR), which provides foundations comparative data on grantee perceptions of key elements of foundation performance, and the Comparative Board Report, which allows foundation boards to assess their own structures and effectiveness against comparative data. The Center has received grants totaling $100,000 from MacArthur as well as grants from other foundations to support its research and data collection efforts; it is also supported by revenue from its assessment tools and programming.

National Committee for Responsive Philanthropy
The Foundation provides general operating support for the National Committee for Responsive Philanthropy, an organization established in 1976 by a coalition of nonprofit organizations in the belief that foundations should be more open and accessible to the public. It stands out in the field of philanthropy for vigorous work in monitoring foundation accountability serving, in general, an important watchdog function. In its role as constructive critic, the National Committee for Responsive Philanthropy produces reports and articles that are studied with interest and respected by the field. The Committee is a prominent voice on issues and policies relating to the nonprofit sector and foundations. It received a recent grant of $25,000 and other grants in earlier years to help in the work being done.


MacArthur Foundation Governance and Policies

While providing support for the field, the MacArthur Foundation continually reviews its own practices and policies to meet evolving best practices in the areas of governance and transparency. The Foundation’s Web site contains a great deal of this information, and it is being revised and updated to include more information on our governance and policies. The Foundation also has a longstanding Commitment to Fairness and Courtesy, and a process to ensure it receives and responds to complaints and concerns. Information about all grants made by the Foundation is publicly accessible, as is financial data.

The Foundation has signed on to the practices of governance for large foundations, adopted a code of ethics, and recently revised its Conflict of Interest policy. The Foundation’s governance and other policies can be found on our Web site. MacArthur is also making information regarding its investments available on-line.


A Closing Thought

Foundations are an important institution in American society. They are given great flexibility in the decisions they can make about how to put substantial sums of money to work to improve conditions local in scope to international in scale. Those organizations engaged in philanthropy, and the larger nonprofit sector, must live up to that trust. We hope this information about the MacArthur Foundation, and those whose work it supports, is useful in understanding the Foundation’s view of these matters.

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