What does transparency look like?

What do nonprofits really think about foundations? There are several sources of information about this - occasional reports from NCNA, Independent Sector, or GEO, research presented in NVSQ or the Nonprofit Quarterly, some of NCRP's work, and the slowly emerging industry standard developing out of the Center for Effective Philanthropy's reports - the Grantee Perception Report and the Applicant Perception Report.

What kind of information do we - the public, donors, community members, voters, activists, nonprofit service users, taxpayers - have about grant making foundations organizations - individually and in their 70,000+ totality? We have data from the IRS, reports from the organizations above plus those from the Foundation Center, the Council on Foundations, the Philanthropy Roundtable, Urban Institutee, Capital Research Center, the Association of Small Foundations, National Center for Family Philanthropy, regional and identity-based associations of grantmakers and dozens of foundation affinity groups. There is information from the foundations themselves - via the web, email newsletters, annual reports, and direct engagement. We have media coverage, sites like ActivistCash, blogger opinion and discussion, and studies by municipal governments or regional and state agencies. Foundations are included in web resources such as GuideStar, CharityNavigator (public grantmaking foundations only), and on the finance site of Google.com.

In fact, we might be reaching a point on the "information available" spectrum where what we need is not more information, but a way to find the right information. One potential analog, from the IT world, would be this site, All-the-analysts, which is intended to provide one-stop-shopping for all the analyst reviews of new IT stuff.

However, I think the reality for philanthropy is we're still in that place where the interest is for more and different kinds of information. The title of Joel Fleishman's 2007 book, The Foundation: A Great American Secret, states it clearly - foundations are not well known nor well understood. We even see foundation-funded efforts to address their collective, presumed low profile. The Philanthropy Awareness Initiative, which aims to broaden understanding of the roles foundations play and the accomplishments they have supported, is one example.

All of the information and information sources noted above share an important characteristic. Somewhere in the mix, foundations are paying some of the costs of making the information available. Are there any sources of information on foundations that are completely free of philanthropic support? If there were, what difference would it make? Does the funding shape the information?

I don't know "the answer" to these questions, though (of course) I have opinions on all of them. The third one, especially, since all one need do is compare the information provided by some of the sources listed above and you can quickly determine the interests of those providing it.

As I was thinking about these issues, I found an analog that caught my attention. Big time.

Imagine if the nonprofit sector went the way of commercial entrepreneurs and starting rating foundations the way entrepreneurs rate venture capitalists - check out TheFunded.com. According to its founder, the original intent for the site was to help him - a successful entrepreneur - keep track of VC firms. He now argues, in a recent BusinessWeek article, that "...airing the industry's dirty laundry will ultimately improve the efficiency of the funding process as well as relations between financiers and entrepreneurs."

Part of the proposition for TheFunded is that those who fund VC firms - including high net worth individuals, universities, pension plans, and foundations - want to know how these firms treat their applicants and funded companies. Giving voice to the opinions of the VC's entrepreneur partners will help the VC's funding partners make better decisions. This proposition is trickier in philanthropy, since many private foundations only "raise money" once. The analogy holds for community foundations, as well as for those foundations that are started with small endowments and expect (or hope) for more over time.

TheFunded gives us an analog for thinking about the pro and cons of publicly sourced, anonymously provided, non-foundation funded information about foundations. Would such information be good or bad? I think that is the wrong question to ask.

What should we ask about such a resource? Here are some suggestions:

  • What, if anything, would such a source add to the total mix of information available?
  • Would it make foundations more transparent?
  • Would it backfire - and make them less transparent?
  • Is any one source of information going to change the way any one person does anything, thinks anything, or takes action?

I'm not advocating on behalf of or against any of the information sources noted in this post, and I don't claim that the lists or the examples are complete. I'm not planning on running out and starting a foundation-oriented version of TheFunded nor do I know anyone who is (though I do know plenty of people who probably wish one existed.) I am suggesting that we add into the industry-wide discussions of transparency - regarding both foundations and nonprofits - some nuance. Herewith:
  • Transparency about what and for what purpose?
  • Information and data provided by and analyzed by whom and for whom?
  • What other sources of information are there, and how will more or different information add to, distract from, or shift perspective on what is already available?

We have a lot of information available. What do we know and not know? What information do we need and in what form? For what purpose? What do you think transparency looks like?




DISCLOSURE: Some of my writing, some of my work, and some of my volunteer time is spent on issues of knowledge, information, transparency, and giving. I am on the Board of GiveWell and an advisor to The Nonprofit Reporter, have spoken at GEO, COF, CEP, and Independent Sector conferences, worked with ASF, and published in some of the sources noted above. You may check my other affiliations here.


6 comments:

Sean Stannard-Stockton said...

Great perspective Lucy. It seems to me that there could be business models that would support something like TheFunded for foundations. I would guess that many, many nonprofit employees would enjoy visiting the site and adding their rankings. An anonymous message board or discussion thread where nonprofits were encouraged to share their foundation stories would be sure to be a hit.

A site like that could be created on a tiny budget by one or two people with some decent web skills. Google ads would seem to provide at lease some basic revenue and I'm sure other revenue streams could be identified.

I think a site like the Funded would attract a lot of nasty, unproductive comments and I'm not sure I'd support the creation of such a site. But my point is that it does seem to me that for-profit sites have a place in the growing infrastructure.

conches said...

As an employee at the salesforce.com foundation, I have been thinking about this topic a lot recently (http://www.conches.org/2008/01/impact-measurem.html). Transparency is critical, in my mind, to attach foundations to the end game, a just and equitable world without suffering. Open information platforms are always a good idea. As you have written iun the past, the idea of a philanthropy marketplace has a lot of buzz these days. Personally, I have very little trust in the marketplace as metaphor because of the reflex to devolve into consumerism as opposed to collaboration and aggregation. However, the mechanisms of a marketplace may be applicable, and more information about the philanthropists role is certainly valuable.

Lucy Bernholz said...

Conches

Thanks for this post. I went over to your blog to check out your "new lens" - and want to encourage others to do the same. There is a lot there to think about - which I will do and hope to write more about. I agree with you that financial markets have are limited and limiting - but in my years of thinking about them, and about philanthropy as industry, they have proven to be (for me) the most complete and provocative metaphor. What does get lost is their shortcomings - and so other lenses, other frames are very much needed.
Thanks
Lucy

Tom Newman said...

Transparency is an issue highlighted by a story published just this weekend by The Vancouver Sun newspaper - examining a scheme operating in the U.S. and Canada at present:

http://www.canada.com/vancouversun/news/business/story.html?id=b76ff000-c8e8-4789-9ed8-806df2c2945a

During the year ending Sept. 30, 2006, GiveMeaning received $234,643 in donations for which it gave tax receipts, according to a financial statement filed with Canada Revenue Agency. Tom Williams said these are largely donations from individuals.

It received another $730,350 from other registered charities. Williams said these donations were made specifically to pay GiveMeaning's overhead.

He refused to identify any of these donors. I found this strange: My sense is that, while some donors request anonymity, most registered charities or foundations publicly report where they are placing their money, not so much for recognition as for transparency.

More generally, I do not understand why certain undisclosed charities would give money to pay overhead for what is essentially a charitable conduit.

In the case of GiveMeaning, that overhead is disproportionately large. Of the $982,705 in total donations it received (and issued tax receipts for), GiveMeaning spent $666,070, or 68 per cent, on administrative expenses.

Those expenses included $199,043 for professional and consulting fees; $153,646 for salaries, wages and benefits; $28,433 for advertising and promotion; and $24,019 for travel.

I asked Williams whether he receives a salary. Well, yes, $90,000 per year. And his wife, country singer Jessie Farrell, who works part-time for the foundation "when she can," gets $30,000. So together they collect $120,000 per year, plus expenses.

After subtracting overhead costs, just over $300,000 was available for charitable purposes in 2006, but only $172,000 was actually given to charities (the remainder is still on the foundation's books). That $172,000 represents just 17.5 per cent of total donations.

But that's not the end of it. Many of the charities that receive money have their own overhead. So the net amount available for true charitable purposes is even less.

Williams insists that, whenever a person gives money for a particular charity, 100 per of that money gets to the named beneficiary. That may be true, but it does not mitigate the fact that the vast majority of the overall money collected during 2006 went to administration.

Williams says this was due largely to start-up costs: "Yes, we have spent more than we have given away. Just like any other start-up business, it takes time to get profitable," he said.

He said the financial return for the year ending Sept. 30, 2007, which is just now being filed, will show a greater percentage of overall donations going to charity. We shall see.


The Vancouver Sun January 19, 2008

Maggie F. Keenan, Ed.D. said...

- Would it make foundations more transparent? Perhaps if it was mandated. Maybe community foundations would be a good place to start.

- Would it backfire - and make them less transparent? Backfire- not if mandated. Make them less transparent – you will have a majority would see the value. There’d always be the few small minded folks that would run the other way and close off everything. Education helps these types and it takes a while to get through.

- Is any one source of information going to change the way any one person does anything, thinks anything, or takes action? NO, not really. Unless it is mandated from an entity (governing body) that makes it a requirement. There’s always the ones that jump on board a new wave, some that lurk a while with suspicion – the cautious type. Others that are just plain stubborn, turf protectors.

- Transparency about what and for what purpose? Transparency about anything about foundations --- I know this is broad but a nonprofit may want information that is different than what a researcher/academic would be interested in. Information for those groups that find the information important, necessary, relevant to their work, research, etc…. Ex. Nonprofits, research, rags, consultants, community assessments, etc..

- Information and data provided by and analyzed by whom and for whom? Provided by --- Hmmm… perhaps a think tank type of entity. For anyone for any reason/interest in foundation/philanthropy. Maybe a few BIG Foundations could invest over a 5 year period to fund start up for this sort of thing. Good way to leverage knowledge, assets, investment.

- What other sources of information are there, and how will more or different information add to, distract from, or shift perspective on what is already available. Sources of info --- don’t RAG’s have good info too? There will always be information that is relevant or non-relevant to someone or something. It just depends on why someone needs it.

- Maggie F Keenan, Ed.D.

Tom Williams said...

I feel compelled to reply to the article posted here as a comment.

David Baines, the writer of this article called me on Friday morning to let me know he was writing a
piece in his Saturday editorial. Armed with our 2005 and 2006 annual
reports we file with Canadian Revenue Agency, he recites publicly
available numbers namely that we received $234,632 in tax-receipted
donations (which are largely donations we received through our website for the projects on GiveMeaning.com) and another $730,350 from charitable foundations to pay GiveMeaning's administrative costs in
operating the website in Canada.

He specifically states that I "refused to identify any of these
donors" when in fact, I offered for him to speak with some of
GiveMeaning Foundation's donors and yet he didn't take me up on this.

I find it odd that Baines appeared to rush to publish this article,
calling me for the first time the day before the article was supposed
to run.

Nevertheless, his main contention is that GiveMeaning Foundation has
spent more money building the GiveMeaning brand and service than it has raised money for its projects. This is not only not in dispute but not surprising to anyone that knows anything about a start-up business. GiveMeaning launched its re-vamped website in late September of 05. Prior to that, our web presence was in Beta and very little transactions flowed through. The numbers that Baines is reporting on is our first full year of collecting tax-receipted
donations in Canada for the GiveMeaning website. Given that our average donation through the website is about $40, our first-year tally of money raised for projects is not surprising. It's also not surprising to anyone that understands the nature of a start-up that in the first few years of operation that start-up costs will exceed revenues. It took eBay eight years to make a profit.

Baines can't understand "why certain undisclosed charities would give money to pay overhead for what is essentially a charitable conduit."

Foundations are investing in GiveMeaning because they recognize that the GiveMeaning service is helping charities of all sizes make
fundraising easier and less costly.

By supporting our work at
GiveMeaning, they are providing an infrastructure for all charities to
use. He seems unaware that foundations regularly make grants to other foundations for capacity and infrastructure costs.

Of course I draw a salary and yes, my wife works as a contractor for
GiveMeaning. Baines seems to think that GiveMeaning should run
without staff and expense and that it's wrong for charitable
foundations to provide GiveMeaning with the financial resources to
build its service, a service used by charities of all sizes.

Baines seems unable to draw distinction between money raised through the GiveMeaning.com website for projects and money raised separately from donors who support our admin costs. When he says "Williams insists that, whenever a person gives money for a particular charity, 100 per of that money gets to the named beneficiary. That may be true, but it does not mitigate the fact that the vast majority of the overall money collected during 2006 went to administration." By
lumping together these two costs as one, he is ignoring the simple
fact that the donors giving to our administrative costs are doing so
specifically FOR our administrative costs and that donors giving
through the website for projects have 100% of their funds passed on
the Implementing Organization responsible for carrying-out that
project.

It can't be laid out more clearly than what we have in our About Us
section which reads "We charge nothing for donations collected online and even cover the credit card costs associated with each donation. We rely on the support of generous donors and advertisers to provide this service."

Baines leaves readers with his own judgement on what is or isn't
philanthropy, passing judgement on a fantastic grassroots economic
development initiative out of Uganda which trains Ugandan people to build guitars and then sells those guitars in North America to create self-sustaining, economic development and on Wild ARC, which is the division of the BC SPCA that provides rehabilitation and care to
injured animals. Baines doesn't think Sea Otters and poor Ugandan
people fall into the class of "quality charities." He's entitled to his opinion but the whole point of GiveMeaning is to give grassroots initiatives an opportunity to find their audiences as we believe that any charitable initiative deserves to have the opportunity to better find and connect with supporters who care about those causes.

Baines' final point sums it up nicely. He says that "we have a
responsibility to scrutinize all charitable endeavours to ensure that we are getting decent value for our dollar." He clearly doesn't think that GiveMeaning's service is needed, valuable or useful to the charities and donors we serve. And that spending money on a new way of fixing a big problem is not warranted. He's entitled to his opinion.