Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

Holding nonprofit foundations accountable

Posted by David Kassel on May 17, 2007

It’s not only the corporate and governmental spheres that find themsevles beset by accountability issues. 

The nonprofit world continues to exhibit its own range of ethical, financial, and performance problems, and U.S. Rep. Charles Rangel, the New York Democrat who now chairs the House Ways and Means Committee, plans to focus on some of them, according to The Chronicle of Philanthropy.

Rick Cohen of The Nonprofit Quarterly maintains that Rangel appears to be following the lead in this regard of his Republican  predecessors, Rep. Bill Thomas (R-CA) and Senator Charles Grassley (R-IA) of the Senate Finance Committee, who conducted “frequent and pointed inquiries” into the nonprofit sector, particularly hospitals.   In an article in the current issue of The Nonprofit Quarterly, Cohen zeros in on giving by nonprofit charitable foundations and wonders just how far Rangel will go in probing that.

“If Rangel and the Ways and Means Committee are concerned about more than well-crafted foundation PR stories, they might ask about some real substance: Where is foundation money going, who’s getting it and who’s not in terms of addressing the interests of low-income American families?” Cohen asks.

Cohen states that foundation funding for programs for minorities and economically disadvantaged population groups in particular has declined as a proportion of grants awarded by the largest foundations.   Also dropping has been funding by the dominant foundations for community improvement and development and for employment, including job training, job placement, and workforce development.  “It is difficult to imagine that Rangel will not be armed with the annual reports on New York City employment showing the continuing and deepening disconnect between young African-American males and opportunities in the labor force,” Cohen states.

Cohen also notes an additional striking statistic:  the racial composition of foundation boards shows a higher proportion of white board members (87.7%) than the composition of Fortune 500 boards (86.6%).   Similarly, disproporationately few staff positions on foundations are held by minorities.

But the nonprofit sector is not alone in sparking revelations about irregularities in charitable giving.  In a separate Nonprofit Quarterly report, Cohen discusses the question of internal mismanagement of funds and malfeasance (read waste, fraud, and abuse) by corporate foundations.  The latest revelations about corporate philanthropy come from Senators Baucus and Grassley at the Senate Finance Committee, he notes.  Their April 2007 report charges that drug companies were using educational grants for improper purposes, such as rewarding physicians for prescribing their drugs and promoting drugs for uses that have not been approved by the FDA.

 The recent decision to fold the troubled Fannie Mae Foundation into the Fannie Mae Corporation is cause for continuing concern about corporate chargiving, Cohen says.  And then there’s Sallie Mae, the nation’s largest student-loan dispenser, now a private corporation, which New York State Attorney General Andrew Cuomo has investigated for providing various incentives to nonprofit colleges for signing up their students as borrowers.  Cuomo has also been investigating several nonprofit college alumni associations for accepting money and benefits for steering students to the Nebraska-based Nelnet student loan packager.

 Cohen maintains that Congress should consider the public need for mandatory disclosure of corporate philanthropic grantmaking.  Currently, corporations are not clearly required to disclose charitable giving to the IRS, as foundations are.

Clearly, the lines of demarcation among the public, private, and nonprofit sectors have become blurred, creating a new domain of activities and functions that raises a whole new set of accountability issues.

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