Tougher Questions for Philanthropy (Part 2 of 4): Accountability

posted on: November 30, 2011

During the past month I attended four philanthropic events, and at each event I delved deeper into the same thought: “Our philanthropic sector must ask itself tougher questions!” In part 1 of this four-part blog series, I began the “tougher questions” with a discussion of philanthropic participation in our democratic society. The participation discussion begged the tougher question: what is philanthropic accountability in our democratic society?

Philanthropic accountability occupied my mind when I attended an Emerging Practitioners in Philanthropy (EPIP) event at the Public Welfare Foundation a couple of weeks ago. As a Steering Committee member of the DC Chapter of EPIP, I was interested in a presentation by Camille Henderson and Bart Lubow of the Annie E. Casey Foundation. They discussed the methodology, research and findings of their newest publication: “No Place for Kids: The Case for Reducing Juvenile Incarceration.”

This is a laudable philanthropic report, not only for its contribution to philanthropic research and practice, but also for its philanthropic boldness. Incarceration is a topic that does not receive nearly as much attention as other, perhaps more palatable, topics of higher education, arts, or protection of endangered species. However, this topic shouts for philanthropic attention, if for no other startling reason than in 2002, 336 out of every 100,000 American youths were in detention or correctional custody; this is about five times as many youths as the next highest nation, South Africa (69 out of every 100,000). However, the report also explains how America’s youth have roughly the same rate of violent crimes as their developed country counterparts. From a financial perspective, it costs American taxpayers $88,000 per year or $241 per day to hold a juvenile in a corrections facility, roughly 10 times the annual cost of tuition at a public university.

It’s also an escalating problem; many prison systems are privately contracted and the executives of those private companies want their businesses to grow. Thus, more juveniles and adults are arrested. Meanwhile, prison lobbyists, namely those representing the interests of the Corrections Corporation of America, help elected officials write laws. One law is SB1070 in Arizona, a law that allowed the arrests of people who appeared to be immigrants. However, the Federal District Court and then the US Court of Appeals for the Ninth Circuit ruled against it.

Elected officials do not want to be soft on crime. Yet, I do not recognize the dichotomous concept that one is either soft or hard on crime. It cannot be a matter of being soft or hard on crime; it is a matter of being smarter about crime, crime prevention, rehabilitation, public safety, health, education and reduction of recidivism. Thus, reading the Annie E. Casey Foundation’s report and other studies about our justice system made me think about accountability.

Politicians are accountable to their constituents and other branches of government. In Arizona, the legislators’ power was checked by the courts. Similarly, CEOs are accountable to their customers, shareholders and government regulators. However, philanthropic accountability mainly rests on reporting to the IRS that at least five percent of assets were paid out. Thus, philanthropy’s dearth of external accountability gives The Annie E. Casey Foundation and the other 73,000 foundations in the country tremendous power to be laboratories of ideas for the public benefit, with an aggregate $45 billion in grants per year. This freedom can and has led to beneficial, paradigm-shifting results. Yet, since 1776, American government and business have also boasted incredible results. Thus, accountability has not stymied government and business. If anything, accountability has bolstered the success of government and business, because accountability promotes the fundamental democratic principles of access, transparency, innovation, and inclusion. Now, what does this mean for philanthropic accountability?

Consider this: If a person of wealth donated to a cause, he/she would receive a tax deduction. However, if that person created a foundation to fund that cause, the donation to the foundation would be tax-free. The National Committee for Responsive Philanthropy (NCRP) interprets this part of the tax code as: there is an expectation that foundations will serve the public good as much as the public would be served if a portion of foundations’ grants were taxed and served the public through various government agencies and programs. Succinctly, NCRP views foundation grants as: “partially-public dollars.” Yet, the concept of partially public dollars is more a hope than a formal accountability structure. Also, it is important to note that “partially public dollars” is a lens through which funders can approach giving; it doesn’t have to be a specific measurement system.

So, how can philanthropy be accountable in our democratic society? Perhaps an idea-session about democratic accountability in philanthropy could begin with these umbrella questions:

  • How would democracy be championed if philanthropy only had institutional accountability (each foundation’s board of directors and staff would hold themselves accountable)?
  • How would democracy be championed if philanthropy also had sector-wide accountability (all foundations—roughly 73,000 and growing—held each other accountable)?
  • How would democracy be championed if philanthropy was also held accountable by nonprofits and communities (nonprofit/grant-recipient partners and communities served would hold their grantmakers accountable)?
  • How would democracy be championed if philanthropy was also held accountable by government (elected officials or agencies at the local, state, and/or federal levels held philanthropy accountable)?

Each of the four above-mentioned possibilities can lead to difficult—and, in some cases, dubious—outcomes. However, they are worth considering and discussing. Yet, perhaps I’m getting ahead of myself. Before determining to whom philanthropy should be accountable, we should first define accountability.

  • Is philanthropic accountability about quantity (the amount of money granted)?
  • Is philanthropic accountability about quality (the way/purpose for which the money is granted)?
  • Is philanthropic accountability about efficiency, effectiveness and return-on-investment (the good achieved over a certain amount of time)?
  • Is philanthropic accountability about donor intent (the wishes of the donor)?
  • Is philanthropic accountability about recipient need (the wishes of the community)?

These are big, messy questions about accountability that will hopefully lead to bigger, messier questions. Now, just as participation questions led to deeper accountability questions, accountability questions are now leading me to deeper values questions. I will address values in the next blog, but for now, in the spirit of inquisitiveness, I leave you with these questions:

  • How much time does your foundation devote to the accountability of nonprofit grant-recipients, as opposed to the accountability of your own foundation?
  • How would you compare the government’s relationship with nonprofits that seek grants to the government’s relationship with nonprofit foundations that issue grants?
  • How might philanthropic participation change if philanthropic accountability changed?

Christine Reeves is a field associate at the National Committee for Responsive Philanthropy (NCRP).