December 26, 2003


The quip going around nonprofit circles these days is that the Ford Foundation's support for Palestinian extremists is the one area of funding it could defend on the grounds of donor intent--an allusion to the notorious anti-Semitism of automaker and founder Henry Ford.

But Chuck Grassley, for one, is not amused. In response to a Jewish Telegraphic Agency series detailing Ford's support for Palestinian NGOs crusading against Israel, the Iowa Republican has announced that the Senate Finance Committee will review the matter. In so doing, we hope it raises a question long overdue for Congressional scrutiny: How U.S. tax laws intended to encourage charity have had the unintended effect of spawning a foundation priesthood funded into perpetuity and insulated from public accountability.

The NGOs and foundations deserve much, much closer scrutiny than they're getting, both in terms of their activities, and in terms of where the money goes. And that's even before you get to basic questions of accounting, oversight, and general honesty in advertising. The kind of financial shenanigans that go on in this world make the for-profit business scandals look minor.

UPDATE: A reader emails that this investigative series by the Boston Globe regarding the Cabot Family Foundation is a model for the kind of inquiry that ought to be going on. (Look to the lower right for links to more stories).

ANOTHER UPDATE: Greg Djerejian, who works in NGOs, says I'm wrong to compare NGO corruption to Enron and Parmalat. (Though his suggestion that we should compare dollar amounts seems to miss the point.) But fellow nonprofit reader Rudy Carrasco emails:

Good to see your details about Ford Foundation et al. Big foundations like Ford regularly grill and dissect small nonprofits, and they need to be grilled themselves. Truth is that all ngos need the grilling (it's usually helpful for us) but there are times when the close inspection is about gate-keeping (keeping ngos that don't toe the party line out of the money pool) and not about good governance. . . .

Made me mad again - because I get pressured, as a nonprofit bringing in under 400k a year, to govern well and properly - which is fine, it makes us better. But to see this double standard irks me. Good to see Ford held to same standards they hold us to.

Well, I've heard a number of horror stories from people I trust who work with NGOs. But, of course, without monitoring it's hard to know just how deep the problem is. Personally, I think it's probably pretty deep -- because when you have large sums of money, few clear metrics for success, and little accountability to outsiders, it usually is. One useful article on this subject, though it's now a bit old, is David Samuels' Philanthropical Correctness: The Failure of American Foundations, from the September 18, 1995 issue of The New Republic. It doesn't seem to be on the web, but here's an excerpt:

In the past twenty-five years, however, a startling shift in foundation funding has occurred, away from research and toward the support of advocacy groups and the kinds of social service programs best accomplished by government and private charity. Of 240 grants made by the Carnegie Corporation in 1989, totaling $37 million, only 27.5 percent (sixty grants) went to American universities. Most were relatively small, and many went to non-research oriented projects such as an "international negotiations network" at Emory University's Carter Presidential Center, or "Reprinting and Disseminating the Handbook for Achieving Sex Equity Through Education and the Sex Equity Handbook for Schools." Most of the Carnegie grants fell into one of two categories: funding and disseminating a host of high-flown reports by Carnegie-sponsored commissions; and funding advocacy groups including the Organizing Institute, the International Peace Academy, the aclu Foundation, the National Council of La Raza, the Fund for Peace and the Children's Defense Fund. It is the stuff of which Republican careers will doubtless be made: a multi-billion-dollar tax exemption for the political agenda of liberal elites.

Those who share the broader social concerns of the foundations might wonder as well whether doling out hundreds of millions of dollars to ideologically driven advocates--who lack the time, the training or the inclination to evaluate what they do--is the best prescription for future innovations in public policy. Foundations enjoy their present tax-free moorings because they claim to operate as a nonpartisan force dedicated to the pursuit of innovative solutions to our pressing social ills, sheltered from the shifting partisan winds. The preponderance of foundation grants to advocacy groups, however, suggests that foundations are less devoted to the reasoned pursuit of the public good than to the multiculturalist dogmas propounded by their staff. . . .

No longer subject to academic review, evaluations of foundation programs today are carried out by foundation staff and by grantees themselves. Certainly many of these recipients are worthy and well-intentioned. The trouble is that, under the new system, it's almost impossible to evaluate what actual good they do. One recipient of major foundation grants, an educator in a Northeastern city who refused to allow his name to be published, described the process with a cynicism that appears to be general: "They think they're being clever by asking you to come up with your own criteria for success--60 percent of children in the eighth grade will be reading at a ninth-grade level in two years, or whatever. And they ask you to select an independent evaluator' to report on whatever progress has been made. It's all very numerical: but the goals you select are always goals that you know you can reach. Maybe 60 percent of eighth graders are already reading at a ninth-grade level. Maybe it's 70 percent. The foundations don't know. And the evaluators you select are people with a stake in the project. They're getting a salary--from you, or an organization related to yours; some part of their income comes from that grant. And so the project is evaluated, declared a success, and everyone--the program officer, the trustees and you--can go home happy."

Samuels isn't so much concerned with bags-of-cash corruption, exactly, as with the pumping of huge amounts of money into politics instead of actual effort to help people, and he notes the way in which many foundations have abandoned, or shifted, metrics for "success" so as to make real accountability difficult. Though that's a form of corruption in itself, and it tends to lead to more traditional kinds of corruption, as well.

I believe that this article created something of a storm at the time, but it doesn't seem to have changed things, much.

MORE: A reader sends a link to this transcript of an interview with Rep. Harold Ford (D-TN) who's looking at foundation practices. Here's an interesting fact: "The Ford Foundation, a $9 billion foundation, the government says you need to give away roughly half a billion every year. Almost $100 million of that, almost $100 million of that is overhead."

As I say, more scrutiny is needed, at a number of levels.