Strong Reactions on What Makes Philanthropy Best

“I was surprised by the venom of some of the responses,” Aaron Dorfman, Executive Director of the National Committee for Responsive Philanthropy, told The Chronicle of Philanthropy (concerning the Committee's recent report, “Philanthropy at Its Best®: Benchmarks to Assess and Enhance Grantmaker Impact.”  The report has been the subject of editorials in major newspapers, drawn criticism from the NCRP's own funders, and reignited the debate about foundations' responsibilities and effectiveness in serving marginalized communities. 

The report argues that the best, most effective philanthropy is that which impacts minority, under-served, and marginalized communities within the context of a foundation's mission.  The NCRP proposed several criteria for this type of work, including levels and types of grantmaking; the philanthropic values of the grantmaker, and actions that foster transparency. 

The first criterion, “Values,” reflects a 50% commitment of grant dollars to marginalized groups, which was broadly defined, with 25% of that towards advocacy for equity, opportunity, and justice.  The second, “Effectiveness,” commits 50% of grant dollars to providing general operating support and multi-year grants and stipulates that grant application requirements are commensurate with grant size.  “Ethics” calls for a diverse, community-based board of directors, ethical practices, and freely disclosed information.  Finally, “Commitment,” tells foundations that they should be investing 25% of assets into program-related investments and adhering to a 6% annual payout.  The report also explains its rationale for each criterion. 

While some of the criteria, such as “Maintains policies and practices that support ethical behavior” do not have specific figures attached and have attracted less controversy, the statement that a foundation should “provide at least 50% of its grant dollars to benefit lower-income communities, communities of color, and other marginalized groups” has generated heated debate.

The report found a harsh critic in The Wall Street Journal Columnist Naomi Schaefer Riley.  In a March 2009 editorial, she argued that the NCRP's criteria ignore donor intent in favor of “giving grants based on political considerations,” and that widespread adoption would restrict the diversity of philanthropic giving. 

The NCRP argues that the criteria are neither quotas nor inflexible rules, but rather establish a high bar for foundations and are ultimately intended to create debate around these issues. The NCRP website now includes a page for responses to editorials, and others who contend that the report is a precursor to legislative action.  In the introduction to the criteria, NCRP Executive Director Aaron Dorfman states that while part of the NCRP's mission is to impact regulation of foundations, this report is not intended to be a call for legislation. 

The most in-depth criticism of the NCRP report comes from Paul Brest, President, The William and Flora Hewlett Foundation, who devoted five weeks of his regular blog column on The Huffington Post to discuss the report in detail.

“Although I would oppose legislative enactment of the criteria” Brest writes, “NCRP's earnest contribution to the discussion of these issues deserves an item-by-item response.”  While Brest agrees with the NCRP's viewpoint that foundations need to be more attentive to grantmaking in marginalized communities, and the Hewlett Foundation has made grants to support the NCRP, he believes that the criteria are too rigid and that the report glosses over the areas of general operating support and payout percentage. 

To summarize Brest’s arguments:

1. The report only engages one side of the research on whether or not spending more than 5% of its assets per year, even in a normal economy, would compromise a grantmakers ability to make grants in the future.  If foundations want to increase payout during bad economic times, Brest argues, it is a function of leadership decisions about priorities and assuming risk to the foundation's longevity.  Additionally, the report does not factor administrative costs into the payout percentage.

2. The NCRP has stated that foundations may decide which of their grants would count toward the 50% level of general operating support (GOS). Brest says, “The IRS would disagree that it’s up to each foundation to decide what counts as GOS, since that term is defined by regulation.” He argues that there are good reasons for both general operating support and project related grants, but it depends on a foundation's own mission.

3. The NCRP's entire set of metrics conflates percentage of grant dollars spent on advocacy or general operating support with actual impact.

While Brest made no mention of Hewlett's ongoing support of the NCRP, other funders took quick action.  The California Wellness Foundation (TCWF) cancelled its membership and asked for a $10,000 grant to be returned after reading the report.  Gary Yates, TCWF’s President, said the Foundation took these actions because it didn't want to be viewed as "tacitly endorsing positions" of the NCRP. 

At the same time, several foundation leaders have come to the report's defense.  In an editorial for the Atlanta Journal-Constitution Janine Lee, CEO of the Southern Partners Fund, reaffirmed the rationale for better grant making through a focus on underserved communities.  “We shouldn’t invest in marginalized communities because it’s politically correct or because public subsidies obligate us to do so,” Lee writes, “We should invest in disadvantaged communities because it has the greatest impact on the things we care about.” 

Another supporter, Lori Bezahler, President of the Edward W. Hazen Foundation, was quoted in The Wall Street Journal as believing that many critics are "misreading" the report. 

Albert Ruesga, Editor of the White Courtesy Telephone, a third sector blog, has a slightly different view of the criteria.  “Where some critics see the NCRP report as a kind of ideological manifesto,” he writes, “I see in it a plea for greater effectiveness in grantmaking.”  He then challenges organized philanthropy to see how many foundations would meet a set of effectiveness criteria focused on clarity of mission and measurable impact. 

The debate continued in person at the Council on Foundation's 60th Annual Conference in a panel featuring Aaron Dorfman along with both critics and endorsers of the NCRP's recommendations. 

If NCRP's only intention was to create debate around who and how foundations should contribute to society, it has succeeded.  However, the focus of the debate will have an impact on future actions by the NCRP and foundations on both sides of the issue.

“I find it unfortunate that the debate is not focused on the NCRP’s core assumption that tax-exempt foundations have a role and responsibility to promote social justice and full inclusion in public life.”  Sarah Stranahan, Trustee of the Needmor Fund, writes on the Council on Foundation's Thought > Action > Impact e-journal  “Nor has the debate focused on the pluses and minuses of the specific practices recommended by NCRP.  Instead, discussion has centered on the question of whether any one organization should dictate values for the field as a whole.” 

The full report can be found on the NCRP’s website.