What Is Foundation Transparency and Why Does It Matter?

Written by: Caitlin Duffy

Date: August 12, 2014

In my role as a research assistant for NCRP’s Philamplify initiative, I have found that “transparency” is defined and applied differently from one foundation to the next. Not only is it rare to find details like contact information, internal policies and strategic plans, but I also found that it can be difficult to source seemingly simple things such as documentation around foundation strategies, grantmaking guidelines or even a list of organizations and projects that receive funding.

Even when such materials are provided, increased disclosure and transparency are not ends in and of themselves. Rather, they allow philanthropists, political leaders, activists and everyday citizens to better hold foundations accountable to the public good. In that, these demands are similar to those advocating for freedom of information in government and corporate responsibility in global markets.

Philanthropic institutions provide vital support for organizations that serve the public interest. Yet, foundations possess an ambiguous identity that is neither completely public nor private, and which operates at the intersection between government and the private sector.

While historically foundations have been created with capital from elite private ventures, they fund services that benefit society, and thus enjoy tax-exempt status as nonprofit entities. This dual nature has for years spurred debate over the public versus private nature of a foundation’s tax-exempt assets, such as whether foundations have a responsibility to redress institutional and societal inequities or if they should be required to release internal documents for public scrutiny.

While the Internal Revenue Service (IRS) and the Tax Reform Act of 1969 mandate that foundations annually file the 990-PF tax return, which provides valuable insight into their charitable operations, such documents are not reader friendly for the larger public. Furthermore, voluntary annual reports are often limited to impact stories and basic grantmaking numbers. The task of making sense of what information is provided, and investigating what is left unexplained, is left to academics, journalists and interested citizens.

In spite of the ease of online research, it can be a struggle to find information and data about foundations’ grantmaking practices. For decades, organizations such as NCRP have advocated for the maximization of philanthropic accountability and responsiveness by calling for stronger oversight and enforcement of standards, such as elements for self-regulation and foundation transparency. Today, transparency advocates are more widespread than ever.

Not only are foundations themselves growing in their willingness to communicate and share, among them the James Irvine Foundation and the Wallace Foundation, but groups such as the Foundation Center and GuideStar have revolutionized our understanding of foundation operations. Their databases facilitate access to a foundation’s annual grant sizes and recipients, assets, expenses and staff lists. In addition, the Center for Effective Philanthropy, Inside Philanthropy and NCRP’s Philamplify, also offer tools for foundation analysis and invite dialogue about what works well and what can be done better in philanthropy.

The Foundation Center, through its Glasspockets initiative, strongly advocates for increased transparency in philanthropy, promoting the more general benefits of funder transparency as:

  • Strengthened foundation credibility
  • Increased public trust
  • Improved relationships with grantees and regions served
  • Reduced duplication of effort among foundations that care about the same issues
  • Facilitation of greater collaboration and collective problem solving
  • Cultivation of a community of shared learning among foundations

Despite the clear advantages, only 66 foundations among the thousands in operation in the United States have submitted profiles on the Glasspockets website. A recent article on a new guide to transparency by GrantCraft, a division of the Foundation Center, cited a grantmaker survey from which “three quarters of respondents reported a greater demand for foundation transparency during the past five years.” The question remains: will foundations respond to that demand?

How has transparency led to accountability in your experience? What standards would you like to see applied to foundation transparency to advance a mindset of openness in philanthropy?

Caitlin Duffy is the project assistant for Philamplify at the National Committee for Responsive Philanthropy (NCRP). Follow NCRP on Twitter (@ncrp) and join the #Philamplify conversation.