Philanthropy Project is experimenting with shorter, one-topic emails rather than our usual newsletter with several articles.
A relatively unnoticed provision in the House version of Trump's colossal bill is a tax change that is supposed to increase tax revenues by almost $16 billion, in part to offset the big tax breaks for the wealthiest Americans.
This new tax? A tax on private foundation assets (a wealth tax of a sort).
Foundations with less than $50 million in assets: no increases; tax remains at current 1.39%
Foundations with assets between $50 million and $250 million: raise to $2.78%
Foundations with assets between $250 million and $5 billion: raise to 5%
Foundations with assets above $5 billion: raise to 10%
But there's a giant available loophole in the House version right in front of us.
A private foundation can transfer a large chunk of its assets to an account at a donor-advised fund sponsor, while effectively still controlling how the assets are invested, what grants are made, their purposes, and how much money (or how little) is put into active charitable use. For example, if a foundation moves $20 million into a DAF, they would pay $0 in taxes on that $20 million. And the foundation's asset size would shrink to a lower tax bracket.
And as an extra enticement, the foundation would have no payout requirement on those funds, and no longer have to publicly disclose what grants, beneficiaries or amounts it made through its donor-advised fund.
Industry publication Chief Investment Officer predicts exactly that. In other words, if the bill passes the Senate, the tax increase won't bring in the promised revenue, and it will likely move billions of foundation dollars into donor-advised funds where they are even more hidden than where they are now.
While the Senate left out the increased tax in its version, the final result is unknown, and could fall somewhere in between.
We know that some foundations already make only one grant per year – to their donor-advised fund. The Big Beautiful bill calls it "raising tax revenue" but in this one area at least it looks more like an incentive to hide money.
The Philanthropy Project believes that charitable funds should benefit the public. Join the movement/subscribe here. Email us info@philanthropyproject.net. We want to hear the good, bad, and the ugly from you. — Jan Masaoka and Jon Pratt, Co-Chairs, Philanthropy Project
Given the outcry over donor-advised funds on both the right and left, why aren't even simple reforms going through? The insightful philanthropy critic Alan Cantor points his finger at the culprits.
The walls are caving in on American nonprofits.
The White House has ordered a vast rescinding of grants, current and future, to the nonprofit sector, with no concern for the lives damaged, programs destroyed, or critical research halted. The Trump Administration is threatening to order the withdrawal of 501(c)(3) status – a previously unimaginable and existential threat – from nonprofits ranging from small agencies to Harvard University. And nonprofits are frantically scrubbing their websites of what the Administration deems to be offensive words and phrases.
This is a frankly terrifying time to be in the nonprofit sector.
In the midst of so much trauma, it might seem incidental or even irrelevant to dredge up the topic of donor-advised funds and the crying need for DAF reform. As my mother used to say, "When the house is on fire, you don’t worry about the curtains!" But at a time when government grants and contracts are disappearing, the financial resources warehoused in DAFs could serve as a lifeline to nonprofits. Moreover, the political crisis has actually been underwritten by the DAF status quo: donor-advised fund grants have been an important revenue stream for the creation and execution of the Trump vendetta against nonprofits.
A Philanthropic Disaster
First, some context, which is painfully familiar to observers of the charitable sector:
Donor-advised funds live in a grey zone of tax law. DAFs provide donors with all the tax advantages of an outright gift to an operating charity, but function much like private foundations, only without the oversight, transparency, and requirements for annual charitable distributions required of foundations.
DAFs have grown wildly in recent decades. As The Independent Report on DAFs from Inequality.org notes, donor-advised funds now take in a sixth of all individual giving each year, and nine of the top 20 recipients in the country, including the top three, are DAF sponsors. Total DAF assets reached $254 billion in 2023, a 67 percent jump in only four years. That’s a lot of money that could do a lot of good.
Notably, a significant portion of the "charitable giving" credited to donor-advised funds is actually in the form of grants to other DAFs. These DAF-to-DAF transfers, which the Inequality.org report estimates to have been $4.4 billion in 2023, inflates DAF grantmaking dollars (and implied impact) considerably.
Moreover, and critically, DAFs offer virtually no transparency. The public has no access to the activities of particular DAFs, including controversial and politically potent grants.
A simple solution, blocked
In the 2021, a reform effort called the Accelerating Charitable Efforts (ACE) Act received bipartisan sponsorship in both houses of Congress, but the bill never came to a vote. Among many other provisions, the ACE Act would have required most – though not all – DAFs to grant out their assets within fifteen years. The ACE Act was an important – if modest and pragmatic – effort to rein in the unregulated world of donor-advised funds. Its goal was curbing bad practices and getting money to good causes. But it never had a chance.
Why not? And who are the forces blocking common-sense reform efforts?
The list of culprits
The first set of culprits protecting the DAF status quo are the financial services firms. We’re talking about Fidelity Investments, Schwab, Vanguard, UBS, Morgan Stanley, Goldman Sachs, and the others. Virtually every financial services firm has an associated “charitable” 501(c)(3) donor-advised fund operation.
This is a lucrative enterprise for the financial services industry. How do the firms make money from DAFs? Well, most dollars held by these affiliated (though technically independent) nonprofit donor-advised fund shops are invested in mutual funds managed by their parent investment companies. Those dollars add up. I laugh (grimly) when people from the commercial DAF world assert that profit has nothing to do with their motivation, that these companies are simply trying to help their clients be philanthropic. Sure.
Fidelity Charitable had assets of $55 billion as of June 2023. Assuming an average fee of 50 basis points (that is, ½ of 1%) for investment management, that’s a haul of $275 million a year for Fidelity Investments. And the longer the money stays in the DAFs, the more Fidelity and its fellow financial firms earn in fees.
Now, some in the financial services world might claim that I’m overstating the income. My response? I’m simply making my best guess, because there is no transparency into the financial arrangements between the investment firms and their closely held "charitable funds." If it turns out I have overestimated the haul by a few million dollars, my point remains: Wall Street firms make money off of DAFs – and the longer the funds remain undistributed, the more money they make.
And, of course, the financial services industry’s lobbyists have an enormous influence in Washington.
The second set of culprits are financial advisors. These are the folks who interact with individual clients and advise them on their investments. In the old days, we called them stockbrokers.
Brokers largely earn their income by taking a fee on assets under management. Back in 1990, if, say, a donor asked her broker to transfer $100,000 worth of IBM stock to the local Boys & Girls Club, that reduced the broker’s funds under management, and the broker would have earned less income in the future. But the broker would have had no options other than to follow the donor's instructions.
Today, it is often financial advisors, rather than the potential donors, who raise the issue of contributing stock to DAF – either within their company or even to Fidelity or another DAF sponsor, which will pay management fees to financial advisors for large donor-advised funds. So long as the assets remain in the DAF account, the management fees continue to flow into the financial advisor’s pocket as if the funds still belonged to the client, rather than to the client’s DAF.
In short? DAFs are a cash cow for financial advisors, and the bigger the cow, the better.
The third set of culprits are community foundations. This breaks my heart, because community foundations are core institutions supporting and often leading their communities. Community foundation staff members by and large are great people who care about helping local charitable causes. But the assets of many community foundations, particularly the younger foundations that don’t have generations of unrestricted assets, are largely comprised of donor-advised funds, and most new contributions go into DAFs. This focus on DAFs causes challenges.
Community foundations draw fees from their assets to fund their operations, a business model that drives some unhelpful behaviors. The community foundation business model relies on most constituent funds being invested in perpetuity, or at least for a long time.
Consequently, many community foundations speak to their donors about creating family legacies, multi-generational funds, and "endowed DAFs." This perhaps explains why grant distributions from community foundations in 2023, according to the Inequality.org report, were only 9.0%, compared with 16.3% from commercial gift funds.
This focus on long-term funds may explain why community foundations fought vociferously against the ACE Act, even though its provisions specifically excluded community foundation DAFs under a million dollars from having to spend down their assets.
The fourth set of culprits are the associations purporting to represent the nonprofit sector. When the Accelerating Charitable Efforts (ACE) Act was proposed in the 117th Congress, virtually no nonprofit associations spoke out in favor of it, even though, if passed, a huge amount of money would have been flushed out of donor-advised funds to support operating charities.
The usual opponents of DAF reform – the libertarian Philanthropy Roundtable, the Council on Foundations, and the Community Foundation Public Awareness Initiative – actively worked to torpedo the ACE Act. Two other opponents:
Independent Sector, which has both foundations and operating nonprofits as members, embraced the priorities of the foundation world. Foundations are generally supportive of the DAF status quo.
Meanwhile, the National Council of Nonprofits chose “to study” the issue until it died. As I’ve written before, the National Council of Nonprofits receives what seems to be significant support from the Fidelity Charitable Trustees’ Initiative, as do Independent Sector, Giving USA, and many other influencers within the field. (My hope is that the National Council, under the impressive new leadership of Diane Yentel, will shift its stance and sever ties with Fidelity.)
While all of this was going on, the commercial DAF funds – the behemoths like Fidelity – stood by, smiling while the nonprofit associations and community foundations did all their lobbying work for them.
The fifth set of culprits are the private foundations who use DAFs to hide their activities and avoid distributing any funds at all. This is a neat and unconscionable trick.
Since 1969, private foundations have been required to use five percent of their assets each year for charitable purposes. These charitable distributions are part of the public record. But when a private foundation makes a grant to a DAF, the accountability trail goes cold, and the foundation (which presumably controls the DAF) can do whatever it wants with the money, without anyone knowing.
I drew attention to this scam thirteen years ago in one of my first blog posts. More than a decade later, some of the wealthiest people in America, including Elon Musk and Larry Page, have buried hundreds of millions of putatively charitable dollars in this paper-shuffling scheme. It’s great for the privacy and influence of billionaires. It’s bad for the federal government (so much lost tax revenue!). And it's disastrous for working nonprofits.
The sixth set of culprits are nonprofit leaders themselves. The nonprofit sector is filled with idealistic, visionary, and hard-working individuals. I consistently stand in awe of the creativity and devotion demonstrated by so many nonprofit leaders. But when it comes to challenging donors and funders, these same folks are silent.
It’s generally not a wise idea to bite the hand that feeds you, and nonprofits do not want to offend their local community foundations or any of their DAF-holding donors by implying that the DAF model encourages the hoarding of charitable assets that are needed today. Ideally, nonprofit associations would be speaking up for these vulnerable nonprofits – but, as I explain above, most don’t. As a result, nonprofits need to speak up for themselves – and pressure their associations to do the right thing.
The seventh set of culprits are wealthy donors. For wealthy donors, there’s nothing not to like about DAFs. Donors get a full charitable deduction up front, just as if they were donating the money to a food pantry or a Boys & Girls Club; they avoid capital gains taxes on appreciated assets; they retain practical control of the distribution of grants, without any spending requirement, ever; and there’s complete privacy and zero transparency.
And when donors then leave DAFs to their children, they are perpetuating their power. They are passing along to their kids the prestige and influence to give (or not give) to charitable causes, on into the future.
Few people ever suggest to donors with DAFs that they are effectively hoarding both money and power. We talk about their generosity – and, indeed, there’s often a great deal of genuine charitable intent. But the fact is, undistributed charitable assets that remain in DAFs are not working to solve the significant problems facing the world. Few donors think in these terms, because those of us in the nonprofit world (as well as their professional advisors – the attorneys, accountants, and investment advisors whom writer and activist Chuck Collins calls “the wealth-defense industry”) are trained to fawn on them.
The final set of culprits are the donors and organizations providing support to the Trump Administration – and who use DAFs to do so.
Most of us are aware of Project 2025, the blueprint from the Heritage Foundation that has driven Trump’s second-term agenda. Since 2020, Project 2025 and aligned politically-driven nonprofits have received some $171 million from Fidelity, Schwab, and Vanguard DAFs alone. Meanwhile, the right-wing donor-advised fund sponsor DonorsTrust, dubbed "the dark-money ATM of the conservative movement" by Mother Jones in 2013, pours money from untraceable donors into the Heritage Foundation, the America First Policy Institute, the Federalist Society, and dozens of other groups working to further deeply conservative political agendas.
In her remarkable 2016 book, Dark Money, New Yorker journalist Jane Mayer quotes conservative megadonor Charles Koch talking about the need to “weaponize philanthropy” to further conservative causes. Part of this plan has been to create rabidly conservative organizations, such as the Heritage Foundation and the Federalist Society, that despite their partisan, political agendas earn designation as 501( c)(3) public charities. Central to those organizations’ ongoing effectiveness and power are anonymous contributions from donor-advised funds. Koch and his colleagues have accomplished this manipulation of the charitable tax laws with stunning success.
Changing the culprits into allies
The people and institutions behind the unregulated and frankly terrifying growth of DAFs need to be called out. But some of them can also help turn things around.
Let’s ignore the first two groups I list above: the financial services firms and the financial advisors. They’re never going to subvert their core drive for profit and do what’s right for the community. As Upton Sinclair noted a century ago (and forgive the gendered nature of the quotation), “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” So too, the billionaire donors behind the right-wing “nonprofits” like the Heritage Foundation and the America First Policy Institute.
But community foundations can adjust their business models to be less dependent on drawing fees from assets in place. They should urge their DAF holders to spend down their assets for the good of the community. They can and should embrace the realization that passing through as much money as possible to meet current, crying needs strengthens their communities – and when community foundations show this kind of strategic generosity, new donations are sure to follow.
Nonprofits, for their part, should extoll donors who spend down their DAFs, or who leave DAFs to charity at death. Nonprofits should go on the record supporting DAF reform, and they should pressure their nonprofit associations to do the same. And those nonprofit associations should remember whose interests they were created to support — operating nonprofits and their missions — and speak out in favor of DAF reform, even if they offend some of their donors.
Those private foundations that are meeting their charitable distribution requirement by dumping money into DAFs will keep on doing just that, so long as it’s legal. It would be a relatively simple act for legislators to close the DAF loophole — but we all have to apply pressure on political leaders and regulators to make that happen. (This common-sense provision was part of the unsuccessful ACE Act.)
Meanwhile, donors – most of whom very much want to do the right thing – can be persuaded to change their behaviors. Many donors simply haven’t been told how counterproductive their perpetual DAFs have become. I have some hope that, if the situation is explained to them, donors in larger numbers will come to realize that to have real impact — and to derive the satisfaction that comes with making a difference — they need to spend down their DAFs, or transfer them to charities at their death, and not leave them to their kids.
* * *
It’s imperative to change how DAFs operate.
I’m the grandfather of three little boys. They, and hundreds of millions of other children around the world, will inherit this terribly fragile and damaged world of ours. On their behalf, we have to invest in saving the planet from climate disaster now. We need to provide opportunity, healthcare, and education to the least powerful and most vulnerable people now. We need to defend democracy now. We need to tear down structural racism and sexism and bias of all kinds now. And we have to recognize that a quarter-trillion dollars sitting in "charitable" investment accounts is a tragic waste. Money percolating in DAF accounts doesn’t fix a damned thing.
ABOUT THE AUTHOR: Alan Cantor has been working with nonprofit organizations since 1982, as a staff member, executive, board leader, and consultant. You can read more of Alan Cantor's writing here, where you can also reach him.
Pete Manzo is President and CEO of United Ways of California. Despite being significant grantmakers in many communities, the 900+ United Ways in the U.S. are seldom discussed when it comes to philanthropy, "democratizing philanthropy," or philanthropic reform. We're glad we had a chance to learn some surprising facts and strong views from Pete.
Q: Pete, not long ago the top three nonprofits by revenue were United Way, Red Cross and Salvation Army. Today the biggest three are Fidelity, Schwab, and the National Philanthropic Trust. What do you make of that?
Pete: A primary concern is that it is difficult to see where funds in DAFs go, and even whether they are spent at all. Nonprofits are frustrated that such a large pool of funds is invisible to them, they are unable to identify and seek funding from them
The large commercial funds you mention are really investment firms – finance companies – they're not taking a strategic approach to philanthropy. Commercial donor-advised funds provide a valuable service, but in my view, they are not really charities with a mission, advancing a point of view about strategic goals, so much as they are financial firms providing services to their investment clients.
Foundations and DAFs talk about payouts of 5% or even 8%. United Way has a payout rate of 80% within 18 months. Various complications make it hard to get out everything quickly, but we work at it!
Q: 80% in grants out? So is the United Way a type of foundation?
Pete: We are a grantmaker, but not a foundation. Pledges we get this year tend to go out next year as the money comes in. United Ways are not endowed organizations, which brings both advantages and disadvantages. United Ways put their funds to work within 12–18 months of raising them, so the time-value of money means contributions to United Ways can have greater impact than if they were held and spent from an endowment. An endowed foundation would need something like $80 billion in assets to make a similar scale of philanthropic investment as the $3-4 billion or so the United Way drives in the U.S. every year. Without endowments, though, the year-to-year prospects of United Ways are much more uncertain, and they certainly are more vulnerable to economic fluctuations.
It's odd that although we give out more in grants than many local foundations do, we aren't typically included in foundation dialog. For a long time we weren't able to join associations of grantmakers.
Q: United Ways of California backed a recent bill to bring transparency to donor-advised funds in California. The foundation community and the DAF sponsors opposed it strongly. Why did United Ways break from the crowd and support it?
Pete: We care about resources going out to the people that need it. And they need it in real time. The near-complete invisibility of donor-advised funds makes it possible for them to be abused, stay inaccessible, and keep the public from understanding where public money goes. We believe in more transparency for all of philanthropy.
Q: Several years ago some United Ways around the country were experimenting with being donor-advised fund sponsors. Where did that go?
Pete: As far as I know, no one is doing that anymore. For some it was just an accounting thing: they would get a donor-restricted pledge and they would create a donor-advised for it. When the donation came in, they would empty that DAF. They realized this accounting method was unnecessarily complicated. In a few cases United Ways talked with their major donors about creating DAF accounts at their local United Way. But most United Way donors weren't interested; they wanted to see their money have an impact as soon as possible.
Q: The federal budget bill (June 2025) looks like it will mean very large cuts to Medicaid and other health and human services. How do you think funders in health and human services could be responding?
Pete: Too many are remaining silent, so far. Funders and nonprofits need to be speaking out against the cuts, and foundations should be funding nonprofit advocacy.
For many years now foundation assets have grown much faster than the 5% payout rate. For all their billions, foundations can't make up for those federal government cuts if they go through, but they could easily be giving out four or five times what they are giving now, and they should, in unrestricted grants, to organizations fighting the cuts and also working to reduce their harmful impacts.
United Ways are non-partisan, but we are not neutral about our values. We know these cuts would be devastating to working families, so across the country, United Way has been working hard to find Republicans who see the importance of maintaining Medicaid [called Medi-Cal in California] and SNAP food assistance (CalFresh).
Funders need to be organizing to make government fund the basic human needs that their communities need – the communities they say they are committed to serving. The "Big 10" universities are creating a mutual defense fund, pooling resources to support whichever of them may be attacked; funders should be looking at similar strategies together, and also should offer to help defend nonprofits, too.
Q: So many nonprofits and nonprofit associations say they strongly support philanthropic reform, but they won't say so in public. Your thoughts on this?
Pete: Well, nonprofits are overly cautious of offending any funder about anything. Some hope that a big DAF holder will someday give them a lot of money, and unfortunately, at times that includes community foundations, who also rely on DAFs and DAF donors, and like other funders, they likely aren't used to hearing any criticism at all so they may overreact to any hint of it. The commercial DAFs have far outpaced everyone in acquiring funds under their management, they are crushing everyone in competing for donors’ funds, so it’s hard to see why community foundations wouldn’t welcome more regulation of commercial DAFs.
Associations of grantmakers understandably want everyone to be happy. They don't want to take a stand that make any member unhappy. So it can stall from being effective on behalf of who their members serve.
With so much wealth flowing to the top, and with commercial DAFs growing so quickly, if nonprofits, nonprofit associations and funder associations won't take stands for government funding and philanthropic reform, then who will stand for the people in our communities?
Q: Thank you Pete!
You can reach Pete Manzo and the United Ways of California here.
Two years ago, Candid (formerly the Foundation Center and GuideStar) closed down its ten-year initiative on making foundations more transparent. The initiative had a great name, "Glasspockets," referencing Carnegie Foundation board chair, Russell Leffingwell’s testimony before Congress during McCarthy-era hearings that the "Foundation should have glass pockets."
We never felt that Glasspockets got the attention it deserved and its closure got even less. We'd like to give both aspects some attention today, and give Candid a chance to talk about what they are doing today on transparency. We are fortunate that Janet Camarena — one of the project's creators and its ten-year director — was happy to reflect on the project with us.
Q: Janet, what is the single most interesting thing that came out of Glasspockets' work?
Janet: What probably surprises people the most is how few private foundations can be found online. When the initiative started, only 6% to 7% of foundations had websites. Now it's perhaps 10% to 12%, which is where it was hovering when Glasspockets wound down two years ago.
This means that foundations have very limited ways to learn about what other foundations are doing, what they’ve learned from their work . . . and nonprofits should realize how limited web information is on foundations.
10 - 12% of foundations have websites
Q: Even 10% or 12% seems shockingly low! But how valuable are foundation websites, really? Many of them seem to be more about public relations than talking about what they are doing in candid enough terms to be useful.
Janet: Well, having a website is a good start towards transparency. And of course we want to encourage foundations to improve the quality of the information on their sites, which was a big part of the Glasspockets effort to provide a roadmap to how to do that.
Q: Example?
Janet: In the grant descriptions published on their websites, too often we just see "general support." That isn't helpful to researchers studying where funding is going, for grantseekers trying to determine if a particular funder may be a good partner, or for other foundations to identify peers, possible collaborators, and more.
Q: Glasspockets invited foundations to publish their "transparency self-assessments" and to be a recognized participant in Glasspockets. Over the ten years, how many foundations signed up?
Janet: 112. I know it sounds like a small number! [There are about 103,000 private foundations in the U.S.] But many did use the criteria to prompt discussions about what transparency might mean in their foundation.
Q: What are some of the types of information that Glasspockets promoted as transparency priorities?
Janet: Of the 20+ indicators, many were straightforward, such as do you publish a list of your board members, do you have a whistleblower policy. [Editor's note: you can find the Glass Pockets Self Assessment Tool here.]
And at the time Glasspockets was founded, foundations were beginning to place greater emphasis on evaluation of grantee performance. When Glasspockets started, the focus for most sector conversations about transparency seemed to be about grantees but not about foundations. GlassPockets combined donor education, peer pressure, and incentives to make it more of a priority.
Q: What was the most common reason foundations gave you explaining their reluctance to be part of Glasspockets, or to be more transparent in general?
Janet: They were usually afraid that if they were more visible -- say, having a website -- they would be inundated by grant proposals. We were able to identify funder case studies that where having clear priorities and processes on their websites, the result was proposals that were good fits.
Q: Under the Trump Administration, many nonprofits have become worried about how transparent they are. We hear fears about language that could flag them as targets for the government or that foundations would be nervous about funding something that could make them a target. For example, I know one nonprofit that has the word "ethnic" in its name. They are thinking of changing that to "American" so as not to create a barrier for some funders.
Janet: Transparency is certainly changing! But it’s important to remember that there are risks to both transparency and opacity, and the risks of opacity are often overlooked. That’s why I’m glad you asked me to reflect on Glasspockets at this particular time because it’s a good reminder that during a period of crisis, when foundations found themselves spending most of the 1950's testifying before Congress, they learned the hard way that if you don’t tell your story, then others will tell it for you.
New option to suppress data
Q: What concrete steps is Candid taking on transparency/opacity in this new period?
If [foundations] are not willing to tell what they do to serve the public good, then as far as I am concerned, they ought to be closed down….The Foundation should have glass pockets.” — Russell Leffingwell, Chair, Carnegie Foundation, 1952Janet: We recognize that nonprofits need the space to evaluate risks regarding public-facing data. So, we have worked quickly over the past weeks to give nonprofits the option to suppress contributed data that might pose risks to their organizations or individual staff. New at Candid is that nonprofits can now suppress data that they are no longer comfortable sharing.
For example, if there are concerns due to language in their mission statements or program activities, they can suppress their contributed data without permanently deleting it. While the data is suppressed, it will not appear in Candid’s products or be shared with any third parties. Once they’re ready to do so, nonprofits can request that Candid restore suppressed information to their profile. Even when data is suppressed, it still exists in Candid’s data systems. During that time, data points may still be used anonymously for aggregate research and statistics about the sector to shed light on key trends and provide context to our collective work. (Editor's note: Forms 990 are still accessible through Candid.)
Q: Yes, transparency seems to be becoming weaponized.
Foundations do need to be thoughtful as well and there are some best practices to keep in mind in terms of grantee data. For example, often the list of published grants comes directly from their grants management system. You need to let your grantees know what will appear about their grant and give them the option not to make it public. They can easily add an opt-in in the grant agreement or award letter that says, "Here's where we typically share this data. If you would prefer not to have this information published, please let us know." (This blog post from Candid shares best practices in using grantee data responsibly.)
Q: How much of a difference would foundation transparency make, in the big picture? Suppose 75% of foundations had joined Glasspockets. What would be different today?
Janet: Endowed foundations have the power to be insular. They don’t need to do marketing to sell anything to contribute to their bottom line, they don’t need to campaign to get votes to stay in office, and they don’t need to fundraise to support their work. As a result, most don’t prioritize the kind of transparency that is a basic fact of life in most other industries.
So, if suddenly 75% of foundations had websites that they were actively working to improve, this kind of transparency would represent a big culture shift to give up some of the power of insularity. And remember that the culture of philanthropy moves slowly, so we need multiple approaches to improve sight lines in the field.
To this end, later this year Candid will be launching an improved search function, for the first time combining foundation grantmaking and nonprofit operations data to provide a full view of the work of the charitable sector.
Transparency and the Philanthropy Project?
Q: As you know, the Philanthropy Project is concerned with lack of transparency in foundations, in donor advised funds, in the business models behind donor advised funds, and more. Do you see an alignment there with the ideals of Glasspockets?
Janet: Yes, we believe transparency benefits all kinds of donors, and once donors understand those benefits, they are more likely to embrace an open approach.
Like endowed foundations, donor-advised funds are another giving vehicle available to donors and represent a fast-growing part of the field, but they don’t have the same disclosure requirements as private foundations. And, as we know, some donors believe it’s helpful to make anonymous gifts, and again, may not pause to consider the pitfalls of this approach.
We found that donor education is important to motivate donors with the benefits to them of working more openly. By understanding the connection between transparency and trust-based approaches, some donor-advised funds used Glasspockets to assess and improve their transparency, establish and improve their websites, and be public about their giving and strategies. Today, we are also working to profile more types of giving vehicles in our database, so they can be discoverable to grantseekers.
Q: Thank you, Janet! We look forward to seeing where transparency in philanthropy goes from here.
Janet Camarena
Janet Camarena serves as director of partnerships for Candid where she works to lead campaigns and coalitions aimed at shaping norms and practices related to the most pressing issues in our sector, such as transparency, equity, and impact. She previously served as the director of transparency initiatives for Foundation Center, and provided leadership for Glasspockets.org, which she helped to found and build in 2010.
The Philanthropy Project believes that charitable funds should benefit the public. Join the movement/subscribe here. Email us info@philanthropyproject.net. We want to hear the good, bad, and the ugly from you. — Jan Masaoka and Jon Pratt, Co-Chairs, Philanthropy Project
ABOUT THE AUTHOR: Alan Cantor has been working with nonprofit organizations since 1982, as a staff member, executive, board leader, and consultant. You can read more of Alan Cantor's writing here, where you can also reach him.
