Charities and Foundations Take Steps to Improve Accountability, Studies Find

Two new reports suggest that many charities and foundations are taking steps to deal with questions that

have been raised on Capitol Hill and elsewhere about their public accountability:

• A survey of officials at 867 foundations found that nearly 57 percent believed calls for greater accountability were justified. Of those who believed the concerns were legitimate, three-quarters said they had recently taken specific steps to review or change their operations so they would be more transparent to the public.
• A poll of 207 charities found that 191 of them had undergone financial audits in the past two years and more than half published their financial statements in their annual reports.

The two studies were released just as the Senate Finance Committee last week held a hearing to discuss proposals designed to ensure that charities and foundations do not abuse federal laws that govern their operations.

Grant Makers’ Efforts

In the study of foundations, conducted by the Foundation Center, nearly 26 percent of all those polled said they had no opinion about the recent calls for foundation accountability, while 17 percent said they did not think they should be subjected to fiercer questioning.

Community foundations and foundations that had at least $1-million in assets were more likely than other types of grant makers to consider the scrutiny justified, a report on the study said.

Of the foundations that considered the questions justified, 38 percent said they were revising their policies or procedures or had already made changes, such as adopting a formal ethics policy or setting up an audit committee. Twenty-two percent said they were working with staff members, trustees, and others to ensure greater accountability among all grant makers.

Even those foundations that did not consider the concerns about foundations justified said they were making changes. Twenty-five percent of those organizations said they were reviewing their governance and oversight policies.

Tax Forms

The study on charities was conducted by the Johns Hopkins University Center for Civil Society Studies as part of an effort called the Listening Post Project, which is designed to monitor the health of nonprofit organizations and assess the impact of economic and policy changes on them.

The report’s findings, which were released in preliminary form, showed that many organizations are already taking the steps that aides to the Senate Finance Committee have suggested might become a legal requirement.

For instance, it said that four out of five groups ask their chief executives or board chairmen to sign their informational tax returns. In addition, the survey found that many of the organizations have made changes in response to financial audits. More than half the groups revamped their internal management controls while nearly one-third of the organizations made changes in how they report their financial information to the public.

While many of the groups in the survey release financial data to the public, few have taken steps to make the information widely available. Only 18 of the groups said they had posted their financial statements on their Web sites, the report said.

The study found that nonprofit groups have strong objections to proposals to add performance measures to their informational tax returns, an idea floated by Senate aides last summer. Only 19 of the groups surveyed said they believed charities should be required to include such information in the tax form. Four out of five of the groups who oppose the idea said they thought it was inappropriate to put such questions on a tax form, while two-thirds felt such performance information would be too subjective to include.

The Foundation Center poll results were contained in a report called “Foundation Growth and Giving Estimates,” which can be downloaded free from the center’s Web site, http://fdncenter.org.

The Johns Hopkins University report, “Nonprofit Financial Disclosure,” is available free at http://www.jhu.edu./listeningpost.