Michigan Asks Ford Foundation to Show It Is Following Donor’s Intentions

In a move that has generated concern in the nonprofit world, Michigan’s attorney general has started an investigation into the Ford Foundation, saying the fund has ignored the Ford family’s philanthropic wishes by reducing support for charities in the state.

The attorney general, Mike Cox, has also raised questions about the foundation’s conflict-of-interest polices covering board members and how much it spends on administrative costs, including compensation for its executives. The fund, located in New York, is incorporated in Michigan, which gives Mr. Cox oversight of it.

He has asked the foundation for governance documents and information about its grant making, which Ford has provided.

The inquiry, which started in August, primarily has focused on whether the grant maker gives enough of its $11.6-billion endowment to charitable causes in Detroit and other parts of Michigan.

In the 1930s and 40s, more than 90 percent of the foundation’s giving benefited nonprofit groups in the state, said Nate Bailey, a spokesman for Mr. Cox. Today, that percentage has declined precipitously, he said.

“The foundation has drifted away from Michigan,” he said. “One of our goals in this undoubtedly is to bring some of Henry Ford’s money home.”

Marta L. Tellado, Ford’s vice president of communications, said the foundation still provides generous support to causes in Michigan, saying that since 1996 the fund has donated $38-million to charities and universities in the state.

“We have a long and proud history of grant making in Michigan,” she said.

Most recently, the foundation gave $1-million to Focus: HOPE, a social-service charity in Detroit, to provide job training to minorities. Since 1977, the group has received $5.5-million in loans and grants from Ford, said Kathy Moran, a spokeswoman for the group.

“The Ford Foundation has been really generous to us. It’s been a long-standing relationship.”

What’s more, in December, Ford awarded $7-million to help rebuild Detroit’s riverfront area and other run-down neighborhoods in the Motor City. Ms. Tellado said the grant was not made in response to the Michigan attorney general’s inquiry.

Original Mission

William Clay Ford Jr., chief executive of the Ford Motor Company, through a company spokesman declined requests to be interviewed by The Chronicle.

Edsel Ford — the son of Henry Ford, the founder of the Ford Motor Company — established the foundation in 1936. In the years that followed, the foundation primarily supported nonprofit institutions connected with the family, such as the Henry Ford Museum, in Dearborn, Mich., and the Henry Ford Hospital, in Detroit.

In 1950, the foundation broadened its mission to include fighting global poverty, supporting world peace, and promoting democracy.

The foundation also ended its direct ties with the family. No member of the Ford family has served on the board since 1976.

Despite those changes, Mr. Bailey said, the fund has a “higher fiduciary responsibility” to the Michigan area because its money was generated by the famous automobile dynasty and at the least should again provide money to charities with the Ford name.

“It has greatly drifted away from these programs, not sending literally a cent since the early 1970s,” he said.

Patricia E. Moordian, president of a Dearborn nonprofit group that manages the Ford Museum and several other educational and cultural institutions established by the family, said her organization, which is known simply as the Henry Ford, received its final grant payment from the foundation in 1973.

She said nonprofit groups in Michigan are facing difficult fund-raising hurdles, in part due to financial problems at automobile manufacturers, and desperately need an infusion of Ford Foundation money.

“The Henry Ford is definitely supportive of the A.G.’s efforts,” she said. “The need is very, very big in southeast Michigan.”

But other local nonprofit officials have expressed concern about Mr. Cox’s inquiry. While they want greater philanthropic support for their economically distressed region, they dismiss the state attorney general’s investigation.

“The question is what’s an appropriate investment to the state you were created in?” said Sam Singh, chief executive of the Michigan Nonprofit Association, in Lansing. “That’s a question for the board to answer. To me, it’s not a legal question.”

Mr. Singh did say that some local charity executives have complained that Ford doesn’t provide enough money to Michigan, but “by no means is there a groundswell of discontent.”

Governance Questions

Aside from concerns about its grant making, Mr. Cox has raised questions about the Ford Foundation’s giving to nonprofit organizations with connections to its board members and whether its administrative costs are excessive. The attorney general has not accused the fund of any wrongdoing, however.

In terms of its governance, “you find an interesting parallel between groups that board members had been close with and Ford Foundation grants going to those entities,” said Mr. Bailey, of the state attorney general’s office.

For example, since 2003 Ford has donated at least $830,000 to the World Wildlife Fund, in Washington. During most of that period, Kathryn S. Fuller was chief executive of the environmental group and served on Ford’s board of directors. (In 2004, Ms. Fuller became the foundation’s chairwoman. Last year, she resigned as head of the wildlife organization.)

Ms. Tellado said all Ford board members recuse themselves from grant decisions involving charities they have worked for. In the case of the wildlife group, she said, the grant maker has supported it since 1957, and Ms. Fuller did not influence the donations.

She also dismissed Mr. Cox’s concerns that the foundation’s overhead costs are too high, saying that the foundation has higher administrative expenses than some other philanthropies in part because it operates more than a dozen offices abroad.

Mr. Bailey specifically questioned the “six-figure salaries” of some of the foundation’s executives. For instance, in 2004, the most recent year that data are available, Susan V. Berresford earned $684,478 as president; its chief investment officer, Linda Strumpf, received $768,169.

Called Unfair

While other state attorneys general have started similar investigations into foundations’ expenses and governance, Mr. Cox’s examination of the Ford Foundation and his intention to change its giving, has caused consternation among national nonprofit officials.

Diana Aviv, president of Independent Sector, a Washington coalition of about 600 charities and foundations, said the inquiry was unfair.

Attorneys general should make sure grant makers are meeting their charitable purposes, but in Ford’s case, its stated goals do not include supporting Michigan causes. “I’m very concerned about the investigation because this is not part of the foundation’s mission,” she said.

William A. Schambra, director of the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal, in Washington, also disapproved of Mr. Cox’s approach, but said Ford is partly to blame for the investigation.

“Like most of my colleagues in the foundation world, I, of course, worry when state A.G.’s start wielding political clubs like this,” he said. “But foundations have brought it on themselves. Too much empty rhetoric about ‘facilitating global-change processes’ with precious little to show for it.”

As a result, he added, “the folks back home in the old neighborhood have even less to show for it.”