Public Scrutiny of Foundations and Charities

The Robert Wood Johnson Foundation Response

American foundations are a unique national resource, serving as stewards of private resources used in the public interest. Responsible primarily to their own boards of directors—as contrasted with, say, the electorate or shareholders—foundations are, in the words of Alan Pifer, former president of the Carnegie Corporation of New York, “the least constrained of all institutions in our society.” Unlike most other institutions, foundations have a dual public and private nature. They are private corporations whose endowments come from wealthy individuals and corporations. Under the Internal Revenue Code, the income on foundations’ investments is largely tax-exempt.

Given foundations’ lack of public accountability and the importance of the tax exemption to their very existence—not to mention their reputation for being secretive—it is not surprising that the federal government scrutinizes foundations to make sure that they use their resources legally and, at least arguably, for purposes that benefit the public. Nor is it surprising—in light of the recent highly publicized corporate and nonprofit organization scandals—that Congress would single out foundations for special attention at this time.

In this chapter of the Anthology, Susan Krutt, a communications associate at the Robert Wood Johnson Foundation, and David Morse, the Foundation’s vice president for communications, provide an overview of congressional scrutiny of foundations and charitable organizations and the sector’s response. They place the recent Senate hearings in the context of past congressional examinations of foundations, analyze the underlying issues, and explain how philanthropy is trying to address concerns about its lack of accountability. The authors conclude by discussing the approaches adopted by the Robert Wood Johnson Foundation to make its own work more transparent, especially through its evaluation and communications strategies.