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Let's Require All Big Foundations to Let More Nonprofits Apply for Grants

The Huffington Post The Huffington Post 20/10/2015 Pablo Eisenberg
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Philanthropy's lack of democratic practices has sunk to a new low: Seventy-two percent of the nation's 96,000 foundations now do not accept unsolicited proposals from nonprofits.

That number from the Foundation Center is quite an increase from just four years ago, when 60 percent of foundations were not accepting such proposals -- a number that was already unacceptably high.

The stunning increase shows that a large and growing majority of nonprofits are being shut out of philanthropic opportunities. The lucky minority of groups that have access to foundations are already large and well established. They have well-connected board members or friends who have some way to gain access to foundation executives and staff.

Organizations that are small to medium size as well as those that represent poor, minority, and other grass-roots constituencies, pursue controversial causes and activities, or lack influential connections or friends struggle to get foundation support.

This invitation-only system allows foundations to perpetuate inequality in American society, and that's why Congress, regulators, and nonprofits must come together to force change.

Foundations that don't accept unsolicited proposals offer many defenses. They worry that without any restrictions they would be inundated with submissions. Many foundation officials say they don't have enough staff members and other resources to manage a huge influx of proposals.

Others reject unsolicited proposals because they have adopted an approach often called strategic philanthropy -- which means not only picking priorities but also hand selecting the organizations a foundation thinks will do the job best. Holding a grants competition, they say, won't achieve that goal.

Neither reason can justify the stifling of philanthropic democracy. The large flow of proposals may be annoying, but most of the medium to large foundations are wealthy enough to add workers to handle unsolicited proposals. Moreover, if foundations provided clearer guidelines and priorities to would-be applicants, that could help stem the submission of unsolicited proposals that don't have a chance.

Foundations and their wealthy benefactors receive enormous tax benefits that subsidize their operations. Donors receive upfront deductions of 40 to 50 percent for their gifts, while foundations are exempt from local and state taxes as well as from taxes on their investment income. In exchange for these benefits, foundations and donors have an obligation to the public to ensure that their philanthropy is accessible to all nonprofits that want to apply for grants.

Many foundation officials, however, claim that as private institutions, foundations have the right to decide how and when they accept proposals.

That is not the view of most nonprofit leaders or the public. And it is unimaginable that that is the kind of behavior Congress had in mind when it passed the 1969 Tax Reform Act, which included new regulations designed to ensure that foundations served society, not just the rich people who created them.

The most surprising thing about the growth in foundations refusing unsolicited proposals is the tepid reaction by nonprofits themselves. One might have thought that at least the excluded groups would be yelling and screaming in protest, going to the news media with their complaints and demanding changes from federal and state regulators and from Congress. Instead, they continue to grumble privately and by and large have kept publicly silent. So, too, have their trade associations.

Neither the National Committee for Responsive Philanthropy nor other advocacy organizations have launched a public campaign to protest foundations' collective denial of philanthropic democracy. And we have yet to hear from any brave souls among foundation executives and wealthy donors who believe that their colleagues are making a mistake by not accepting unsolicited proposals.

It is time that nonprofits get together to put pressure on regulators and Congress to clamp down foundation practices that are offensive to standards of fairness and decency. Since foundations have refused to open their intake policies -- indeed they have progressively closed them -- government must step in to ensure an open democratic process.

At a minimum, foundations that have assets over a certain amount -- say, $50 million -- should be required either by legislation or regulations to accept unsolicited proposals. Or those that refuse to do so should have their tax benefits taken away.

If nonprofits don't have the courage to push for change, they will deserve the callous treatment they have received from foundations.

Pablo Eisenberg, a regular Chronicle of Philanthropy contributor, is a senior fellow at the Center for Public and Nonprofit Leadership at the McCourt School of Public Policy at Georgetown University. His email address is pseisenberg@verizon.

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