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Cracks in foundations

KAI RYSSDAL: According to the Internal Revenue Service, nonprofit foundations make up nearly 10 percent of U.S. gross domestic product. More than a trillion dollars when you add it all up.

You've probably heard of the marquee names like Gates or Carnegie or Ford. But there are plenty of tiny foundations too. They fund just about anything you can imagine: fighting the spread of AIDS, supporting a local food bank. Even public radio programs like this one.

Duke University professor Joel Fleishman says that despite their good intentions, most foundations have plenty of problems. We started our conversation with a definition of failure.


FLEISHMAN: When foundation sets out to do something, and they spend a lot of money on it, and they don't succeed at it.

RYSSDAL: How can we then replicate the good things?

FLEISHMAN: The answer is not very easily, because we don't get the blueprints for the good things, either. And that means that everybody in the nonprofit sector who wants to do something has to reinvent the wheel. Ten years or so ago, a person who just started a billion-dollar foundation called me up and said, "We want to work in X Y and Z areas, and I would like to know what other foundations have done with what effect. So that we can build on what they've done and avoid the mistakes that they've made." And he said where can I go to get that information? I said there's no place to go to get that information, because foundations don't reveal that information.

RYSSDAL: Why though? If the theory goes that, you know, they're working in the public good, why not spread the wealth, as it were?

FLEISHMAN: What foundations say . . . they say a number of different things. They say look, we don't really do the things that we support. The things that we support are done by other people. Grant-receiving organizations. And therefore it's improper for us to take credit for what they've done and it's also improper for us to criticize what they've done. I've never been persuaded that those are the real reasons. I think that the real reasons have to do with concern on the foundations' part about people second-guessing their judgements and really digging in. And foundations don't like to be criticized. And so the less information they provide, the less likelihood they're gonna be targets of that kind of criticism.

RYSSDAL: But there is, when you set up a foundation and you file the paperwork with the IRS, you get this thing called a tax-exempt status. So you're not really accountable to the government for your money. Don't you need, though, some sort of device where we can know what's going on?

FLEISHMAN: Well, the answer is you do. And part of the main argument in my book is that foundations don't get enough outside feedback to enable them to do what they are trying to do as well as they could if there were people looking out from outside, commenting on what they were doing, criticizing what they were doing, and helping them reach better solutions.

RYSSDAL: But the big ones, at least, are fairly transparent. We all know that the Bill and Melinda Gates Foundation spends a lot of time in Africa working on healthcare and AIDS issue there. The

Ford Foundation has its specialities and Kaiser does its specialities.

FLEISHMAN: But they never give you the assessments that

have [been] done for them . . . about whether things are working. That information is simply not made available publicly. There are a few foundations that have begun putting their internally-generated assessments on the Web, such as the

Robert Wood Johnson Foundation. But, as I say in the book, I can find only five examples of foundations that have publicly stated that initiatives that they had undertaken had not succeeded. Well, that's incredible when you think about the fact that foundations are giving away in excess of $35 billion a year. Surely, some of those things are not working very well, but nobody knows about 'em.

RYSSDAL: You know, it's all private money, so Bill Gates gets to do what he wants to do. But is there a way to force disclosure?

FLEISHMAN: It is private money, and people ought to be able to do what they want to do. And I applaud that, support that, want desperately to protect that from any kind of government incursions on foundations to tell them what they should do. My own view is that foundations need to bite the bullet themselves, take responsibility themselves, and avoid any kind of heavy-handed federal regulation that would force them to reveal more information.

RYSSDAL: Joel Fleishman is a professor of law and public policy at Duke University. His latest book is called

"The Foundation: A Great American Secret."

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.

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