In March 2009, the National Committee for Responsive Philanthropy (NCRP) (http://www.ncrp.org/) released the Criteria for Philanthropy at Its Best: Benchmarks to Assess and Enhance Grantmaker Impact. “The Criteria is the first ever set of measurable guidelines that will help foundations and other institutional grantmakers operate ethically and maximize the impact of their dollars.” The Criteria for Philanthropy at Its Best: Benchmarks to Assess and Enhance Grantmaker Impact can be viewed at: http://www.ncrp.org/paib
It is controversial and Leona Helmsley would not approve - she is probably rolling in her grave. Leona, the “Queen of Mean” who is rumoured to have said “We don’t pay taxes. Only the little people pay taxes ...”, would probably not like the idea that any of her money should be used for helping marginalized communities or other public good. Leona, according to Wikipedia “In addition to $12 million Leona Helmsley left to her pet, she left instructions that her trust, now valued at $5 to $8 billion, be used to benefit dogs.” Setting up private foundations in the US is the most important way to eliminate estate tax obligations. Some may say that as long as the foundation operates ““efficiently” or “effectively” that is great - I would think that there should be some element of public benefit as there is so much foregone tax revenue.
The one page summary of Criteria for Philanthropy at Its Best (c) at http://www.ncrp.org/files/paib_onepager.pdf provides that:
A grantmaker practicing Philanthropy at Its Best serves the public good by ...
CRITERION I: VALUES
… contributing to a strong, participatory democracy that engages all communities.
a) Provides at least 50 percent of its grant dollars to benefit lower-income communities, communities of color and other marginalized groups, broadly defined (In the report it is referring to 11 groups that include: economically disadvantaged; racial or ethnic minorities; women and girls; people with AIDS; people with disabilities; aging, elderly, and senior citizens; immigrants and refugees; crime/abuse victims; offenders and ex-offenders; single parents; and LGBTQ citizens.
b) Provides at least 25 percent of its grant dollars for advocacy, organizing and civic engagement to promote equity, opportunity and justice in our society
CRITERION II: EFFECTIVENESS
… investing in the health, growth and effectiveness of its nonprofit partners.
a) Provides at least 50 percent of its grant dollars for general operating support
b) Provides at least 50 percent of its grant dollars as multi-year grants
c) Ensures that the time to apply for and report on the grant is commensurate with grant size
CRITERION III: ETHICS
… demonstrating accountability and transparency to the public, its grantees and constituents.
a) Maintains an engaged board of at least five people who include among them a diversity of perspectives- including of the communities it serves-and who serve without compensation
b) Maintains policies and practices that support ethical behavior
c) Discloses information freely
CITERION IV: COMMITMENT
… engaging a substantial portion of its financial assets in pursuit of its mission.
a) Pays out at least 6 percent of its assets annually in grants
b) Invests at least 25 percent of its assets in ways that support its mission
Lets close with Bill Gates commenting on the 5% US private foundation disbursement requirement: ““There is nothing magic about the 5 percent figure, except that it is the minimum required by the IRS. Our spending in 2008 was $3.3 billion. In 2009, instead of reducing this amount, we are choosing to increase it to $3.8 billion, which is about 7 percent of our assets.”
—Bill Gates, Co-chair and Trustee The Bill and Melinda Gates Foundation
Bill we have the same problem here in Canada except we only have a 3.5% disbursement quota for private foundations - people view that as the ceiling, not the floor.
Mark Blumberg is a lawyer at Blumberg Segal LLP in Toronto, Ontario. To find out more about legal services that Blumbergs provides to Canadian charities and non-profits please visit http://www.canadiancharitylaw.ca or http://www.globalphilanthropy.ca He can be contacted at or at 416-361-1982.
This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional.
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.