Nonprofit Newswire | Foundation Scholarships Failing to Make the Grade

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August 29, 2010; Source: Dallas News | The discovery that a member of the U.S. House of Representatives from Dallas awarded scholarships worth $20,000 from the Congressional Black Caucus Foundation to four relatives and a top aide’s two children, violating anti-nepotism rules, is raising more questions about the charity’s operations, especially on its lack of transparency. According to the Dallas News, congresswoman Eddie Bernice Johnson claimed she wasn’t playing favorites, didn’t know she was violating any rules, and if she had known of more “worthy applicants in my district,” then she probably wouldn’t have awarded the scholarships to her relatives. The foundation lets each member of the Congressional Black Caucus annually award $10,000 in scholarships. The foundation is supported by private and corporate gifts and receives no taxpayer funds. While there are rules governing how the money is to be awarded, there is virtually no oversight. Instead, lawmakers make their own decisions about how to hand out scholarships, including whether to decide personally, set up review panels or ask disinterested third parties to make recommendations. More so, the program operates an honor system. That meant in Johnson’s case, foundation officials didn’t know she was awarding money to relatives.

James Ferris, director of the Center on Philanthropy and Public Policy at the University of Southern California, said the Black Caucus Foundation’s practices are out of step with the way most nonprofits operate to avoid conflicts of interest. “In this case, it sounds like the power to make those grants rests in one person,” he said. “The member can allocate it without any kind of oversight or checks and balances. That’s sort of the nub of the problem.”

Previously, the foundation, which gave out $716,000 to 556 students last year, had been rebuked for spending more on galas and conferences that allow lobbyists to rub elbows with influential lawmakers than for scholarships. Others also fault the program because it’s not that well publicized, seemingly limiting the lack of qualified applicants. Daniel Borochoff, president of the American Institute of Philanthropy, said if more people knew what is going on there would be “outrage because there are probably students who are more deserving and more needy of the funds.”—Bruce Trachtenberg