Council on Foundations Fights Tax Changes and High-Profile Criticism

Print Share on LinkedIn More


Council on Foundations

The Cleveland Plain Dealer reported last week on an example of nonprofit and philanthropic public policy advocacy, covering the annual meeting of the Council on Foundations in that city, which attracted hundreds of attendees.

But the Council had to first respond to scathing criticism of its effectiveness in late September in the Chronicle of Philanthropy from Pablo Eisenberg, a senior fellow at the Center for Public and Nonprofit Leadership at the Georgetown Public Policy Institute.

The Plain Dealer wrote that “community foundations are gearing up to fight tax reform measures they say could cripple one of their sources of revenue,” quoting Vikki Spruill, president and CEO of the Council, who told it that “community foundations’ work will be severely stymied if proposed measures by U.S. Rep. Dave Camp go through.”

Spruill cited a proposal by Camp, a Michigan Republican, which would significantly curb the donor-advised funds many community foundations rely on. The proposal would require them to spend each contribution within five years of receipt or face an excise tax on the remaining balance.

The high-profile public policy advocacy may have come in response to Eisenberg’s column a month earlier:

“The Council on Foundations, the most prominent trade association in the grant-making world, has been in the doldrums for a long time, beset by weak boards, declining membership, a lack of clear values and mission, unsatisfactory services to its member organizations, and a failure to stand for principles and ethics in grant making.”—Will the Council on Foundations Be a Change Agent or Just a Trade Group?

Eisenberg writes that in the past few years, the council has lost over 200 members who were dissatisfied with the direction of the organization, adding that “some of the remaining 1,585 members feel they are no longer getting much bang for the big bucks they pay in membership fees.”

He continues, saying that many more are considering quitting, and that Spruill, who has led the group for the past two years, “is increasingly under scrutiny from people wondering what’s next for the council.”

Eisenberg spoke to “over 45 people who work at foundations and elsewhere in the nonprofit world…I heard a steady refrain of criticism about the council—past and present—its board, its structure, and its programs…. Yet despite their gripes, almost everyone I interviewed believes the council still has an important role to play and that if it didn’t exist, it would have to be created.”

He writes that his sources acknowledged Spruill’s “tough, challenging job in trying to transform the organization into a respected leader,” but adds that reviews of her performance were mixed.

Eisenberg’s column then goes on to relate a sorry story of an organization struggling “to define its mission and values, to decide, in short, what it wants to be.” He talks about the history leading up to Spruill’s appointment to the job, her quick moves “to put her stamp on the organization,” and the results of those efforts. He criticizes some of those actions, saying that they “placed the council in a deeper financial hole.”

He talks about the Council’s five-year plan, “an ambitious blueprint to transform [it] into a leadership institution for foundations with a strong public-policy voice, a growing membership, a network of affiliates, an organization that is financially viable and strong.” It contains detailed approaches to fix the organization’s finances, build better networks and leadership development, and be much more proactive in public-policy, an effort on display at its annual meeting in Cleveland.

Eisenberg calls on the Council to be more transparent with its members, but he says that the biggest challenge is its failure to reach out to the networks of local foundations “and figure out what they need.” He points out that Spruill is beefing up staff in the various geographic regions, but that regional associations oppose that approach. He does not say whether this might be a classic turf battle as much as anything else.

He says there are “greater tensions…between the council and a large group of community foundations that don’t feel the council is sufficiently dealing with their concerns, most notably growing calls to regulate donor-advised funds.” That may have prompted Spruill’s vocal opposition to the tax legislation at the meeting a month later.

Other criticisms from Eisenberg range from the Council’s spotty engagement in policy issues about philanthropy, its failure to call out the transgressions of its own members, and its perceived weak internal and external communications programs:

“Is it not time for philanthropy to take a stand on the major issues that face both foundations and those they serve? For instance, it should take an active role in addressing the dwindling access to foundations that grantees find both frustrating and infuriating. The question is a matter of inequality and democracy, especially for institutions receiving large tax breaks.

“Other issues that deserve attention include whether foundations are distributing enough of their assets and the problems created by the expanding number of mega-foundations, which are often governed by just a small number of family members, and the lack of a reasonable oversight and enforcement system by federal and state governments.”

However, he praises the “Council’s recognition of the need to develop strong foundation executives, both among current officials and among those of the next generation.”

Spruill defended her tenure in a letter to the editor of the Chronicle ten days later. She never directly answers Eisenberg’s specific criticisms, nor does she refute the declining membership numbers he cites. Instead, she focuses on the challenges inherent in implementing change in an established organization. Excerpts follow.

“My team and I understood [what its role should be] as we changed the Council, [and] we would in turn push our members and the field of philanthropy to change with us. And we understood that transformation is hard and that at times we would misstep. But we wouldn’t let that deter us.

“To guide the shift from the past to the future, I’ve spent two years listening to hundreds of foundation leaders, lawmakers, and thinkers…”

“Philanthropy needs a united voice that is as influential as the Chamber of Commerce is for businesses and as forward-thinking as the Council on Foreign Relations is for international issues. The council gives foundations that voice. This is important, as issues like comprehensive tax reform are coming to Congress sooner rather than later, and we must stand together and speak up for the role of philanthropy…”

“Ten years ago, we would not have thought that charitable giving, a bedrock of American civic life, would be under attack. That’s why we are deeply engaged in discussions around tax reform and individual tax provisions that are meaningful for our field.”

Spruill argues that she brought in a “talented, focused, and strategic team” that is member-focused and change-oriented. She says that the Council has restructured staff and boosted its expertise and restructured the board. She points to several new initiatives under her watch and her work on behalf of community foundations.

She proposes that “critics and skeptics may ask, ‘What’s going on at the council?’ Big change is the answer. If you think the council’s priorities should change, and want a stronger philanthropic sector, then get involved.”

America’s institutional foundations are like most complicated and influential public institutions; while they are critical to the nonprofit ecosystem by funneling large amounts of private wealth to the public realm on behalf of good causes, they are fraught with imperfections and inconsistencies that result in a “love-hate” relationship with public advocates and nonprofit leaders. It’s no surprise that the group that represents them is in the same boat.

  • John Rubens

    Timely arguments from Camp and Eisenberg.

  • Thomas Sidebergh

    Mr. Kaplan, after reading this article a couple of times, I wanted to ask you to explain specifically what the point of the article was, because it’s completely lost on me.