Seventy-five percent of foundation grants could be best described as random acts of kindness—surely benefiting someone, but so fragmented that their net effect is no greater than randomly distributing grants among all eligible organizations.
—Young Social Entrepreneurs Network
Making Change Manifesto, 2008

Then Tonya Gallagher-Ross and her young colleagues looked at the landscape of what passed for rigorous thinking and evaluation in the nonprofit and foundation field, they were appalled.

“Do we get evaluations that are scientific? Are they valid? Are they believable?” she asks. “Sadly, few are credible. Not deliberately false—just that the underlying premise, the data collected, the research methodology, the assessment criteria and the logic model are all wack!”

“We’ve all seen it,” she continues. “At the research conferences, at the bar afterward. We’re asking, ‘How did this project ever get funded? What were these people thinking? Does anyone actually read these reports?’”

Frustration with what it saw as an entrenched and essentially corrupt system led the Young Social Entrepreneurs Network, an online community of some 4,000 members, to issue its Making Change Manifesto. “When we looked underneath the rock for why the same organizations kept getting the largest share of foundation and government dollars, we saw that the inertia is cemented by reassuring, so-called evaluations, said Neil Perrigo, founder of the Toledo Social Innovation Center. “Frankly, these evaluations go looking for positive results, so that’s what 95 percent of them report. No one sets out to be compromised, but if you run a consulting firm that wants to be in business for more than a year, you need to keep customers satisfied.”

Perrigo insisted that he did not question the professionalism and intellect of the current set of evaluation companies but said, “Humans being human, it is too much to expect that the business realities of future contracts don’t enter into the results.”

The solution? A systematic reform of all nonprofit and government program evaluations by the new National Bureau of Evaluation, with 400 highly compensated evaluators, complete with a requirement that evaluation reports financed by tax-exempt funds be made available on the Internet.

The National Bureau of Evaluation was envisioned as a system to render fair and honest judgments free from fraud employing a framework analagous to those used by goverments to maintain fair judicial systems. The bureau drafted a proposal that copied a key element from judicial impartiality: insulation from bribery either through elections or tenure, such as lifetime appointments at a decent salary.

“We figured the easiest way was to just use the same compensation and benefits package as the federal judiciary,” Gallagher-Ross says. “Yes, we know that high-end consultants and foundation staff can earn more than that, but we’re in the same boat as the judiciary—who no longer talk about comparisons to the private bar, since their former law clerks earn more than they do their first year out.” (Incidentally, U.S. federal judges currently earn $165,200 a year, the same as members of Congress, and pending legislation would raise that to $233,500.)

Manifesto co-author Rodriga Rodriguez was biting in her criticism of foundations. “We are all about reducing philanthropists’ angst over lack of results, which has led foundations into recurring loops of program redefinition, strategic restructuring, refined guidelines and jolly whatnot,” she says.

“The jaded, so-called leaders in this field are so used to the current arrangements,” Rodriguez continues, “and are so rewarded by its hypocrisy, that they never question why poverty and disparity are increasing as their humanitarian efforts are so richly rewarded.”

Echoing criticisms raised at numerous conferences, the report cites the need for a professional cadre of evaluators as esteemed as accountants, who every day are trusted to crank out critical numbers.

“We’ve put millions into small-scale community development, middle-school enrichment, and youth mentoring,” she says. “It’s like picking winners in a lottery: yes, we helped that kid, that neighborhood, that school, but what about the 98 percent of kids, neighborhoods, and schools not part of our model? Does anyone seriously believe our own rhetoric about the effect of these random acts of kindness on the larger society?”

“Shouldn’t we try to influence policy or assess the actual replication? No, instead we constantly move on to the next ‘promising result’: a polite fiction of new “initiatives” always too early for serious measurement, but reliably offering heartwarming delusion to obscure the larger problem.”

Jeff Goldheart, the president of the Promising Results Foundation, agrees, noting, “Of course we hate it when people call foundations dilettantes. We are more than that. We care about frank results, and I firmly believe that the new Bureau of Evaluation will show that.”

The hint of scandal in the report caught the roving eye of Senator Wendel Weedley, ranking Whig member of the Senate Finance Committee, with jurisdiction over the IRS and, consequently, over tax-exempt organizations. Senator Weedley announced hearings to inquire on the whereabouts of evaluation reports filed with foundations.

In a letter from Yusef Arak, the president of the Council of Large Foundations (CLF), which recently relocated to a 41,500-square-foot headquarters in Crystal City, Virginia, the council questioned the need for the Bureau of Evaluation. “As the venture capital of social progress, as society’s passing gear, foundations innovate by looking forward, not obsessing in the rear-view mirror. The many demands on foundation program officers and trustees, including compelling programs and networking receptions held by more than 120 foundation affinity groups, causes us to discern that our time is best spent exploring new opportunities. Nevertheless, we see grantees’ reports as a treasure trove of critical information—a virtual Alexandria Library—which is why foundations insist that these reports be filed; indeed, we are quite rigorous about this,” the letter states.

Opposing the bureau was not easy for CLF. “If there were any practical way for everyone to contribute, we of course would support that, but that’s just not in the cards,” the letter emphasized. “These institutions represent the best of America, going back to the Declaration of Independence, which is why we now call ourselves ‘independent foundations’ instead of ‘private foundations.’ Each foundation has its own calling, its unique mission,” the CLF letter emphasized.

Not wanting to offend the powerful committee chair, CLF announced that it would “go on record that it will immediately establish a new foundation affinity group on this very important topic.”

In its own letter to the committee, the National Committee of Ungrateful Grantees supported the Manifesto and proposed paying for its cost through a square-foot fee on foundation presidents’ offices, a 25 percent tax on investment fees paid by foundations, and a 50 percent tax on foundation catering expenses.

Senator Weedley responded with a press release announcing his plans to introduce legislation to include the National Bureau of Evaluation as well as the public disclosure of evaluation reports. “I’m pleased that our committee markup will include a way for every foundation to contribute and keep its independence. Our House colleagues have agreed to a one quarter percent increase in the excise tax on the net investment income of private foundations starting in 2010.”

Senator Weedley directed the last section of his communication to the Council of Large Foundations “Please don’t be offended that federal law still defines your members as ‘private foundations’; you have convinced me to add the word independent to make this new entity the ‘National Bureau of Independent Evaluation.’ This additional quarter percent will raise $100 million per year, or enough for 400 independent evaluators at the same salary and lifetime appointment as federal judges.”

Thrilled with their success, Tonya Gallagher-Ross of the Young Social Entrepreneurs declared, “Now is the time for action—yes we can! Our network will do whatever it takes to identify a diverse pool of wicked-honest evaluators!”

Phil Anthrop is a consultant to foundations in the G8 countries.