3 Concerns about foundations
Single-issue interventions
34. Foundations can make independent decisions about
what to fund. They often choose focused, "problem-oriented"
interventions that produce fast results. For smaller foundations,
adopting a single-issue approach is often the easiest approach,
as Sarah Lock of the Nuffield Foundation told us:
It is much easier for us to focus on specific
issues rather than addressing everything, but those single issues
still fit into the big jigsaw […] Having a single issue helps
keep trustees on board and it also helps people who are applying
for funding from us to know where to go.[63]
35. However, critics argue that a 'quick win' approach
means that foundations may fail to recognise structural and political
impediments to development. Rather than taking a holistic approach,
critics say, foundations focus on isolated problems and devise
'vertical' interventions to deal with them—for example,
developing vaccines for a single infectious disease without strengthening
health systems (by training staff, improving clinic facilities
or helping patients access care). It is argued that foundations
risk creating parallel structures that could further undermine
the effectiveness of public sector provision. One critic, Michael
Edwards, has stated:
New loans, seeds and vaccines are certainly important,
but there is no vaccine against the racism that denies land to
'dalits' (or so-called "untouchables") in India, no
technology that can deliver the public health infrastructure required
to combat HIV, and no market that can re-order the dysfunctional
relationships between different religions and other social groups
that underpin violence and insecurity.[64]
36. Further, critics claim that foundations' preference
for innovation and flexibility can mean following development
"fads" rather than focusing on trusted development interventions
such as clean water provision and building schools and clinics.
It has been argued that foundations focus "too much on glamorous
science and long-term technology bets and not enough on putting
boots on the ground in places like Africa."[65]
Dr Noshua Watson of IDS told us that foundations needed to build
more local partnerships in developing countries:
When you look at those partnerships, the foundations
that are giving are very recognisable names—Rockefeller,
Gates, Hewlett and so on—but their partners are still largely
think-tanks, academic organisations and NGOs in the US and Canada.
Only about a fourth of their partners are abroad in, say, India,
Kenya and so on and, even then, they are largely other think-tanks
or academic institutions, so there is still a lot of work to be
done in terms of building up the links and partnerships between
foundations and with NGOs or civil society organisations on the
ground.[66]
She also highlighted a key risk with single-issue
interventions:
If you are creating a monoculture of approach
to a certain problem, particularly when that approach might not
necessarily be empirically proven or state of the art in development
practice, it becomes a problem.[67]
37. The problems caused by focusing on 'vertical',
single-issue interventions instead of whole development sectors
are demonstrated by recent comments made by Babatunde Osotimehin,
the executive director of the UN Population Fund (UNFPA). In
a recent interview, Dr Osotimehin said that "efforts to expand
family planning services in the developing world stalled for a
decade while global health organizations turned their energies
to fighting HIV/AIDS." He said "We made a mistake. We
disconnected HIV from reproductive health. We should never have
done that because it is part and parcel".[68]
38. When we put criticisms about foundations' single-issue
focus to Jeff Raikes, Chief Executive Officer of the Gates Foundation,
he defended the Foundation and said it sought to do both the "low
tech" and the "high tech"; that is, that it committed
substantial resources to strengthening health systems in poor
countries by, for example, building pit latrines and providing
anti-malarial bednets, as well as funding "high tech"
immunisation initiatives.[69]
39. As we have said, DFID has provided generous support
to GAVI, a single-issue vaccine and immunisation intervention.
We asked the DFID Minister to respond to criticisms about vertical
funds of this kind. He denied that by supporting GAVI, DFID was
neglecting broader health projects in its partner countries. He
said he had "asked this question robustly in the Department"
and felt "genuinely that what GAVI and Gates are doing complements
and supplements and does not displace".[70]
DFID has a large bilateral budget, spending the same in one year
on the health sector—£830 million in 2010-2011, its
largest expenditure for any sector—as on GAVI over five
years.[71] Systems
strengthening is a key priority for the Department: within Whitehall,
DFID is lead (with the Department of Health) on the 'Health systems
and delivery' pillar of the new cross-Government 'Outcomes Framework
for Global Health 2011-2015'.[72]
DFID also works with the Rockefeller Foundation on their
Transforming Health Systems initiative.[73]
40. Critics have argued that the focused, 'problem-oriented'
interventions followed by many foundations can risk focusing on
isolated issues rather than wider obstacles standing in the way
of development such as inequality, conflict and poverty. However,
equally, for small foundations, choosing a single issue gives
a focal point around which trustees and grant-seekers can unite.
As we noted in a previous recommendation, DFID has contributed
generously to the Global Alliance for Vaccines and Immunisation—a
classic 'vertical' intervention—but this is just one of
a wide range of DFID health inputs, many of which focus instead
of strengthening wider health systems. To avoid the risk of too
many parallel, single-issue interventions springing up in the
health sector, DFID should seek to engage foundations with global
development structures such as the Paris Agenda, and use these
fora to highlight the importance of sector-wide and 'systems strengthening'
approaches.
The education sector: left behind
by foundations?
41. Education receives less attention from foundations
than health. Data suggests that education represents around 5%
of the global US$9 billion philanthropic financial commitment,
compared with over 80% for health. Additionally, much of the finance
provided through corporate philanthropy for education is directed
towards middle-income countries.[74]
This means the education sector in the poorest countries misses
out on much-needed funding. There are approximately 67 million
primary school-age children out of school worldwide, along with
over 70 million adolescents. Many millions more are in school
but receiving an education of extremely low quality. Girls are
often hardest hit, in terms of attendance and learning outcomes.
Failure to make progress on getting children into school is holding
back progress on other Millennium Development Goals, especially
those on child survival, poverty reduction and gender equality.[75]
42. Kevin Watkins of the Brookings
Institution partly attributes philanthropy's relative neglect
of the sector to the fact that education "lacks a strong
multilateral core" and that there is no counterpart to the
Global Funds of the health sector, which have provided a "financing
window" for philanthropists and private sector actors.
Watkins suggests the establishment of a Global Fund for
Education, which—as well as catalysing finance for the education
sector generally—could act as "a platform through which
companies can deliver finance, technology and support to some
of the world's most disadvantaged children."[76]
43. Encouragingly, we heard from several witnesses
that a number of foundations were beginning to move into education,
especially girls' education.[77]
DFID has a high profile collaboration with the Nike Foundation,
which invests exclusively in projects for adolescent girls in
the developing world (including a focus on girls' education).
The Foundation has opened the 'Nike Girl Hub' in DFID's offices
in London. In addition to the Palace Street base, the Girl Hub
operates through DFID country offices in Ethiopia, Nigeria and
Rwanda. DFID states in its written submission:
The Nike Foundation's deep expertise in girls
as well as communications combined with the reach, scale and knowledge
of DFID creates a powerful partnership in the Girl Hub joint venture
that is capable of transforming girls' lives.[78]
DFID gave us some specific examples of outputs from
the partnerships, such as the national rollout of an adolescent
girl health programme with the Rwandan Ministry of Health and
DFID Rwanda. In addition, DFID says the Girl Hub has supported
DFID's top management group in redesigning its gender strategy
to ensure girls and women are a key priority for every country.[79]
We asked DFID whether it could look at extending Girl Hub activities
into the Democratic Republic of Congo (DRC), which we visited
this summer and learned of the terrible situation facing girls
and women in the country, particularly in conflict-affected eastern
DRC. The Department replied that "having a Girl Hub in neighbouring
Rwanda means that [the Hub] are learning about the potential to
reach girls at scale in this region."[80]
44. Education in poor countries receives far less
support than the health sector from foundations. DFID should encourage
foundations to move into education sector, especially girls' education,
in line with DFID's prioritisation of girls and women. It should
look at either strengthening the Global Partnership for Education
(formerly the Education for All Fast Track Initiative), or helping
set up a new independent Global Fund for Education—either
of which could help facilitate increased funding from foundations.
45. The Nike Girl Hub is an innovative approach
that has scope to be scaled up, and possibly replicated in other
sectors. We recommend that DFID extend Girl Hub activities to
eastern DRC, where many girls and women face extreme hardships—especially
gender-related violence—on a daily basis. Initially, a DRC
Girl Hub could operate out of the Hub's base in Rwanda, but the
long-term aim should be for an independent Hub in DRC operating
within DFID's expanded programme there.
Accountability
46. Foundations differ from official development
agencies in that, instead of being accountable to the taxpaying
public, they answer to their boards and/or to their benefactor(s).[81]
As we have said, this comes with advantages—notably
that it can enable them to take more risks.[82]
Yet at the same time this weakened accountability poses a challenge,
as academics from the Institute of Development Studies told us:
There are serious issues around private foundations'
lack of legitimacy due to the private and undemocratic nature
of their decision-making processes. These processes need to be
inclusive and actively seek to engage with local communities as
well as other donors, NGOs and civil society organisations.[83]
47. Foundations and trusts are administered by trustees.
Dr Noshua Watson of IDS emphasised that "within better governed
foundations you find a separation between the trustees who determine
the strategic direction of the foundation as a whole, and then
the programme officers or programme managers who are subject specialists
and actually make the funding decisions." She said "when
you have the trustees themselves making the funding decisions,
they may not necessarily go in the direction they need to go or
select the appropriate programme."[84]
She and other witnesses highlighted the importance of building
the capacity of trustees with limited experience of international
development (for instance, by getting advice from academics, donors
and NGOs and working in partnership with more specialist organisations,
as many foundations already do).[85]
Improving monitoring and evaluation (M&E) is another route
towards strengthened accountability. A recent study found that
only 43% of US-based foundations formally evaluated the work financed
by their grants. There is evidence that the larger foundations
are improving their M&E: for example, the Gates Foundation
now has an Impact Planning and Improvement Unit.[86]
48. A recent paper by Michael Edwards, co-author
of Philanthrocapitalism,[87]
detected an "accountability deficit" within the philanthropy
sector, giving the example of the Gates Foundation, which, he
asserts, controls a quarter of global spending on public health
and yet "has a board of three family members plus Warren
Buffet—a model that is unlikely to be effective in governance
terms and is sure to raise more questions in the future."[88]
However, he concedes that, like other foundations, Gates is taking
steps to improve accountability by using 'advisory panels' of
various kinds. Edwards suggests a number of other ways in which
foundations could strengthen their own accountability: by channelling
funds through structures that are governed by a broad cross-section
of stakeholders at the national and international levels, such
as the Global Fund to Fight AIDS, Tuberculosis and Malaria, which
has formal civil society representation on its board; diversifying
their boards of directors; strengthening feedback from their grantees
and other independent voices; increasing coordination with host
country governments; channelling more resources through public
structures; and "fostering a culture of self-criticism to
produce a 'social science of philanthropy' from which everyone
can gain".[89]
49. DFID collaborates with private foundations on
accountability and transparency through the Transparency and Accountability
Initiative (TAI), which aims to empower citizens to hold governing
institutions to account. TAI was launched in March 2010, is co-chaired
by DFID and the George Soros Open Society Foundations and is funded
by a consortium of four foundations.[90]
One of TAI's aims is to bring together the major private donors
to stimulate further innovation in major areas of development
work (such as climate change financing, natural resource governance,
aid and budget transparency).[91]
50. The fact that foundations are accountable
only to their board members and trustees, rather than to the public,
brings both advantages and disadvantages. Poor accountability
limits co-operation between foundations and official donors, and
thus it is in the interests of DFID and other agencies to support
foundations to strengthen accountability. We recommend that DFID
offer its skills and experience to build the capacity of the trustees
within smaller, UK-based foundations, who may have limited exposure
to the international development sector. This training could
emphasise other ways to strengthen accountability such as: setting
up decision-making structures that involve local grantees and
funding partners; increasing co-ordination with partner country
governments; and improving monitoring and evaluation.
Transparency
51. The precise volume, distribution and targeting
of foundation spending are currently unclear. Compared to official
donors, foundation reporting is weak. This is especially true
in Europe; the US foundation sector is more established and subject
to more stringent regulations.[92]
US regulations are set out in the Tax Reform Act of 1969 which
exempts grant-making foundations from paying most taxes on their
income from endowments. However, the Act requires a grant-making
foundation to pay out at least 5% of the value of its endowment
each year to charitable purposes. The Act also requires foundations
to file annual returns that are publicly available with detailed
financial and programmatic information, and to list every grant
made.[93]
52. Currently, all that is required of foundations
in England and Wales is the filing of annual reports and accounts
with the Charity Commission (or in Scotland, the Office of the
Scottish Charity Regulator, or in Northern Ireland, the Charity
Commission for Northern Ireland). Foundations' reports must demonstrate
how they are carrying out their charitable objectives and providing
public benefit.[94]
However, many foundations told us that they exceeded
these requirements by voluntarily reporting a wide range of information
about their spending on their websites.[95]
IMPROVING TRANSPARENCY
53. Steps are underway to improve transparency of
foundations' spending. Some of the initiative is being taken by
foundations themselves. For example, the Gates Foundation has
begun reporting its health sector spending to the OECD Development
Assistance Committee. It plans to extend this to all its international
development spending as soon as possible.[96]
Donors, too, are working to help ensure that reporting improves.
DFID has taken a leading role in securing international support
for the International Aid Transparency Initiative (IATI), which
was launched in September 2008 as a voluntary, multi-stakeholder
initiative aiming to make aid easier to track. Whilst so far it
is mainly traditional donors (including DFID itself) that are
making their reporting IATI-compliant—that is, conforming
to the IATI Standard, which was agreed in February 2011 and lays
out recommended data items for organisations to report on, including
an agreed electronic format for reporting this data, enabling
data from different organisations to be easily compared[97]—the
Hewlett Foundation has also signed up.[98]
The Initiative was given a strong boost at the Busan High Level
Forum on Aid Effectiveness in November 2011 following the US's
announcement that it will become IATI-compliant. NGOs are also
moving towards compliance: in March 2011, DFID announced that
all NGOs receiving DFID funding though Programme Partnership Arrangements,
Global Poverty Action Funds and Civil Society Challenge Funds
would be required to be IATI-compliant by April 2013.[99]
75% of global Official Development Assistance now falls under
IATI.[100]
54. The Gates Foundation has not committed itself
to compliance but is, according to the submission from the NGO
Development Initiatives, taking steps to "publish more detailed
and timely data consistent with IATI standards".[101]
When we asked Jeff Raikes whether the Foundation was moving towards
compliance, he said "we have chosen to publish our global
health information in that format and we are working towards doing
that with global development" but that it took "a little
bit of time to get the data, reformat it into the appropriate
categories". He stressed that he thought IATI was "a
good initiative for the world aid community".[102]
55. Matthew Bishop and Michael Green recommended
that the UK could tighten regulation further by introducing a
5% 'payout' rule for foundations to ensure that "these tax-subsidised
vehicles deliver real public benefit rather than being 'warehouses
of wealth.'"[103]
The DFID Minister cautioned against increasing regulation in this
way, saying that encouraging IATI compliance was one thing, but
that asking UK foundations in the development sector to conform
to a completely different set of rules to other UK-based charities
was problematic.[104]
56. Witnesses expressed concern that smaller foundations
might struggle to achieve IATI compliance. Sarah Lock of the Nuffield
Foundation said increased regulation might deter smaller foundations
from funding international development work.[105]
Noshua Watson of IDS agreed, saying "we do not want to create
onerous bureaucracy that stifles innovation and stifles the ability
of foundations to be flexible". She stressed that currently
the sources of data on foundations were largely private (in the
UK, New Philanthropy Capital; in the US, the Foundation Center;
and in Europe, the European Foundation Centre).[106]
She said that mandating a public organisation such as the OECD
DAC to collect data "would certainly benefit not only philanthropy
but also development", as this would enable the collection
of aggregated philanthropic spending, which currently did not
exist.[107] The DFID
Minister also welcomed the idea.[108]
As we have said, the Gates Foundation has already begun reporting
its health sector spending to the OECD DAC and plans to extend
this to all its international development spending as soon as
possible.[109]
57. The volume, distribution and targeting of
foundation spending is currently unclear. Compared to traditional
donors, foundation reporting is weak, especially within Europe.
In the US, foundations are required to list every grant made
and pay out 5% of the value of their endowment each year to charitable
purposes. Improved transparency amongst foundations would help
pre-empt the need to move to this kind of mandatory regulation
in the UK. DFID deserves credit for its leading role in setting
up the International Aid Transparency Initiative (IATI). The Department
has taken steps to ensure that the NGOs it funds are becoming
IATI-compliant. It is encouraging that the Hewlett foundation
has also achieved compliance. DFID must now seek compliance from
other foundations, including the Gates Foundation, which has already
taken the step of voluntarily reporting its health sector data
to the OECD Development Assistance Committee. DFID should encourage
other, smaller foundations to report their spending to the DAC
as a precursor to full IATI compliance. This would recognise the
limited capacity within some smaller foundations to increase their
reporting burden, and would facilitate a phased move towards increased
reporting requirements.
63 Q 9 Back
64
Michael Edwards, Just another emperor: the myths and realities
of philanthrocapitalism (Demos, 2008), cited in Robert Marten
and Jan Martin Witte, 'Transforming Development? The role of philanthropic
foundations in international development co-operation' (Global
Public Policy Institute Research Paper Series No.10, 2008). Back
65
'The side effects of doing good', The Economist, 21 February
2008. Back
66
Q 6 Back
67
Qq 10-11 Back
68
'Focus on HIV/AIDS cost family planning a decade, says UN population
chief', The Guardian, 24 October 2011 Back
69
Q 72 Back
70
Q 101 Back
71
At the GAVI pledging conference in June 2011, DFID committed £163m
per year for the next five years (DFID, 'What we do: Immunisation',
online at http://www.dfid.gov.uk/What-we-do/Key-Issues/Health/Immunisation/
Back
72
HM Government, 'Health is Global: An outcomes framework for global
health 2011-2015', p.15 Back
73
Ev 57 Back
74
Kevin Watkins, 'Corporate philanthropy and the Education For All
agenda', Briefing Summary of commissioned paper for The Bellagio
Initiative, November 2011, p.1 Back
75
Ibid., p.1 Back
76
Ibid, p.2 Back
77
Foundations with education sector programmes include: Hewlett
Foundation; Children's Investment Fund Foundation; MacArthur Foundation;
Elmo Philanthropies; ARK (a philanthropic organisation in India);
Pearson; the Soros Foundation Open Society Institute; the Qatar
Foundation; and the Aga Khan's Foundations((Ev 57-58 and 61-62).
Back
78
Ev 57-58 Back
79
Ev 60 and Ev 57-58 Back
80
Ev 63 Back
81
There are some exceptions to this, such as Comic Relief, which
is different to many other private foundations in that its income
is generated primarily through public fundraising rather than
endowments. It says this makes it a unique case with an enhanced
sense of accountability to the UK public (Ev w14) Back
82
Ev w19 Back
83
Ev w47 Back
84
Q 13 Back
85
Noshua Watson, Sarah Lock and David McNair, Q 13 Back
86
Cited in Marten and Witte (2008), p.21 Back
87
Matthew Bishop and Michael Green, Philanthrocapitalism: How
the Rich Can save the World and Why We Should Let Them (London:
A&C Black, 2008) Back
88
Michael Edwards, 'The role and limitations of philanthropy' (commissioned
paper for The Bellagio Initiative, November 2011, online at www.bellagioinitiative.org)
, p.12 Back
89
Ibid., p.2 Back
90
The Open Society, Ford, William and Flora Hewlett and Pierre Omidyar
Foundations. Hivos (a Dutch international NGO) and two global
civil society networks (International Budget Partnership and Revenue
Watch Institute) also provide support. Back
91
Ev 56-57 Back
92
Ev w15 and Erik Lundsgaarde, 'Global philanthropists and European
Development Co-operation', EDC 2020 Policy Brief no.8 (February
2011), p.2 Back
93
Ev 37 Back
94
Ev 34 Back
95
For example, Baring Foundation (ev w3); Wellcome Trust (ev w43);
Gates Foundation (ev 38) Back
96
Ev 38 Back
97
http://www.aidinfo.org/open Back
98
Organisations that are currently IATI-compliant include: DFID,
the World Bank, the European Commission, the Hewlett Foundation
and two NGOs. Back
99
Ev w17 Back
100
'Busan has been an expression of shifting geopolitical realities',
Jonathan Glennie, The Guardian 2 December 2011 Back
101
Ev w16 Back
102
Q 86 Back
103
Ev w25. According to the latest survey, by the Cass Business School,
in aggregate the 100 biggest foundations in the UK (by donations)
paid out 4% of the value of their endowments in 2007 (see 'The
five per cent solution', Matthew Bishop and Michael Green, April
2010. Online at http://www.stepjournal.org/journal_archive/2010/step_journal_april_2010/the_five_per_cent_solution.aspx) Back
104
Q 124 Back
105
Q 24 Back
106
New Philanthropy Capital describes itself as a "consultancy
and thinktank dedicated to helping funders and charities achieve
a greater impact." The US Foundation Center provides data,
analysis and training to foundations, and maintains the most comprehensive
database on US foundations. The European Foundation Center is
an international association of foundations and corporate funders
aiming to support the sector and document its activities. Back
107
Q 25 Back
108
Q 126 Back
109
Ev 38 Back
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