Private Foundations - International Development Committee Contents


Written evidence submitted by Development Initiatives

INTRODUCTION

1.  Established in 1992, Development Initiatives is an independent organisation with a particular expertise in analysing, interpreting and improving information about international aid and development, and making it more transparent and accessible.

2.  DI receives funding from two foundations: the William and Flora Hewlett Foundation and the Bill and Melinda Gates Foundation.

3.  Our aidinfo programme seeks to increase the transparency of all resources for poverty reduction, in order to increase impact on poverty. As part of our work, we provide technical support to the DFID-led International Aid Transparency Initiative (IATI)[2]. We have worked closely with the Hewlett and Gates Foundations and the US-based Foundation Center to encourage private foundations to publish information on their activities in an IATI-compatible way, which would enable comparable analysis of their activities and increase accountability and effectiveness.

BACKGROUND

4.  Private financing for development has grown in significance over the last decade. As well as additional financial resources, private actors have brought innovative approaches to international development drawn from business practices and new philanthropic priorities. Consequently, foundations have also attracted attention given the major financial and advocacy role that larger grant-making bodies now play or might play in the future.

5.  While comprehensive data on volumes and uses of private giving are problematic, available data reveals the growing role of private actors. Private grants as reported to the OECD-DAC (Chart 1) increased nominally from US$ 7 billion in 2000 to US$ 22.2 billion in 2009. This represents a real increase of 128% over the period, compared to just 55% for ODA when debt relief is discounted.

6.  Private grants increased steadily to 2008 but fell 7% in real terms in 2009, moderating optimism on their ability to remain insulated from effects of the economic crisis. 2009 levels were equivalent to 19% and 27% of DAC total and bilateral ODA respectively (excluding debt relief). Volumes are primarily driven by the USA, accounting for 73.5% of private grants in 2009, followed by Germany (6.2%) and Canada (6%). The UK is the 9th largest source, constituting 1.5%.

Source: Development Initiatives calculation on OECD-DAC data.

7.  Whilst valuable in indicating overall trends, OECD DAC data on private giving is limited on a number of fronts. Firstly, reporting of this category is voluntary and thus considered to be underestimated, while more recent increases are also thought to be skewed by improved reporting. Nor does it consider corporate private giving. By contrast, for example, the Hudson Institute[3] estimates that 2009 private giving from DAC members to be US$ 52.5 billion, more than double the amount reported to the DAC. Further, data is limited to the perspective of the donor, not beneficiary, such that it is not possible to ascertain where, through which channels and for which purpose funds are allocated. Finally, DAC figures aggregate several types of private grant flows (e.g. NGOs, foundations, charitable sales etc.) and do not present information on foundations specifically.[4]

8.  Coverage and detail of other sources that focus on foundations specifically are similarly poor, with the inability to track net inflows to developing countries a fundamental limitation. Data on grant-making institutions in the developing world are currently unavailable and those outside the US and Europe are scant.[5] Aggregated information on European foundations is also limited. The European Foundation Centre counts more than 95,000 foundations in Europe, with 58,588 foundations across 14 European countries giving US$ 57.1 billion in 2004-2006.[6] Information is missing on contributions to international development. Updated analysis is ongoing.

Table 1

US FOUNDATIONS GIVING TO DEVELOPING COUNTRIES (2004-09)
US Foundations Giving to Developing Countries, 2008-2009 (current US$ billion)
20042005 20062007 20082009
Annual giving3.4 2.243.3 4.34.6
Annual % variation--35.3% 81.8%-17.5%30.3% 7%

Source: The Hudson Center and Development Initiatives calculations.

9.  Data are more complete for US-based foundations where the sector is most dynamic. The Hudson Institute[7] records a nominal increase of 35.3% in US foundation giving to developing countries over 2004-09, from US$ 3.4 billion to US$ 4.6 billion (Table 1). The Foundation Center's map on international US giving[8] confirms these trends, although volumes differ. It reports an upward trend in giving to developing countries from US$ 515 million in 2005 to US$ 5.4 billion in 2010, representing a 952% nominal increase over 5 years. Particularly large foundations, such as the Bill and Melinda Gates Foundation (BMGF), have driven much of this growth, and are also responsible for increasing proportions of total grants allocated for international development. BMGF grants through its Global Health and Global Development program areas reached US$ 1.98 billion in 2010, making it the 12th largest bilateral donor in that year.[9]

10.  Although data on US foundations are most comprehensive, they share a number of limitations with other regions. Estimates vary greatly as each data source uses different methodologies to calculate grants and classify key information, such as domestic and international giving, type of organization and modes of operation. There is also a lack of clarity on the volumes and proportions of grants directly allocated to countries and projects rather than, for example, those channelled through international or domestic organisations. In addition to this, reporting practices by foundations themselves are often unsatisfactory and an agreed reporting standard is missing.

11.   As a consequence understanding the role of foundations in relation to other international development financing remains a challenge. The presentation of data is indicative of volumes of giving as much as of the need of increased accountability and transparency in private donorship.

IMPROVEMENTS IN REPORTING AND AVAILABILITY OF INFORMATION ON FOUNDATIONS

12.  Nevertheless, in the last year there have been significant improvements in access to data on Foundation spending on international development. In 2010 the Bill and Melinda Gates Foundation started reporting to the OECD DAC on their grants to support Global Health, allowing their investments in this area to be compared with, and included in, figures from traditional aid donors and multilateral organisations. They are now moving to report all of their international work through the DAC.

13.  In addition to this, US foundations are beginning to engage with the International Aid Transparency Initiative (IATI). IATI is a multi-stakeholder initiative, launched at the Accra High Level Forum on Aid Effectiveness in 2008. It brought together aid donors (bilateral, multilateral, foundations and more recently non-governmental organisations), civil society representatives and aid recipient governments to agree on a common standard for reporting information on aid flows.

14.  The content of the IATI Standard includes a common list of data items, a common list of definitions, and an electronic format to enable the automated sharing of data, and was agreed in February 2011. IATI's ambition is to make aid information more useful to stakeholders in partner countries by publishing more timely, detailed and comparable aid information from a wide range of aid providers.

15.  DFID have taken a strong lead on the IATI process, hosting the initiative, offering strong political support, and becoming the first organisation to report to the standard. They first published data in January 2011, as part of the UK Aid Transparency Guarantee. Since then, momentum has been building on IATI with a further eight organisations now reporting to the Standard, including the World Bank, the European Commission, the William and Flora Hewlett Foundation and two NGOs. A further five organisations a planning to publish their data to the Standard before the High Level Forum on Aid Effectiveness in Busan in November 2011. Furthermore, in September 2011, a Statement by Commonwealth Finance Ministers included a recommendation to "collectively support the adoption of IATI or an IATI-compatible common standard".[10] It is currently unclear how IATI's role will be reflected in the outcome document for HLF4 in Busan, but it is being incorporated into a Building Block proposal on aid and fiscal transparency.

16.  The Hewlett Foundation has been engaged in IATI since its launch, and was the second aid donor to publish data to the Standard. The Gates Foundation has been an observer to the IATI process and is taking steps to publish more detailed and timely data consistent with IATI standards.

17).  By publishing to the IATI standard, the Hewlett Foundation has taken the first steps to making its data comparable with that of other traditional donors, in an open format that makes it accessible to users of information. This helps partner country governments build a more complete picture of aid activities in their country, it helps other donors coordinate their activities and avoid duplication, and it helps the Hewlett Foundation itself to ensure that its activities complement those of other organisations.

18.  With funding from the Hewlett Foundation, the Foundation Center has been working on a project to align their reporting standard with the IATI standard, in order "to foster greater transparency and accountability, and provide leaders with the information resources they need to be more strategic, purposeful, and effective in their work".[11] They have mapped the data collected in their reporting system eGrant[12] with the data fields in the IATI standard, to understand the differences in the information being collected and reported by the 600 or so foundations reporting through eGrant and the data that is required for reporting with the IATI standard. Their standard will then be developed, following consultation and surveys with foundations, to develop and include new fields that will enable alignment with IATI.

19.  Foundation engagement with IATI has revealed the different accountability arrangements which, in turn, lead to different priorities in publishing data. For government donors there is a clear line of accountability to taxpayers, which provides an incentive to demonstrate that money invested in international development is spent effectively. NGOs have a public constituency to whom they have to be accountable for the way they spend money. Accountability structures for foundations are to the board or trustees, and thus information on grant-making is generally quite internally focused. There is very little need to publish data to the public, so their incentives for reporting to a standard like IATI are focused rather towards ensuring good value for money, and using the data they generate to improve their operations. Sharing information openly and being able to understand the work that other organisations are doing can enable foundations to target their investments in the most effective way, ensuring best value for money.

What could the future look like?

20.  It is clear that there is a demand for improved access to data on the work of private foundations in the international development sector. This is of particular concern to partner country governments, as evidenced in recent consultations. For example, aid recipient governments at the IATI Partner Country Consultation in Montenegro in 2009 agreed that "all providers of development assistance need to report for a comprehensive overview of resource flows for planning, ie including flows from NGOs, private organisations, foundations and non-DAC donors".[13] Although it is not yet possible to calculate the precise volume of financing coming from philanthropic foundations, the figures already indicate a very significant contribution to work on international development.

21.  The International Aid Transparency Initiative Standard for reporting on aid flows holds great potential for foundations in this respect. It offers a common platform and protocol for what information foundations can share to increase publication of data, and to enable greater collaboration and comparability between the different organisations. More importantly, it offers a platform for sharing data with other development actors who choose to publish to the IATI standard, enabling greater comparability and understanding of the larger picture of aid and development flows from both traditional actors, and other new and emerging donors, including foundations, NGOs and the private sector.

22.  While the IATI Standard is based on the DAC CRS, which applies principally to official donors, we are confident on the basis of our current work with foundations and NGOs that IATI has sufficient flexibility to be relevant to their business models, irrespective of whether they are large or small funders of development. Although some foundations already publish data on their development activities via their own websites, this has significantly more value if it can be easily compared with the contributions of other actors. The advantage of IATI's approach is that each organisation continues to publish its own information, but does so in a common, open, electronic format, with the location of that data catalogued in the IATI Registry. This makes IATI data easy to find, use and compare.

CONCLUSION

23.  Engagement with IATI offers a mechanism which can improve coordination and make all resources more efficient and effective. The value for foundations in using and sharing data on projects from a broad range of different funders is that they would be able to make decisions on their own grants with better information on what else is being funded from elsewhere. Development Initiatives would encourage all foundations to engage with the work of the International Aid Transparency Initiative, and consider the potential benefits it could bring to their work.

24.  Although IATI is a voluntary initiative, the UK Department for International Development has recently required organisations that they fund to be IATI compliant. . In March 2011, DFID announced that all NGOs receiving DFID funding through Programme Partnership Arrangements, Global Poverty Action Funds and Civil Society Challenge Funds should publish data according to a set of minimum requirements from the IATI Standard by April 2013. Where DFID provides funding to UK foundations, it may wish to consider a similar approach. Engagement with IATI could also support foundations in increasing their development effectiveness, by helping stakeholders in partner countries to build up a more complete picture of the resources available for poverty reduction, and ensure best use of those resources. There is a tendency for funding organisations to provide information that they want themselves but this does not mean that it will be useful to others. IATI was designed to meet the priority information needs of partner country stakeholders, including their need for more and better information from all actors, including private foundations. Without information on all resource flows into developing countries, it is impossible for planning and budgeting at a country level to happen effectively. Put in this context, by publishing data to the IATI standard, foundations will be able to understand better how their investments can interact best with those of other players in the field, and ensure that the valuable resources that they are contributing to development are being spent in the most effective way.

27 October 2011



2   www.aidtransparency.net Back

3   Hudson Center , Index of Global Philanthropy and Remittances, 2011. Back

4   The Net private grants line includes grants and any additional contributions (also in-kind) by NGOs, foundations and other private sources for development assistance and relief made to or for developing countries, multilateral organisations, special appeals or international NGOs as well some expenditures in the donor country (e.g.: subsidies to students from developing countries). The amount is discounted of funds received by the donor country official sector or from abroad. Source: DAC Statistical Reporting Directives, November 2010. Back

5   Some data are available on Japanese foundations: http://www.jfc.or.jp/eibun/e_index.html Back

6   European Foundation Centre, Foundations in the European Union - Facts & Figures, May 2008. Original value of EUR 46.1 billion. OECD-DAC exchange rates applied. Countries surveyed are Belgium, Czech Republic, Estonia, Finland, France, Germany, Hungary, Italy, Latvia, Luxembourg, Netherlands, Slovakia, Slovenia Spain, Sweden and the UK. Back

7   Hudson Center, Index of Global Philanthropy and Remittances, 2006-2011. Back

8   Calculations based on the center's Interactive Map of Direct Grants by US Grantmakers to Non US Recipients: http://fconline.foundationcenter.org/maps/ Back

9   When considering country bilateral ODA only (excluding debt relief). It is the 15th largest if country donor contributions to multilateral agencies are also included. Comparison based on 2010 provisional OECD data for DAC donors. Data for the BMGF available at: http://www.gatesfoundation.org/annualreport/2010/Pages/grants-paid-summary.aspx Back

10   http://www.thecommonwealth.org/files/240432/FileName/CommonwealthStatementonAcceleratingDevelopmentwithMoreEffectiveAid-CFMM1.pdf Back

11   Foundation Center (2010), Proposal Summary from Grant Proposal to the Hewlett Foundation Global Development Program. Back

12   http://foundationcenter.org/grantmakers/e-grants.html Back

13   International Aid Transparency Initiative Consultation for Europe and the CIS, Consultation Report (2009), Montenegro, http://www.aidtransparency.net/wp-content/uploads/2009/08/Report-IATI-Consultation_Europe-and-the-CIS-Montenegro-6-and-7-July-2009.pdf p10. Back


 
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Prepared 20 January 2012