It’s Time for Critical Reflection on Transparency in Philanthropy

By Sarah Rennie, Chair of the Grindrod Family Centenary Trust  

Transparency and accountability 

The notion that private philanthropy should become more transparent is gaining traction.  So much so that the Worldwide Network for Grantmaker Support (WINGS), a global network of philanthropy support and development organisations has recently published a guide called “Moving from Reflection to Action: A Guide on Transparency and Accountability for Philanthropic Organisations” which focuses on how philanthropic organisations can become more transparent.   In this document, WINGS is very brief on why philanthropy should be more transparent, stating: “transparency and accountability are important for building trust and support in philanthropic organisations. It is considered a part of good governance”.   

Why should philanthropy be more transparent?  

I would like to think about the “why” of transparency a little more in the hope that it will guide us better when we think of the “how”. Some of the benefits of greater transparency in philanthropy are outlined below.   

Facilitating access to funding  

I think most people, whether they are in the philanthropic sector, are grantees of Foundations or the general public, would consider philanthropic organisations to be opaque or private. Certainly, in the general public, it appears that there is not a detailed understanding of philanthropy, either referencing charitable deeds or mega-donors such as Bill Gates.  Many non-profit organisations (NPOs), whether grantees or not, will say that they find it very difficult to find out about philanthropic organisations, to contact them or to know what areas of work they support.   A network of relationships appears to be the most effective way of making contact with potential new donors, and that only goes as far as the stretch of your networks, leaving outsiders potentially forever outside.   

Even those working for or with philanthropic organisations will agree that generally, there is not a clear line of sight of the number, scale, overall value, areas of interest and grantee support of philanthropic organisations in South Africa.  Knowledge is patchy, to say the least, and on the whole, quite reluctantly given up.  Many Foundations do not have websites and many only accept grant applications by invitation Pity the poor Masters’ student of Philanthropy and pity the poor fundraiser! 

Supporting ethical behaviour 

Another argument in support of greater transparency is that we live in a country beset by unethical behaviour in all aspects of our life, with fraud and corruption infiltrating almost all sectors, private or public and even, most upsettingly, when the organisation is established to promote the public good and improve life opportunities. So civil society, including philanthropic organisations is not magically exempt from misconduct. Many support the view that increased transparency will enhance governance and make the environment for misconduct less conducive.  

Added to this mix is that there are, albeit a handful, Foundations with very large sums of money at their disposal and/or ambitious goals to effect system change.  These philanthropic organisations can effect systemic changes to public mandates on key services and policies. They are possibly playing a quasi-public role and accordingly, the public should have more information about who they are, what they believe in and what they are doing.  

Promoting a culture of giving 

Finally, it is possible that if philanthropists were more transparent and public about their philanthropy – such as The Giving Pledge – it could encourage a stronger culture of giving – with more philanthropists giving more and learning how to do it better with the sector knowledge available.  

Supporting greater transparency  

It is no wonder that there is a push towards transparency. Arguably, grant seekers would benefit from more freely available information about Foundations that may support them, opportunities for misconduct would narrow and changes that affect large parts of the public that Foundations are supporting could be publicly known and discussed. Greater disclosure, led by philanthropic institutes themselves, via a collective organisation like IPASA, would be a good thing.  

There is a lot that the South African philanthropic sector can learn from other countries in this regard.  For example, The Philanthropy Roundtable in the United States, which is a network of donors, argues that to ensure that foundations are pursuing a charitable purpose, governments should mandate disclosure of information that is necessary to that end.  In the US, from a cursory investigation, it appears that private foundations are required to submit annual returns to the country’s Treasury detailing quite a lot of information: all their trustees and staff identities and compensation, the value of total assets and other balance sheet information, all revenue and expenses, including the salaries of all trustees and staff, the amount of grants paid and to whom and for what, and to provide yes/ no answers to a long list of questions relating to their activities (Form 990- PF). While for some, this reporting may appear to fulfil any transparency requirements, others argue it does not go far enough.  

A sensible response from the sector would be to proactively respond to the debate on transparency and to agree on and promote the minimum transparency requirements that the sector agrees upon.  

Transparency can be complicated    

However, before we rush headlong into “enthusiast transparency”, as described by Rober J Reid in his excellent article, “Foundation Transparency: Opacity – It’s complicated”, let us pause a minute to consider the reasons why private philanthropy remains largely opaque. Arguably, most of these reasons are rational or rooted in a values system. Before we can start to encourage greater transparency, it is important to understand the reasons for and value of opacity.  

A great deal of philanthropy is motivated by religious beliefs and instruction. Various religions encourage their followers to give anonymously as an act of humility and love. This is not something a philanthropist would surrender lightly. Even without an explicit religious injunction, many philanthropists want to give but want to be modest – and to be public about their giving makes them feel like they are boasting, which goes against their values.  

There are also very practical concerns. In a country with rapidly escalating kidnapping, there are real safety concerns for living donors publicising their – and thus their family’s – identity.   

There are other arguments in favour of opacity that relate to effectiveness. As Reid succinctly puts it in his article previously mentioned, “Such [opaque] practices by private foundations were observed to be efforts intended to protect important grantmaking capacities, such as preserving philanthropic freedom, shielding grant decisions from political interference, facilitating the ability to experiment, making important grants potentially too controversial for other funders and more freely engage in higher-risk projects”. The autonomy and relative lack of accountability of private foundations allows them practically to make decisions that can result in better grant making – more creative, more innovative, more risk-taking and more flexible. 

Rethinking transparency  

It is worth carefully considering these deeply held beliefs as well as the practical advantages of Foundation opacity and weigh them against the advantages of transparency.   One concept that is worth further investigation is “situational transparency” as described by Reid. This occurs when a Foundations increases its transparency in certain situations with certain grantees in ways intended to improve collaborative relationships.  It could also occur when Foundations are collaborating with each other.  In these strategic instances, Foundations engage in high levels of transparency and access;  advocating loudly for particular projects or grantees and openly sharing strategies, tools and documents, networks as well as stories of successes and failures.   

In other words, currently, it appears that Foundations move between being transparent and being opaque in very intentional and pragmatic ways that are used to improve grantmaking effectiveness.  This flexibility is one of the hallmarks of private philanthropy.  In my view, too often opacity is the default position of too many Foundations without considering whether it is the best and most effective response in the circumstances.   

Many opaque practices can be discarded with very little downside, and I think IPASA is very well positioned to encourage greater transparency and to persuade Foundations to use increased transparency for their own benefit.  However, the decision to be more transparent should be taken carefully and intentionally, understanding both the costs and the benefits.  

Taking the transparency discussion forward 

As a first step, an organisation like IPASA could convene funders around the topic of transparency for a nuanced discussion exploring situational transparency. It is not only IPASA that could play a role in promoting transparency in the philanthropy sector – funders, as peers, should also hold each other accountable for their practices regarding transparency. Last but not least, funders should open themselves up to critical self-reflection on transparency to ensure that their practices are in line with their key values and strategic objectives.  


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