Clinton Foundation controversies throw spotlight on nonprofit finances

Addressing participants at the closing session of the Clinton Global Initiative’s Middle East and Africa meeting in Marrakech, Morocco, earlier this month, Bill Clinton invoked what he called the “grandfather test”: “When I see a child, I ask myself, which course would be best for this child’s future?” Clinton’s lofty pronouncement sought to bring a warm, feel-good ending to an event that for three days had been in the eye of the political storm surrounding the wider Clinton Foundation. The furor had originally been sparked by the launch of a book, “Clinton Cash,” which alleged multiple improprieties connected with the Clinton family’s charitable endeavor. While some of the book’s claims have since been refuted, it has set off a treasure hunt among the who’s who of investigative journalists, including seasoned sleuths from the The New York Times, The Washington Post, Politico and the International Business Times. Since the media hounds caught the first whiff of blood, hardly a single day has gone by without new allegations about misdeeds and improprieties at the $2 billion foundation appearing in the press. The debate has moved the issue of nonprofit funding and transparency from the shadows to center stage. Two facts stand out. First, the Clinton Foundation has attracted severe criticism for opacity despite broadly disclosing more information than legally required. Second, no clear and universally recognized transparency standards for the sector exist. For example, Transparency International, arguably the most prominent pro-transparency advocacy group worldwide, has to date not developed any standards or guidelines for foundation transparency and does not formally require its national chapters that make up its global network to reveal in detail who funds their work. (Disclosure: The author is a former employee of Transparency International Georgia, and has undertaken consulting work for the TI Secretariat. He currently serves as Transparify’s advocacy manager.) While Transparency International itself does disclose its donors in great detail, many other prominent international pro-transparency nongovernmental organizations are reportedly somewhat opaque about their own financial backers. With scrutiny of nonprofits’ operations on the rise worldwide — the government of India recently moved to place restrictions on the Ford Foundation and on advocacy groups, while some U.S. foundations have come under fire in Germany — and a lack of universally accepted standards, what should development actors do to demonstrate their commitment to transparency, allay suspicions of “hidden agendas” and pre-empt similar criticisms? Devex canvassed several leading advocates for nonprofit transparency for their opinions and elicited seven rules for excelling in accountability in this new age of heightened scrutiny. Rule 1: Some donors are worse than no donors. “The question from a public benefit organization’s perspective is whether you have the funds to support the programs you think are critical to improving people’s lives,” Steven Lawrence, director of research at the Foundation Center, told Devex. “That said, I would expect that many organizations would refuse gifts from the North Korean government based on their policies, just as many have refused funds from major tobacco companies.” Rule 2: Develop crystal-clear contributions policies. “We advocate for corporations to publicly disclose all of their political spending. Shareholders have a right to know if their money is being spent for political purposes. Disclosure is good risk management and forces corporations to be accountable,” Marrian Currinder, associate director at the Center for Political Accountability, noted. “Foundations, like corporations, need to have a board-approved policy in place that governs contributions.” Rule 3: Establish clear ground rules with donors. “Organizations need to be clear with donors as to what they plan to do with their contributions and then deliver fully on those promises,” Lawrence said. “At the same time, if a donor wants to be more directive about the work of the organization than the organization believes is appropriate, then the organization should not take money from that donor.” Rule 4: Be at least as transparent as your governmental peers. “Imagine you’re an activist in Nepal trying to track how the earthquake relief money is being spent. I don’t think you care if the money comes from a government or a foundation. You want to know how much there is, what it is being spent on and what effect it is having,” Publish What You Fund CEO Rupert Simons explained. “We would like to see foundations publish where their money comes from, where it goes and what impact it has. In particular, we encourage foundations to sign up to the voluntary International Aid Transparency Initiative standards; some have already done so.” Rule 5: Use financial transparency as a risk management tool. “Public disclosure of contributions and spending is good governance. Being transparent forces recipients to consider whether they are really comfortable disclosing and defending big contributions they have received,” Currinder highlighted. “If the Clinton Foundation had been fully transparent when Hillary was U.S. secretary of state, perhaps it would not have accepted some of the foreign contributions that have since raised eyebrows. I think the lesson learned from this controversy is not to accept contributions that you are not comfortable publicly disclosing, explaining and defending. Rule 6: Beware of inviting political actors onto your leadership team or board. “Private foundations should not be established or controlled by government officials or those running for public office,” Craig Holman, a Public Citizen government affairs lobbyist, argued. “We should recognize that such foundations often serve as a means for special interests to throw money at the feet of those in power in order to curry favor. Such relationships pose an inherent conflict of interest.” Rule 7: Remember that external accountability challenges are legitimate. “Our position is that there are legitimate questions to be raised and answered, including questions about the organization's financial disclosures … and whether there are potential conflicts of interest,” Jenn Topper, spokeswoman for the Sunlight Foundation, stressed. 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