Why are foundations and nonprofits losing public trust?

Foundations, individual philanthropists, and nonprofits should be worried about growing distrust in their organizations and sectors at large if they want to continue to effectively fundraise and drive societal changes, according to philanthropy leaders and advocates.

Even as philanthropic organizations begin to transition toward a more trust-based approach with their grantees, data shows a decline in public trust in them, said Phil Buchanan, the president of the Center for Effective Philanthropy, on Thursday at a virtual event hosted by CEP and the Council on Foundations. The event focused on rebuilding trust in nonprofits and philanthropy.

Public trust in nonprofits is declining in the United States, according to research from Independent Sector, a network of U.S.-based nonprofits and philanthropic groups. Independent Sector conducted a survey in February showing that 56% of Americans said they trusted nonprofits — a drop of 3 percentage points from a 2020 study. Trust in philanthropy also dropped from 36% to 34% during that same period, “but this difference is not statistically significant,” the group said.

Trust in institutions generally seems to be falling, but trust in nonprofits seems to be declining even more rapidly, Buchanan said. He linked that growing distrust to a decrease in household giving in the U.S., which he called “concerning.”

“This all matters a lot, and it matters for donors — individual donors as well as foundation donors,” Buchanan said.

Maintaining public trust is critical for foundations and nonprofits because of the voluntary nature of philanthropy, said Beth Breeze, the director of the Centre for Philanthropy at the University of Kent. It is difficult for citizens to completely disengage from business and government, but it is simple for them to “opt” out of involvement with nonprofits and philanthropy if they lose faith in them, she said during the event.

The reasons why the public is losing trust in these organizations have grown much more “interesting” than those cited decades ago, said Breeze, who authored the 2021 book “In Defence of Philanthropy.” In the 1990s, nonprofits commonly heard criticisms based on the perception that their leaders were too “amateurish” to run an organization, she said.

“Now, I think that rather than being worried about good intentions that are imperfectly executed, I think that now the public are worried about the bad intentions of nonprofits and, in particular, of their donors,” Breeze said.

There is a worry that philanthropists are “in it for themselves” and that they’re motivated by a desire to advance their own agenda — and not by altruism, she said. One example of this is the conspiracy theories that have proliferated on social media about Bill Gates’ interest in funding COVID-19 vaccines. A popular conspiracy theory is that the billionaire philanthropist wants to use the vaccines to place tracking devices in people, a baseless claim that he has denied.

In public discourse, people also seem to be conflating critiques of philanthropy with critiques of government, Breeze said. When you dig deeper into some of the criticism, she said, many of the worries are really about the “welfare state not being funded,” as well as about health care and children’s education.

Still, many of the speakers at Thursday’s event also acknowledged that growing wealth inequality was driving much of the skepticism about philanthropy and individual donors in particular. In the U.S., those concerns have resulted in the introduction of national legislation that would force philanthropists to spend money set aside for charitable donations in donor-advised funds within 15 years. Currently, money can be held in DAFs indefinitely.

However, the bill has been divisive. The Council on Foundations, a trade association representing U.S. foundations, has opposed the legislation. Targeting dollars that are bound to go toward the public good is “wrong,” Kathleen Enright, the president of the association, said at the event.

“Why not look at the rest of the dollars that are being held by the wealthy, rather than the dollars that have already been committed to the philanthropic purposes?” she said.

Still, she did suggest that foundations could try to regain public trust by acknowledging how they may have benefited from tax policies that have exacerbated wealth inequality and by playing a role in “reversing that” through programmatic and policy work on addressing inequalities.