The response to COVID-19 has revealed a gap between the rhetoric of philanthropies and the realities of the grantees. It remains to be seen how and by whom that gap will be bridged in a post-COVID-19 world.

In a recent letter to its grantees, the Open Society Foundations President, Patrick Gaspard, wrote that: ‘COVID-19 may require shifts in strategy, re-prioritisation, and adjustments… We stand ready to find flexibility in our grants to help you respond to these challenges wherever possible.’

This statement exemplifies the sort of well-intentioned shift that several philanthropies are attempting as they rethink their working methods and engagement with grantees at a time of emergency. A similar pledge was collectively made by hundreds of foundations joining philanthropic networks’ led-initiatives, such as the Council on Foundations’ Call to Action and the European Philanthropy Statement, some of which translated into the creation of dedicated emergency funds. An example is the COVID-19 Emergency Fund established by Calouste Gulbenkian Foundation, with an initial amount of €5 million, to strengthen the resilience of society in the face of the global pandemic.

Yet, a few months into this emergency pandemic, it has become clear that there not only exists a gap between the rhetoric and reality, but also that such a gap becomes wider in an emergency. This has already raised some important questions: What happens when emergency funding is money redirected from other needy organisations to which it was originally promised? Why do donors systematically put NGOs into competition when allocating funds in emergency situations? What’s the impact of emergency funding when it can sometimes be slow, arriving after the emergency is no longer urgent?

COVID-19 has not just shed a light on issues of emergency response, it has also highlighted deeper structural issues that can arise in the donor-grantee relationship. Looking at funding announcements that have been made since the beginning of the year raises questions about how foundations ultimately decide what are the most deserving social change organisations. What criteria and processes do they use to determine who gets the funding? Should unsuccessful applicants be given feedback justifying their rejections to a funding request?

These are legitimate – yet taboo – questions among most grantees. It’s possible that COVID-19 might change that. As many nonprofits face an unprecedented existential threat, they may forgo accepted norms and become less deferential to their donors. Business as usual is no longer an option for many nonprofits in their relationship with their donors. The extreme financial pressure and overall distress caused by the global health crisis might prompt them to might speak out. But should this responsibility lie with grantees? While many philanthropies are doing their best to offer support, should they be doing more than just trying to be ‘responsive’?

A call for responsible grant-making to enhance accountability

OSF received praise for its COVID-19 emergency fund – $130 million to soften the economic blow of the coronavirus and confront the threat of authoritarian responses to the pandemic by nations around the world – but a deeper dive into the specifics of that funding left much to be desired. According to the Washington Post, following the announcement of their emergency fund, OSF employees wrote a letter to Gaspard accusing the foundation of:

• giving a false impression that it was committing new funds rather than cutting grant budgets;
• failing to consider pulling money from its endowment and assets, which total more than $19 billion;
• and ultimately, ignoring the ‘realities, values, and accepted practices of responsible grant making’.

The dispute at OSF touches on a broader discussion about whether and how philanthropies should be accountable to their grantees and society-at-large. As such the OSF story must be contextualized within an era of greater scrutiny of philanthropy, and as illustrated by this case even contestation. This reflects a clear shift – relatively new in Europe, more common in the US – from a benevolent attitude towards philanthropy towards a more critical societal stance.

The ensuing demand for greater philanthropic accountability often translates into practice and is referred to as responsible grant-making, a semantically vague, conceptually underdeveloped but intuitively enticing concept.

But if philanthropies comply with the law, why should they be subject to any other form of scrutiny, accountability and ultimately responsibility?

True: philanthropies’ activities are subject to legal and regulatory regimes. Yet government regulation only provides a basic form of accountability, essentially that funds are being used for approved charitable purposes, and for which tax exemptions have been provided.

But such regulation does not provide accountability in terms of how decisions are made, the processes adopted to make them, how those affect applicant, and ultimately the societal impact the foundation is having through its grant-making. This situation of limited accountability through light regulation may be highly beneficial for society – enabling philanthropies to fund the riskier initiatives (all the more so in an emergency situation) – but also deeply damaging, by discouraging potential grantees, be they communities or NGOs, to accept philanthropic support and therefore giving up on pursuing their public interest mission.

As no regulatory framework today guarantees full accountability, it is left to philanthropies to self-regulate their conduct by going beyond what is required by the law. This is the space – referred to as ‘responsible grantmaking’ or ‘social license to operate’ – where leading foundations could make a difference by pioneering on a voluntary basis new accountability standards for the philanthropic sector. While an emergency might not appear the most appropriate situation to embrace public accountability, emergencies present circumstances that require rapid adaptation – choosing this moment to set a new and higher standard of behaviour might be more effective than expected, and certainly it would help organisations on the ground that are currently struggling.

If philanthropies have the interests of their ultimate beneficiaries in mind whenever they make decisions, they should be ready to give them an account of what they are doing and why. Philanthropies should also subject themselves, and in particular the exercise of their grant-making decision power, to the same level of scrutiny imposed on their grantees’ actions.

Yet many foundations provide no motivation of their decisions, be they major strategic decisions, such as grant re-purposing, or individual decisions to an applicant. Generally no account is given of the impact their grant decision-making power produces on society.

For hundreds of organisations and individuals committed to social change who are denied any form of feedback, sometimes even a response, this is discomforting. What is worse is that this conduct also affects the reputation of philanthropy in society, at the time in which its contribution is needed the most.

It might be too early to predict whether the disruptive effects of the pandemic on both grantees and donors might fundamentally alter their relationship and, more broadly, the way philanthropy works. Yet COVID-19 provides a welcome opportunity to rethink the historically difficult relationship between donors and grantees, in particular their respective and reciprocal accountability.

While greater public accountability might not be the ultimate solution in making that relationship less asymmetric, if radically embraced it could certainly lead to more responsible grant-making, both in emergencies and normal times.

As philanthropy enters into a new era of greater public scrutiny, the question remains whether self-regulation, as outlined in brief here, may satisfactorily address all concerns prompted by its actions and omissions.

As COVID-19 has further exposed some of these concerns, could it lead to higher self-awareness within the philanthropic sector, and possibly trigger a fresher, braver conversation on how to close the gap between the rhetoric of the foundations and the realities of the grantees?

A growing number of policymakers are showing interest in understanding how philanthropies operate and contribute to society right now. But the ball is still in philanthropy’s camp – now could be the moment for change from within, before public authorities step in.

Alberto Alemanno is Jean Monnet Professor of European Union Law & Public Policy, HEC Paris and the founder of The Good Lobby.