Growing pains: foundation accountability in emerging economies

Caroline Hartnell and Andrew Milner

Where economies are ‘emerging’, the foundation sector often is, too. In many emerging economies, foundations are making increasingly substantial contributions to society, especially in areas that are less popular with government and individual donors such as institution building, NGO capacity building, human rights and governance, and work with underserved communities. As their contributions increase, so the question of accountability arises – as indeed it does in countries with more developed foundation sectors. So what does accountability look like in these countries? Alliance asked people in Brazil, Colombia, China, India, Russia, South Africa and United Arab Emirates, all very different ‘foundation worlds’, how far they had come in this respect and how far they still had to go.

It seems that even where accountability is a topic for discussion, it’s far from being a prominent one. Foundation accountability is ‘almost non-existent’ in India, says Ingrid Srinath of Hivos India. Carolina Suarez of the Association of Family and Corporate Foundations (AFE) in Colombia says transparency is ‘not yet a priority’ for most foundations in Latin America. In fact, she says, absence of transparency is a common charge made against the region’s foundations, with ‘some entities called “foundations” using their name as a cloak to shield mismanagement of public funds or to avoid paying taxes’. There isn’t even an adequate translation of the term ‘accountability’ into Portuguese, says Andre Degenszajn of GIFE, Brazil’s association of foundations.

‘Accountability is not the strongest feature of Russian foundations,’ admits Maria Chertok of CAF Russia, and no one appears to be pushing Russian foundations in the direction of greater accountability. Their boards mostly consist of family members or representatives of the donor corporation, rather than of groups of concerned stakeholders, says Chertok, and the degree of accountability demanded by such boards is limited at best. Foundations have little prominence in Russian society so they can get away with ‘a low profile and low level of transparency’.

What is accountability anyway?
The need for a clear notion of what constitutes accountability is raised by several respondents. In China, says Wangsheng Li of ZeShan Foundation, there is demand for accountability. Public demand for disclosure and accountability ‘helped break down the rather opaque nature of state-monopolized philanthropy and paved the way for private philanthropy to carve out a unique role in an emerging civil society’. In fact it was private philanthropy that led the way in terms of greater accountability. However, for most, accountability simply means disclosure. So beyond the collection of data ‘there is very little analysis or substance … whether through self-reporting or indirect sources’ – a tendency which is exacerbated by ‘overemphasis on data’.

As he points out, disclosure is only partial transparency since ‘charities report only what the government requires for annual audit; the non-governmental China Foundation Centre mostly relies on self-disclosure supplemented with information gleaned from the public domain, such as media reports and press releases’.

Andre Degenszajn cites another reason for confusion – a more straightforward linguistic one. ‘We often use the term accountability in English and, when translated, its meaning tends to be reduced to being transparent about one’s accounts. Feedback is also a word difficult to translate, demanding additional explanation if we want to capture its deeper meaning. The Portuguese translation would be closer to “comment on” or “respond to”, implying a more unidirectional communication, rather than getting involved in a loop of meaningful and transformative exchanges.’

‘It’s about participation rather than just feedback.’

For Neville Gabriel of The Other Foundation, which works throughout southern Africa, ‘it’s about participation rather than just feedback. Feedback is often used to justify something that’s been done already or to generate learning for some indeterminate future work which may not happen. People want to be engaged throughout the process and especially from the beginning – not just asked for feedback at some later stage.’

The value of feedback, in his view, is that it ‘builds greater public trust and ownership of a shared agenda, promotes good stewardship of resources, and enables funders to take more responsibility for decisions and actions. But the value of meaningful participation goes far beyond that. In the longer term it builds a much higher quality of conceptual clarity and strategic rigour in the work that is done. It keeps development efforts more relevant, efficient and effective, generating much better value for money’.  ‘

‘People want to be engaged throughout the process…not just asked for feedback at some later stage.’

But Gabriel does also acknowledge that feedback can go beyond the rather limited ‘after the event’ process described above if ‘there is openness to relevant feedback at multiple levels of decision-making by people and organizations that matter particularly in your field of influence, and if feedback inputs are not simply taken at face value but taken to depth in engagement with communities of interest so that there are multiple loops of learning in a process’.

Accountability to whom?
In India, Ingrid Srinath is not ‘aware of any formal or structured accountability or feedback mechanisms, beyond statutory reporting to tax authorities, Charity Commissioners and, in the case of organizations receiving funds from foreign sources, to the Home Ministry’. The result is that, for those organizations or movements that are obliged to depend on foundations for their resources, ‘power relationships are pretty skewed in favour of the donor’. She points out that ‘the major grassroots movements in India by and large avoid external funding from NGOs and foundations, seeing such funding as eroding their authenticity, real and perceived.’

Another possible source of accountability – publicity and scrutiny by the media – is also ‘negligible to absent’ in India, and there are ‘very few forums for donors to engage each other or grantees that are not essentially congratulatory awards functions’. 

‘In Brazil…”accountability, in many cases, lacks a public dimension and is mostly towards those above – funders, sponsors, boards”.’

But it is needed even if it’s not being explicitly demanded. The question of accountability, Srinath believes, is becoming more urgent at a time when philanthropy is being called upon to discharge public functions: ‘we have seen funding for major national programmes – HIV/AIDS, polio vaccination, the midday meal programme, etc – being provided by foundations with absolutely no voice even for the public authorities mandated to deliver these programmes let alone the citizens who are their passive recipients’.

In Brazil, says Andre Degenszajn, ‘accountability, in many cases, lacks a public dimension and is mostly towards those above – funders, sponsors, boards’.

The degree of accountability depends on what kind of foundation you are talking about, argues Neville Gabriel. ‘New emerging community foundations are, by identity and geographic design, much more accessible and directly engaged with local groups on an ongoing basis, which makes accountability a lived reality.’

Cultural barriers to greater accountability
Ingrid Srinath sees the major obstacles to change in India as ‘cultural and attitudinal’. Seeing the poor, women, minorities, children, people with disabilities, lower castes and tribal communities as ‘hapless objects of individual or collective largesse with neither the capacity nor the right to participate in making decisions is a paradigm that pervades government, business, philanthropy, media, even most social enterprise’. In addition, in a country ‘where corruption is endemic’, public scrutiny is more likely to be turned on the recipient than the donor.  

‘It has been impossible thus far to organize grantees on any significant scale to evolve coherent voice, input or pushback targeted at donors.’ 

A further reason is the size and diversity of India, which means that ‘the scale of the problems addressable by philanthropy are gargantuan. It has been impossible thus far to organize grantees on any significant scale to evolve coherent voice, input or pushback targeted at donors. There is a consequent lack of what I’d call the basic “architecture” or “infrastructure” of philanthropy and of civil society more generally – research, legal, other forms of consultancy, knowledge building and dissemination services, platforms, associations, convening, publications (like Alliance)’.

Absence of a culture of accountability seems particularly pronounced in countries previously dominated by an impenetrable bureaucracy. Wangsheng Li thinks this absence of institutional accountability ‘makes Chinese charities very reluctant to act on disclosure and they shun meaningful discussion of accountability’. Like Ingrid Srinath, he notes deficiencies in infrastructure, especially where intelligence on the sector is concerned, a ‘lack of intellectual capacity and knowledge base’ producing a ‘fragmented field of studying and analysing charity data’. 

‘This absence of institutional accountability “makes Chinese charities very reluctant to act on disclosure and they shun meaningful discussion of accountability”.’

Similarly, the greatest obstacle to foundation accountability in Russia, thinks Maria Chertok, is that there is no demand for it. ‘There is no public scrutiny of foundations, and grantees are usually happy to accept the structure of power relations that is offered to them alongside the money.’ There is also no push from the donors’ side, she explains: ‘accountability requires a mindset that would accept sharing of control and power, and Russian donors are simply not ready to do that – they want to be in control, as they believe that will produce better results’.

Andre Degenszajn also sees overconfidence on the part of foundations as one of the possible blocks to greater accountability: ‘The power imbalance and, maybe, excessive confidence in their own strategies and approaches are obstacles to shifting these practices.’

Four ‘myths’ about accountability
Carolina Suarez doesn’t believe there are any ‘reasonable’ obstacles to foundation accountability. However, she cites four ‘myths’ that deter foundations from practising accountability. One is security: a foundation feels more vulnerable when it is more open about its activities. Another is that publishing how much a company puts into social investments will open it to judgement and criticism that it is not spending enough.

‘Accountability requires a mindset that would accept sharing of control and power, and Russian donors are simply not ready to do that.

‘A related objection is unwillingness to disclose how much a foundation receives from a third party, a domestic or overseas government for instance. The final ‘myth’ – though she thinks this is less common – is that accountability ‘takes too much time and distracts the foundation from its core goal to serve communities’.

None of these should be significant objections, in her view. There is no evidence to show that open foundations are more vulnerable. Nor should the chief consideration be how much a foundation spends relative to the resources of the parent company’s, but how effectively it is using what it does spend (as we’ll see, this chimes in with what Clare Woodcraft has to say).

‘Transparency and accountability should be to all,’ argues Suarez, ‘to the government that gives legal and tax benefits, to international cooperation agencies, grantees, beneficiaries, and in general anyone interested in knowing about any foundation.’ AFE is one of the prime movers in promoting transparency and accountability among foundations. They are at the pilot stage with an online assessment tool comprising 70 questions under eight general themes related to openness and accountability. The intention is that any Colombian foundation will be able to have access to the platform and she hopes that it will be ready by the middle of this year. 

‘Transparency and accountability should be to all…to the government that gives legal and tax benefits, to international cooperation agencies, grantees, beneficiaries.’

Is feedback always a good thing?
Neville Gabriel believes that, under certain circumstances, feedback can do more harm than good. Too much feedback, ‘weighted equally’, he argues, can mean that foundations tend towards a kind of mean where they all ‘look much the same’. That’s unhelpful, in his view: ‘Positive change emerges through a structured contestation of ideas and agency that requires diverse interests and perspectives to meet each other – not through dulling (or refining, depending how you look at it) identities into one standard model.’ He sees fear of ‘loss of focus and unique identity, as well as losing efficiency and autonomy in decision-making’ as a major barrier to accountability on the foundation side.

On the grantee side, Gabriel thinks the greatest obstacle is probably time, ‘since most grantees are asked to give informed feedback by multiple donors with very different processes’. There is also a sense that while their participation is valued, what they actually have to say is not. ‘The form,’ he feels, ‘is probably more highly valued than the substance.’

He provides an example where beneficiary groups were unwilling to offer feedback: ‘A local community trust linked to community ownership of a solar power plant in a small rural town in South Africa’s Northern Cape Province recently attracted only about five people to a town hall meeting to get feedback on its work, even though it channels tens of thousands of dollars annually into the small community.’

Accountability to themselves
Clare Woodcraft of the Emirates Foundation takes a different tack to most of our respondents. She believes the primary emphasis of foundation accountability should be on accountability to themselves. Too often, she argues, foundations concentrate on ‘measuring input – how much money did we spend? how many grants did we issue? – rather than looking at how much social value we created and whether it is sustainable, measurable and scalable?’. The chief reason is convenience: it’s hard to create and to measure social value, much easier to ‘simply issue grants to third parties and measure total spend’.

She believes that foundations should be taking a closer look at what they achieve and ‘at their cost effectiveness and competitiveness’. For instance, she says, ‘if governments can do what a foundation does at scale (ie reach more people) and more quickly, then foundations need to challenge their own role.’ Foundations, she argues, not just in her region but globally, should be asking themselves ‘about the real value they are creating and at what cost’, and it is boards that should be pushing them to do this, rather (though she does not say this explicitly) than external oversight bodies. 

‘If governments can do what a foundation does at scale (ie reach more people) and more quickly, then foundations need to challenge their own role.’

The Emirates Foundation is beginning to put this into practice, having recently changed from a grantmaking to an operating foundation that ‘creates social enterprises and runs them like small businesses’. She thinks that the new approach, ‘essentially having deployed the model of venture philanthropy, is really helping us to understand what works and what doesn’t, assess our cost-effectiveness and focus on creating measurable impact at scale’.

Are things changing?
The short answer is ‘yes’ (though not everywhere), but often at a snail’s pace. The Emirates Foundation’s work is to some extent emblematic of such change, as is that of AFE in Colombia. Andre Degenszajn notes ‘a growing discourse on the importance of transparency and on developing more horizontal relations with partners and beneficiaries’. However, he adds that ‘the extent to which the discourse translates into practice is a different matter. It tends to emphasize formal measures rather than engaging in a more meaningful dialogue. Feedback is more valued when it reinforces the foundation’s assumptions than when it challenges them.’

Maria Chertok reports with qualified optimism from Russia. She concedes that many Russian foundations do publish regular and comprehensive reports and some of them ask their stakeholders for feedback and sometimes even involve them in strategy reviews. But, she concludes, ‘there is still a long way till this good practice is spread wide enough in the sector.’

For Ingrid Srinath, one bright spot in the gloomy landscape of accountability is the new CSR legislation in India which, she thinks, could at least oblige corporate donors to ‘be more transparent about their activities’.

Whether it’s because they lack the technical means to do so, or they come from a background where institutions have traditionally been inscrutable, or they are worried about the demands that might be made on them or, quite simply, no one has asked them, foundations in emerging economies haven’t generally made the progress towards accountability that our commentators would like to see. That probably won’t surprise many readers, since the natural tendency of many foundations in more mature economies has often been towards secretiveness rather than openness. It would be nice to think, though, that this article might help to stimulate a debate on foundation accountability in emerging economies.

Alliance would like to thank the following for contributing to this article:
Maria Chertok CAF Russia
Andre Degenszajn GIFE, Brazil
Neville Gabriel The Other Foundation, South Africa
Wangsheng Li ZeShan Foundation, China
Ingrid Srinath Hivos India
Carolina Suarez Association of Family and Corporate Foundations (AFE), Colombia
Clare Woodcraft Emirates Foundation, UAE

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