Holding the gift horse accountable.

Several papers have added 'philanthropy beats'

While most philanthropies are truly do-good organizations, the fast-paced growth of foundations and nonprofit organizations raises public policy issues.

Consider, for example, the number of government services that have been transferred to private, nonprofit groups. Sunshine laws and open meetings laws don't apply to nonprofits, and that fact makes it harder to hold them accountable for use of tax dollars -- or tax-exempt dollars.

Few of the issues currently being raised about nonprofits are new, but the growth of the giving community puts pressure on journalists. Several newspapers have added "philanthropy beats" to their staff. And this year, the Poynter Institute's first seminar for covering nonprofit organizations played to a full house of 16 participants.

We editorial writers have a role in exploring the public policy issues, which are overwhelmingly abundant. For assistance in how we might begin, The Masthead sought advice from several philanthropy and investigative reporters: Kate Shatzkin of The Sun in Baltimore, Casey Selix of the St. Paul Pioneer Press, Rebecca Carr of Cox Newspapers' Washington bureau, and David Gulliver of the Dayton Daily News.

Shatzkin says the transfer of decision-making from the public sector to the private nonprofit sector can have "grand implications for democracy." When an after-school program is run by a nonprofit group, parents or educators may not have control of the program. Someone else may determine whether to use those hours for proficiency-test training or to offer low-income children lessons in music or sports that their parents can't afford.

Another concern is a trend to target donations so that outcome can be measured. Such results-oriented gifts are more likely to go to AIDS research or water-quality surveys rather than to food kitchens or to mental health clinics. While a great deal of good work is being done through results-oriented donations, other needs are being neglected.

A growing trend is for foundations to set their own agendas. Weigh, for instance, the effect on research universities if a $20 million gift is donated for study in a narrow field, while other broader studies go begging. For the good or not, agenda-oriented foundations are reshaping school, environmental, and foreign policies -- and more.

The political use of foundations is another concern. Again, most foundations follow the law, but some may overstep boundaries in lobbying for their causes. In other cases, foundation boards could be loaded with political appointees who may be able to draw in more dollars from government sources but who also may alter the orientation for a nonprofit group. In yet other instances, tax-exempt foundations can be used to skirt campaign-finance laws.

Gifts can also be self-serving. When a high-tech firm donates computers to public libraries, is it being altruistic or building another set of clients for its business? The same can be asked of a sewing-machine company ouffitting schools with its products. Such tax-exempt donations are good and also a form of advertising.

Yet another area to explore is how much foundations give. In a probe of Minnesota arts foundations, Selix found that one group had given out only 2% of its money for three straight years. The reason? The directors said they were creating a "new giving strategy," Selix said. (Search for her series at www.pioneerplanet.com)

All reporters recommended IRS 990 form as the first step for investigating charities or 990pf for foundations. The basic information can be obtained online (Guidestar or Urban Institute), but more substantive details are in copies of the filed forms.

Listed there are investments and grants. You can also get a picture of how much of a group's money goes to programs or administrative costs. And you can find the group's affiliations, its mission statement, and its professional-service contracts.

IRS Forms 1023, the application for tax-exempt status, is informative, as is the IRS Letter of Determination, which notifies the group of its status. Both are public documents.

Review of the IRS forms is the start, not the end. Carr notes that organizations are not required to list donors, and that the "notoriously understaffed" IRS does little to investigate tax-exempt groups.

Gulliver agrees, saying that it's easy to hide information in the forms.

Other useful resources are available from the Foundation Center, the National Charities Information Bureau, the Urban Institute, the Council of Better Business Bureaus, and the Council of Foundations. All these are on the Web and have links to dozens of other related sites. For an overview of giving trends, Selix recommends reading David Wagner's book, What's Love Got to Do With It? A Critical Look at American Charity.

Other sources recommended:

Public Libraries: Annual reports of foundations usually have financial statements, list of grants, and names of policymakers, sponsors, and staff.

State offices of attorney general or secretary of state: Many have records of small foundations or non-profits that may not be in national databases.

NCEW member Kay Semion is associate editor of the editorial pages of the Dayton Daily News.