What Brookings Did Right

Last week The Washington Post published an article questioning the level of influence that the Brookings Institution's donors have on its research outcomes.

The article states "Washington Post review of a few key issue areas found that Brookings’s public seminars, research papers, congressional testimony and op-eds often correspond to the interests of donors." Well .. of course they do! That's how fundraising works. You set an agenda, then you find supporters who are interested in that agenda. Clearly the article is accusing Brookings of letting their donors set the agenda, but the evidence they offer to support their argument is weak.

Certainly, if the Post were to investigate the Cato Institute or the Heritage Foundation, they would see the same correlations between the organizations' work and their donors' interests. Perhaps this situation is less concerning to the Post because Cato and Heritage are unabashedly leaning in specific directions. In fairness, Brookings does claim to be an independent research institution, whereas the others don't. However, there is no difference between the way that Brookings raises money and the way that colleges and universities -- which also purport to conduct independent research -- raise money.

Also, these organizations all share donors -- close reading of each organization's 2013 Annual Report shows that the Walton Family funds Brookings, Heritage, and Cato; the Koch brothers fund both Cato and Heritage; and Hitachi and GE both give to  Brookings and Heritage. This overlap supports the Post article's leading assertion that donors seek out opportunities to advance their own goals by funding organizations. The appropriate conclusion to draw, then, is not that donors are exerting undue influence at Brookings, but that the increasing competitiveness of the nonprofit funding landscape is creating a "buyer's market" for donors.

Here's what Brookings is doing right:

Having a lot of donors, so no one gift is more than 2.5% of their revenue. How much influence can one donor have if their departure would result in a relatively small loss for the organization? In fact, the article references instances where Brookings and its donors have parted ways due to disagreements: "Brookings officials say there are many examples in which the think tank has declined offers to conduct research and cases­ in which donors withdrew their money because they disagreed with Brookings’s activities. In one instance, Brookings lost funding from a longtime Turkish donor who had objected to an event that included a Kurdish official ..."

Having strong policies. All organizations, but especially those that take significant funds from corporations, should have a board-approved gift acceptance policy. This kind of policy enables an organization to create clear guidelines around how they will accept gifts to ensure that their philanthropic revenue aligns with their mission and prevents undue influence of industry. In addition, their conflict of interest policies seem appropriately rigorous given their size.

Being transparent. The level of access that Brookings officials allowed the Post is above and beyond what should reasonably be expected. There is significant data available publicly in the form of annual reports and 990 forms. Between those two documents, the reporter had a lot of information about the organization's financials, but Brookings also gave the Post " a one-page chart analyzing cash received by donor type, which showed fluctuations from year to year in the proportion of overall gifts that came from corporations and foreign governments." While the extra information they provided was limited, it is certainly proprietary and could put them at some risk in this competitive funding environment. After all, their revenue mix is the foundation of their business model.

Here are the trends that the article reflects:

Increasing reliance of nonprofits on corporate and individual donors. Government funding (particularly from local and state governments) is dwindling and nonprofits are having to look more to other sources. The majority of money in the US lies with corporate and individual donors, so it is no surprise that Brookings is expanding their revenue from these sources, especially given their large fundraising goals. It is likely that a review of the revenue sources of any number of successful nonprofits, you would see similar trends.

More restricted dollars from foundations. At the same time that foundation funding is stagnant, it is also more restricted. As the article mentions, many foundations are tightening their program strategies and focusing their funding on programs as opposed to general support. Most unrestricted funding for nonprofits comes from individual major donors.

Overall, this article seems to be a tempest in a teapot. Perhaps the Post should focus its energy more on lifting up the success of the nation's nonprofits, rather than looking for opportunities to tear them down.