[This article was co-published in The Chronicle of Philanthropy on October 21, 2020.]
Grants from corporations inevitably keep the donors’ business interests in mind at recipient organizations. That’s certainly the case with Fidelity Charitable, the commercial donor-advised-fund colossus, which is using a special grant-making project to build alliances and quell criticism of DAFs among influential nonprofit organizations.
The grants in question come from an entity called the Fidelity Charitable Trustees’ Initiative. Let’s describe it — as far as we are able.
The Fidelity Charitable Trustees’ Initiative is a special grant-making arm of Fidelity Charitable.
Unlike the 225,000 or so donor-advised funds under Fidelity Charitable’s umbrella, where grants are determined by the donors, the grant decisions for the Trustees’ Initiative are made by Fidelity Charitable’s board of trustees, officially for the purpose of strengthening “the resilience, sustainability and effectiveness of the social sector’s infrastructure.”
As Fidelity Charitable’s CEO Pamela Norley and trustee Catherine D’Amato described their intentions in the Chronicle last fall, the Fidelity Charitable Trustees’ Initiative has “historically focused on providing grants that upgrade the leadership, technology, fundraising, and other management abilities of nonprofits, especially small organizations.”
As a consultant to nonprofits, I readily agree that more grant dollars should go toward these purposes. But it’s also clear that the Fidelity Charitable Trustees’ Initiative’s grant making is partly philanthropic and largely self-serving. That self-interest is sometimes obvious, sometimes implied, but always lurking.
There’s much we don’t know about the Fidelity Charitable Trustees’ Initiative. Yes, Fidelity lists its most recent grantees in an annual report with some featured stories, along with a one-line description of each grant purpose. We know that in the most recent year the Trustees’ Initiative distributed $12.7 million through 40 grants, for an average grant size of $317,500. But we don’t know how much was in each grant. Nor do we know how the grant making is decided, other than that there’s no open application process: Potential grantees must be asked to apply.
Lack of Transparency
The lack of transparency about the Trustees’ Initiative is par for the course with Fidelity Charitable. Fidelity Charitable is cautious about sharing information about its operations. Fidelity Charitable prefers to keep its operations veiled — this is, after all, an organization that refuses even to report the salary it pays its CEO, something that virtually every other charity lists on its Form 990. Winston Churchill once famously described Russia as “a riddle, wrapped in a mystery, inside an enigma.” I would suggest that Fidelity Charitable is the unknowable but very influential Russia of the nonprofit world.
Why does any of this matter? Because of the way in which Fidelity Charitable uses its Trustees’ Initiative to further the interests of Fidelity Charitable.
Sometimes these efforts are overt, such as funding a 2018 study of donor-advised funds by Giving USA that was superficial and uncritical at best, and an infomercial for the DAF industry at worst.
At other times, the efforts to win favor are more subtle — and effective. Yes, Fidelity is investing in nonprofit leadership, technology, and management, a seemingly good thing. But what, in particular, are we to make of the Fidelity Charitable Trustees’ Initiative’s annual grants to two national nonprofit associations that play leading roles in setting the charitable world’s public-policy priorities?
One, the National Council of Nonprofits, lists the Fidelity Charitable Trustees’ Initiative as a major financial supporter, but Tim Delaney, its CEO, and Rick Cohen, its COO, refuse to say how much the council has received from Fidelity, other than to acknowledge that it was more than $5,000. (This is consistent with the National Council of Nonprofits’ policy regarding its donors, Delaney and Cohen say: They do not share details on any of their grants.)
Another association, Independent Sector, similarly will not comment on the size of their grants from Fidelity.
We all know how hard it is to get general operating grants — particularly those that arrive year after year. We also know that it’s not in the interest of grant recipients to criticize donors that provide unrestricted dollars. This raises the critical question: Are the grants from Fidelity Charitable so important to these recipient organizations that it would influence their policy work related to donor-advised funds?
Independent Sector and the National Council of Nonprofits are two of the pre-eminent public-policy organizations in the nonprofit world, while Fidelity Charitable is a controversial entity at the center of a national public-policy debate. The unbridled growth of donor-advised funds in the last decade is a white-hot topic of conversation in nonprofit circles, as are policy pushes to impose stricter regulation on DAF operations.
The willingness of Independent Sector and the National Council of Nonprofits to accept grants from the nation’s leading purveyor of donor-advised funds calls into question their objectivity in addressing DAFs on Capitol Hill. And the refusal of these two organizations to discuss the size and terms of the Fidelity grants makes them appropriately subject to scrutiny and skepticism.
Examining the Record
And what is the record of these organizations relating to DAFs? Let’s look back to 2017, when Professors Ray Madoff and Roger Colinvaux wrote a letter to the Senate Finance Committee urging that DAFs be required to distribute their money within a certain number of years after they were contributed and to prohibit private foundations from counting grants to DAFs as part of their 5 percent required charitable distribution. In response, Independent Sector joined with three other groups in vociferously opposing the recommendations.
I understand the motivations of the other groups in this alliance. The Council on Foundations and the Community Foundation Public Awareness Initiative both represent community foundations, which depend heavily on donor-advised funds and which have a vested interest in the DAF status quo.
I also understand how the Philanthropy Roundtable, with its libertarian political philosophy, would object to what it would interpret as a limitation on private philanthropy.
Meanwhile, the National Council of Nonprofits was silent on the Madoff-Colinvaux proposals and generally has been mum on donor-advised funds. Delaney and Cohen assert that the National Council’s policy priorities develop from the concerns of the state nonprofit associations that form its membership and that DAFs have simply never risen to the top of the list.
This is a bit disingenuous, given the overall prominence of the donor-advised-fund controversy, and particularly given that the California Association of Nonprofits, a member organization of the National Council, has been working throughout the past year to promote state legislation regulating DAFs. In any case, by choosing not to weigh in on a major proposal such as the Madoff-Colinvaux recommendations, the National Council was in fact making a decision: It was consciously deciding to stay out of the fray.
Why did the National Council avoid getting involved? Might its leaders have decided otherwise were they not leery of offending their major grant maker Fidelity?
Tim Delaney, the National Council’s CEO, told me strongly that the Fidelity money has had absolutely no effect on the council’s policy priorities. Similarly, Dan Cardinali, the CEO of Independent Sector, told me, “We take seriously our own Principles of Good Governance and Ethical Practice and would not let one funder sway positions that affect the entire sector.”
I have little doubt that Delaney and Cardinali are sincere. But color me skeptical.
Perception of Influence Buying
Fidelity Charitable is meanwhile seeding allies along with projects and programs as it distributes its largesse to state nonprofit associations, as well as journals, research groups, training organizations, and evaluation agencies that focus on the nonprofit world. I spoke with several grant recipients, all of whom were grateful for Fidelity’s support, and none of whom had held internal discussions about the propriety of taking funding from Fidelity.
There are increasing calls for DAFs to distribute their assets more quickly and for greater transparency, which would threaten the current donor-advised-fund business model. Fidelity, for all its money and power, is desperate to silence critics and win over allies.
When nonprofit associations that set the nonprofit world’s public-policy agenda accept grants from Fidelity without acknowledging the perception of a conflict of interest, it is, at best, tone deaf. When they refuse to disclose the size and nature of the grants, it demonstrates a grievous lack of transparency and a disregard for the very membership they purport to support. And each and every charitable beneficiary of the Fidelity Charitable Trustees’ Initiative needs to be conscious of the implied pressure from accepting these funds. Will these grants blunt their criticism of the commercial DAF industry? Will Fidelity’s money keep them from speaking out?
There’s an old joke in nonprofit development: “The only problem with tainted money is that there ’taint ’nuff of it!” Charitable organizations are well aware that some grant makers use philanthropy to distract attention from their business dealings and to burnish their reputations. But there’s a higher level of ethical challenge for nonprofits when grant makers use their dollars to buy influence. I suggest that there are ways to accept money appropriately from Fidelity Charitable if the recipients are transparent about the transaction, make clear to Fidelity that the grants will not influence policy decisions, and then demonstrate their independence. But quietly taking Fidelity’s money, subsequently taking stands that support the DAF industry, and then denying that the grants played any role in their policy decisions? That’s unconvincing, disheartening, and unacceptable.
More “good trouble” from Mr. Cantor–hurray for Grandpa Cantor
Thanks, Chris. This kind of “good trouble” is not 1/1000th of the level or importance of Congressman Lewis’s, but I’m honored by the reference. And also, thanks for acknowledging my new title!
This was a well-timed illuminating article, Al, that I am sharing widely with colleagues. Thank you for continuing to delve into the facts in a meaningful way behind what superficially would appear to be good philanthropic intentions on the part of Fidelity Charitable.
Thanks, Elena! Please do share widely! Hope you are well.
A salient look at Fidelity Charitable, a mega-commercial foundation, using “orphaned funds” to finance its own prerogatives. Fidelity is not a private foundation. With no oversight, transparency or accountability the article rightly points out Fidelity is using other donors’ dollars to “win over allies.” Why not take guidance from the donors posthumously by spending out the orphaned donations to support the charities they gave to while alive? Or, as Al points out, to small organizations that require assistance during this most challenging of times.
Mark Hurtubise, former president and CEO, Inland Northwest Community Foundation (2005-2017)
Thanks, Mark. Good observations!
I like the reform suggestion that all DAFs have one or more charitable organizations named to receive the principal of the fund, should the donor/advisor die without naming a successor advisor. (I would of course go further and require that all DAFs be spent down within, say, 15 years of the donation of the asset — and then the money split up, whether the donor is alive or not.)
Of course, we don’t even know for sure where the funds are coming from. An article in the Chronicle of Philanthropy from a few years ago (the link is in my piece) suggests that these dollars come from orphaned funds, but Fidelity has not confirmed that, at least not with me. I’m a bit suspicious because the amount distributed in the most recent year was nearly double of the year before, and I am guessing that either they suddenly found more orphaned funds, or Fidelity Investments made an injection of capital to boost the influence of the Trustees’ Initiative. (It actually would be a smart investment for the corporation. Fidelity Charity creates a lot of business for them.) Again, see my reference to Churchill — an enigma, a riddle, a mystery. Who knows?