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Sunday, April 10, 2011

The American Model For Philanthropy

By Olga M. Lazin
Copyright Olga M. Lazin, 2011

The United States has presently the biggest pool of philanthropic money in the world.

"The principle of this one [America]
seems to be to make private interests harmonize with the general interests. A sort of refined and intelligent selfishness seems to be the point on which the whole machine turns. . . .

Americans of all ages, all stations of life, and all types of disposition are forever forming associations. . . .

In democratic countries knowledge of how to combine is the mother of all other forms of knowledge; on its progress depends that of all the others.

Alexis de Toqueville,
Democracy in America (1835)

The Importance of American Philanthropy

America's spirit of civic cooperation, articulated so well by Alexis de Toqueville, has laid the basis for the creation of the U.S. foundation sphere is the most well endowed and effective on in the world. This sphere is built on a compact between government and citizenry. Thus, in 1938 the U.S. Congress explicitly recognized that:

the exemption from taxation of money or property devoted to charitable . . . purposes is based on a theory that government is compensated for the loss of the revenue by its relief from financial burden . . . and by the benefits of promoting the general welfare.

The strength of America’s foundation sphere lies in the freedom of donors to choose the cause they want to support as well as to support programs which have not been supported or inefficiently supported by government. In return for helping to develop the general welfare (defined in an unlimited way, as we will see), individual and company donors can deduct their contributions (monetary or “in-kind” donations calculated in monetary terms) from their U.S. income taxes to the extent permitted by law—50% from persons and 10% from companies. U.S foundation sphere is in essence being supported by the government, which of foundations and civic associations, such as diversification of group interests.
One of the most important historians of U.S. philanthropy, Robert H. Bremner, distinguishes between (a) “foundations of the past” that prior to the twentieth century tended to serve “designated classes in particular locations” and (b) “modern philanthropy [that] has created general purpose foundations whose function is to encourage research, discovery of causes and cures, and prevention of ills rather than relief of need, and that operate on a nationwide or worldwide basis.”
Unfortunately for history, analysts have tended to treat foundations in negative terms. Why? According to Bremner:

One reason for writers’ indifference or hostility is belief that foundations reflect business values and represent the business spirit at its most cautious and conservative. John D. Rockefeller, who set the pace and tone for much of the modern philanthropy, advocated establishment of foundations as a way of managing “this business of benevolence” properly and effectively.

History of Philanthropy

Competition among U.S. persons to set up foundations and projects is part of the same ethic that goes back far in time. Indeed, it has its roots in England’s1601 Statute of Charitable Uses, the “cornerstone of Anglo-American law of philanthropy,” as well as in the Elizabethan Poor Law, the “basis for English and American public poor relief enacted by Parliament,” as Bremner points out.
Foundations that have risen in America to dominate world philanthropy came into being to
- honor the name of rich families (hence overcoming any negative propaganda about any “tainted profits” won in the world of competition), and to
- carry out the family’s philanthropic goals.
Only since the U.S. income tax was instituted in 1917 have wealthy persons added the goal to
(3) redirect to their own specific projects the money that
they would have paid as taxes for general government funding.
Almost two decades before the American tax motivation beginning in 1917 to establish foundations, however, in 1889 Andrew Carnegie had named philanthropy the “Gospel of Wealth,” which he distinguished from the Gospel of Christianity practiced by John D. Rockefeller. However different, for many observers both Gospels, had similar intent—to defeat radical proposals to redistribute wealth.
The Gospel of Giving is impressive and may be seen in the foundations established prior to the American tax law of 1917 giving them tax deductibility:
1867 Peabody Fund established by George Peabody to
fund southern education—first of the Modern Foundations
1881 American Association of the Red Cross organized
by Clara Barton to seek funds from the broad general public,
1885 Stanford University chartered with donations by
Leland Stanford
1895 Jewish Charities in Boston adopt “federated fund
raising” though many chapters
1900 American Red Cross chartered by U.S. Congress to
receive donations from the broad general public
1905 Carnegie Foundation for the Advancement of
1905 Milbank Memorial Fund
1907 Russel Sage Foundation
A. Carnegie Corporation of New York
1913 Rockefeller Foundation chartered by the State
of New York “to promote the well-being of
mankind throughout the world”
These foundations came to be organized as “trusts” literally and/or figuratively that followed Rockefeller’s dictum of 1909 stated at the tenth anniversary of his founding of the University of Chicago. According to this dictum, the “business of benevolence” should be organized by establishing foundations as trusts directed by boards of directors who make it their life work to manage those foundations with the cooperation of their donors.
Although John D. Rockefeller did not gain tax deductibility against income for the foundations that he set up early in the century--income taxes were not legislated in America until 1917--, he was resented by many. Such resentment had arisen because many citizens felt that Rockefeller was establishing his own philanthropy based on donating his “ill-gotten profits” or “tainted money.” Further, Rockefeller seemed to be supporting “Elitism” when, in 1889, he provided the funds to establish the private University of Chicago. Nevertheless, John did define the concept of “giving” as well as his motives when he said: “The best philanthropy is not what is usually called charity. ” He saw philanthropy as investing in education, research, and cultural institutions deemed as likely to, in Andrew Carnegie’s words, “stimulate the best and most aspiring of the poor to further efforts for their own improvement.” Like John D. Rockefeller, Carnegie distinguished between philanthropy and charity when he stated that the worst thing that a millionaire could do would be give money to the “unreclaimably poor.”
With tax exemption granted to foundations in the America of 1917, the cry against the role of foundations would rise against the “draining away” of the U.S. tax base, just as it had when the first such tax exemption was granted to foundations in England by William Pitt in 1799. When Pitt had introduced his Income Tax Law, he specifically included a clause to exempt charitable organizations. The result was that the Law generated the establishment of charities designed to protect private funds from taxation; and by 1837 an English Royal Commission of Inquiry found that there were already 28,840 foundations. By 1885 the charities of London had greater income than did such countries as Denmark, Portugal, Sweden, or Switzerland.
By the 1970s, the United Kingdom had 111,500 charitable trusts; and the number was growing on the European continent: 32,000 in the Netherlands; 19,500 in Switzerland; 15,000 in Sweden; 4,000 in West Germany, 4,000 in Spain; and about 800 in Latin America.
But the wealth and power of the Old World has paled in comparison to that of America. To understand the importance of the U.S. foundation sphere in the world, Ben Whitaker, writing in 1974 found that of the 315 foundations which each had assets of over $10 million, 95% were situated in the United States.
The number of U.S. “foundations” is open to debate because of the broadness of the U.S. law on Tax Exempt Organizations—a concept


“TEOs” are also defined here as
“Not-for Private-Profit Organizations” (NPPOs, which in the literature and in common discourse are in general wrongly called
“Non-Profit Organizations”).
NPPOs include privately and non-privately directed Charitable Trusts, Associations, and Foundations
(Grant-Making, Operating, Community, Other); and include
non-privately directed Non-Governmental Organizations (NGOs)

1990 1997 % Change
Estimated1 No. of TEOs
in IRS Publication 78 325,000 525,000 62%
1. My estimate is made by sampling the number of TEOs listed per page
in the U.S. Internal Revenue Service (IRS) Publication 78 in order
to calculate an average number per page which is then multiplied
times the number of pages in the volume.

The published lists of approved TEOs are not all inclusive because:

a. some NPPOs are dropped from the published list if they do not
report two years in a row at least $10,000, and this may lead to erroneous totals because some TEOs are active with small amounts of funding or only operate in sporadic years. Some TEOs operations owing to lack of funds
even to seek official termination.

b. some NPPOs are not included in the published list because their TEO approval was granted by a regional IRS office which has not forwarded
the data to Washington, D.C., the reporting not being deemed useful
because the cost of overseeing hundred of thousands of small
organizations, which in any case do not pay taxes;

c. some NPPOs are added to the list up to 10 or more years after approval,
Because Publication 78 is not necessarily complete, however, TEOs and
their donors legally rely in the IRS “Letter of Determination” (which is valid until revoked by the IRS) that an organization is tax exempt and that donations are deductible under Section170(c)(1) of the U.S. Internal Revenue Code and its sub-sections such as 501(c)(3).


$25K+ in TEOs IRS Grant-
Grants or Peterson Total $100K+ Making
$500K Commission TEOs Income Foundations
. Sources .
Year . A A B C . D .
1939 525

1949 1,659

1959 4,205

1969 5,436 45,000

1975 21,877

1990 325,000 32,401

1997 525,000 187,306 44,146
A: Calculated from data in Thomas Parish, “The Foundation: A
Special American Institution,” in Fritz Heimann, The Future of
Foundations [Background Papers for the 41st American
Assembly of Columbia University] (Englewood Cliffs, N.J.:
Prentice-Hall, 1973), pp. 19-29.

B: See Table 1 and

C: National Directory of Nonprofit Organizations, ed. Ned Burels
(New York: Taft Group, 1998), p. vii.

D. Foundation Center

that includes, for example, “grant-making foundations” (including community foundations) that grant funds to “operating foundations” (such as think-tanks, clinics, research centers), and to NGOs. Between 1990 and 1997 the number of such organizations grew by 62%, reaching about 525,000 TEOs.
The growth of TEOs as variously defined is shown in Table 2-2.
Here we see that between 1990 and 1997b the number of grant-making foundations grew 46%, reaching 46,832 and with assets
nearly tripling to $330 billion.
The total number of TEOs stood at about 525,000 in 1997, including operating foundations, NGOs, and community foundations which receive funding from personal donors as well as grant-making foundation and trusts. The latter usually themselves also make grants as well as operate programs, just as grant-making foundations also operate some programs—the terms “operating” and “grant-making” referring to the majority of their activity.
Where in 1975 U.S. grant-making foundations (including trusts) gave away $2 billion, that figure reached $9 billion in 1990, $16 billion in 1997, and almost $20 billion a year later. The ratio of grants to assets, which stood at nearly 7% in 1975 had declined to about 5% by the late 1990s—all foundations seeking to maintain their existence by expending only some of the interest earned from the investment of their assets.
How much of these U.S. grant funds have been sent internationally is not possible to calculate. The Foundation Center makes only 1% samples each year, but the result of about 9% of giving for international philanthropy is preposterously low.

U.S. Philanthropy in Societal Context

American philanthropy evolved during the 20th century into the fourth of 4 spheres of overall societal organization, as is revealed in Table 2-3:


1. State Sphere
A. Central government

i. Executive power (defense, police, roads, post office, etc.)
ii. Legislative power
iii. Judicial power

B. State government Provincial

C. Municipal government

D. Parastate independent government agencies and/or
industries that may permit no private sector
investment or permit only minority private
sector investment

i. Social security
ii. Public utilities

a. Nationalized Railway System, Airlines, Telephone System, Steel Mill, Ports, etc.

iii. GONGOs: Government-Organized NGOs, in
U.S. English (QUANGOS: Quasi-Autonomous NGOs, in British English.

This type of "extra-governmental organization" includes panels, councils, and authorities operating local services in such areas as health, education, housing, and training with central government funds but only loose attachment to a ministry (often without standard audit) and little (if any) outside accountability.a

2. Private Sphere which attempts to earn profits for investors.

i. FPPOs = For-Private-Profit Organizations.

3. Mixed “State-Private” Sphere

A. State companies which permit nearly equal or majority private investment

i. Utilities, ports, industrial plants, airlines, etc.

B. Subsidized Privatize companies with the state holding a majority or minority of shares

i. including some privatized social security funds

4. Tax-Exempt Organization (TEO) Sphere (see Table 2-4)

TEOs have the goal to gain more income than expenditures and to invest that excess income in order to provide a growing base of interest income to pay operating expenses. The income comes from

i. business profits directly related to the tax-exempt purposes of the organization;

ii. donations from individuals or private companies--
the incentive of the donors is not only altruistic but also to receive a deduction against their tax payments, hence the saying:
“with regard to income taxes, one has the choice of either (a) paying them to the government for its activities (many of which may be useful, wasteful, corrupt, etc.), or (b) divert all or part of one’s taxes from the government to support one’s own targeted TEO activities, with or without one’s own foundation structure.”

iii. grant-making foundations donations to other NPPOs.

The goal of NPPOs (including operating foundations such as hospitals and universities) is to seek an “endowment,”
that is a grant that can be invested to earn the interest that can be used to pay costs of administration and operation. TEO’s seek to accumulate more income than they spend in order to endow their TEO in perpetuity or for the time chartered.

A. NPPOs (Not-for-Private-Profit Organizations)

1. NPPOs-M (income from many donors) often called “foundations/funds supported by the broad general public" because they normally receive at least 1/3 of their income from many donors b (including government agencies) and not more than 1/3 of their income from their own investments
(including interest, dividends, royalties, etc.)

a. community foundations, charities
b. emergency relief, e.g. Red Cross
c. NGOs that do not engage in legislative lobbying
d. “operating foundations” (including the special case of those private operating foundation permitted to operate under NPPO-M status rather than under NPPO-F status immediately below, such as private hospitals and private universities which spend most of their yearly income to benefit the general population. (see Table 2-4)

2. NPPOs-F (income from few donors) often called “privately-funded foundations" that normally
receive most of their income from only a few
donors (often only one family or company), do not receive at 1/3 of their income from a many donors and/or receive more than 1/3 of their funds from the NPPO’s investment income (including dividends, royalties, etc.) or from an excess of
nonrelated business income: c

a. family-endowed foundation, e.g. Soros Foundations
b. business-endowed foundation, e.g. Ford Foundation
c. Others (See Table 2-5)

B. ATEOS (Activist Tax-Exempt Organizations)
ATEOs (sometimes misleadingly called “social welfare
organization”) may engage in activities that are activist in relation to legislation, in contrast to NPPOs
which must maintain an objective and informational role in relation to legislation.
a. trade association, chambers of commerce
b. NGOs which do engage in legislative lobbying.
c. business leagues, etc. (See Table 2-6)
a. “How to Control QUANGOs," Economist, August 6, 1994, pp. 45-47.

a. To reach the 1/3 amount, there is a limitation of 2% of the NPPO’s qualifying public and/or governmental support that can be counted from any one donor (except another NPPO or government agency), not including in the 2% limitation any amounts less than $1,000. (Unusual amounts may be excluded.) Nevertheless, even if an NPPO does not meet the requirement of many donors donating at least 1/3 of the income, it may still qualify under this category if it receives at least 10% of its total support from governmental and donor sources, has a continuous program of soliciting funds from the general population, and all other pertinent facts concerning the NPPOs organization (including the NPPOs governing board) are likely to appeal to persons having some broad common interest of purpose. (See Bruce R. Hopkins, The Law of Tax-Exempt Organizations, fifth edition; New York: John Wiley & Sons, 1987), pp. 452 and 447.)

c. Ibid., p. 449.




1. NPPOs-M (funded by many donors) are often
called “public foundations,” and “public charities”—

The “public” idea is unfortunate because it is confusing to many citizen in America as well as to leaders of the
developing world
who seek to understand U.S. TEO law, but for whom
“public” connotes “government”
rather than “broad general public.”
Although NPPOs-M may receive funding
from government agencies, they are not under
government control. NPPOs-M are called “not-private
foundations” in much of the TEO legislation.

NPPOs-M, often called “not private foundations” normally receive at least 1/3 of their income from many donors and less than 1/3 of income from investments, except that private operating foundations, such as universities and hospitals that spend most of their yearly income on the welfare of the general population, are included here rather than as NPPOs-F, below.

NPPOs-M can
receive tax-free grants & donations from
another NPPO
receive donations deductible from income, gift, and
estate taxes

Donors to NPPOs-M reduce their “taxable income” by taking tax deductions as follows against:

up to 50% of an individual donor's “adjusted gross
income” and
up to 10% of a private corporations’ “adjusted gross income”

Donor “gross income” minus “business expenses” equals
adjusted gross income,
from which donations to NPPOs are deducted to get
taxable income

2. NPPOs-F (income from few donors) are often termed
“Private Foundations” (e.g., Rockefeller Foundation, Soros Foundation, Ford Foundation, Pew Charitable Trusts), or “private charities.” However, private operating foundations such as hospitals and universities are included in NPPOs-M, above, because they spend most of their yearly income on operations to benefit the general population

These are organizations which:

a. do not meet the 1/3 and 1/3 criteria, discussed under NPPOs-M

b. can receive tax-free grants & donations from another NPPO

b. can receive donations deductible from income, gift, and estate taxes up to 30% of an individual donor's adjusted gross income (up to 20% if properties) but no more than 50% total donations to both types of NPPOs

c. up to 10% of a private corporations’ adjusted gross

In contrast to NPPOs-M that are broadly funded, NPPOs-F which are funded by a few donors must pay a 2% tax on net investment income and must distribute a certain minimum percent of each year’s income

3. Activist Tax-Exempt Organizations (ATEOs) differ from
NPPOs in that ATEOs:
a. may engage in activities such as influencing legislation;
b. may not attract donations deductible from income, gift, and estate taxes;
c. may not receive grants from NPPOs;
d. do receive their income from donors who deduct their contribution from income as a business expense.

ATEOs are “action organizations” which may draft legislation and lobby for its passage to benefit a specific group, in contrast with NPPOs which must maintain an analytical role in addressing the pros and cons of legislation that must benefit the general society

Like the NPPO, the ATEO:
1. may not engage in political campaigns or finance
political parties;
2. may and is expected to make "profits" which are tax free to the extent that they are used for the
ATEO’s purposes (including the payment of salaries and expenses);

ATEOs may work with NPPOs in order to attract funds to
support activities, which are eligible for deductions from income, gift, and estate taxes. For example, businesses leaders who establish a regional planning ATEO (through business expense tax deductions that are intended to advance the interests of private companies), also may establish an NPPO to attract funds which will benefit the region’s population as a whole, e.g. funds for general regional research and development. (Cooperating NPPOs and ATEOs must retain their autonomy--one cannot control the other.)

Table 2-5
NPPOs Classified by Main Function and Use of Funds*

Grant Develop Operate
Functionsa,b Fundsc Activity c Entityc,d
Grant-Making Foundations x
Foundations and Trusts x
Community Foundations x x
Universities and Schools x x x
NGOse,,f (Non-Governmental Organizations) x x
that do not engage in legislative lobbying
Emergency Relief Groups (Red Cross, etc.) x x
Charities, Hospitals, and Orphanages x x
Scholarship Funds.................................................. x x
Private Voluntary Organizations (PVOs) x
Research & Scientific Centers, Think Tanks x x
Civic Groups (inc. monument preservation) x x
Educational Associations & Consortia x
Professional Associations ....................................x x x
Religious Organizations & Cemetery Leagues6 x x
Humane Societies x x
Human & Civil Rights Organizations x
Cultural Societies & Literary Clubs x x
Sports Associations …………………………… x x x
a Any NPPO may opt for ATEO status. Functions may overlap as when a foundation dedicates its funds to operate a scientific research center or hospital.

b Terms such as “foundation,“ "center," "institute," "association," "fund," “NGO,” "society," “organization,” “trust,” “consortium,” “club,” “sponsorship,” etc. are interchangeable. Further, NPPOs may cooperate with ATEOs--see below.

c These 3 categories are not mutually exclusive; and some NGOs do grant funds.

d “Operating” organizations or foundations devote most of their income to serve the function for which they were created, e.g. administering a school or museum.

e GONGOs (government-organized NGOs) are included in Table 2-3 as parastate organizations. Also known as QUANGOS.

*An NPPO may
(a) and is expected to make "profits" which are tax free to the extent that they are used for the NPPOs purposes (including
the payment of salaries and expenses)--see text;
(b) engage in nonpartisan research on and make available its analysis of legislation, offering general recommendations
about policy beneficial to society at large;
(c) provide information and technical advice or assistance in response to a written request by a governmental body;
(d) communicate with any legislative body with respect to any decision which might affect the organization and its tax- deductible activities or status;
(e) engage in routine communications with government
officials or employees;
(f) communicate with its members about legislation of direct interest to them.
An NPPO may not
(g) spend on legislative activities (excepting those listed above in a-f) more than $1 million dollars (or expend more than 20% on the first $500,000 of its outlays, 15% on the next $500,000, or 5% of any of its remaining expenditures);
(h) encourage any person or body to influence legislation;
(i) engage in conduct that is not analytical, informational, and/or educational as it address the pros and cons of legislation. Cf.
ATEOs (see Table 2-6, below.)


ATEOs Listed by Main Purpose
[Exempt under the U.S. Internal Revenue Code (IRC) section
listed below]

ATEOSs engage in legislative lobbying--for NGOs
that do not do so, see Table 2-5, above
ATEOs may opt to change to NPPO status,
provided that they change their mode of operation)

Corporations holding titles for other tax-exempt organizations--IRC 501(c)(2).
Local employee associations--IRC 501(c)(4).
Labor, agricultural, and horticultural organizations-- 501(c)(5).
Trade associations, business leagues, professional associations, health care organizations, chambers of commerce, boards of trade, --501(c)(6).
Social clubs--501(c)(7).
Fraternal beneficiary societies--501(c)(8).
Voluntary employees beneficiary associations-- 501(c)(9).
Domestic fraternal societies--501(c)(10).
Teachers’ retirements fund associations--501(c)(11).
Benevolent or mutual organizations--501(c)(12).
Cemetery companies owned and operated for members--501(c)(13).
Credit unions operated for members--501(c)(14). Mutual insurance companies--501(c)(15).
Crop operations finance corporations--501(c)(16).
Trusts providing supplemental unemployment benefits--501(c)(17).
Certain funded pension trusts--501(c)(18).
Veterans organizations--501(c)(19).
Farmers cooperatives--IRC 521.
Associations to protect and indemnify ship owners-- IRC 526.
Political organizations--IRC 527.
Homeowners’ associations--IRC 528.
Group legal service organizations--IRC 501(c)(20).
Trusts for black lung benefits--501(c)(21).
Multi-employer pension plan trusts--501(c)(22).
Other ATEOs (e.g. title-holding of the same company by multiple ATEOs, and ATEO operated
retirement plans.
Governmental ATEOs:
i. state governments
ii. political subdivisions
iii. corporations authorized by the
U.S. government under IRC 501(c)(1), e.g.
Federal Deposit Insurance Corporation,
Federal National Mortgage Association,
which generally do not receive payments eligible for deduction for income taxes
as a business expenses.)

Types of Foundations

Foundations are regulated by Congress and the Internal Revenue Service (IRS). Since 1969, the tax code has drawn a clear distinction between public charities and private foundations. Both may use the term "foundation" in their titles, but depending on their IRS classifications, they are treated very differently under the tax laws.
The member organizations of the U.S. Council on [Grant-Making] Foundations (which has worldwide members) generally fall into one of 2 classifications (“Private” and “Public”) and 4 categories

These foundations are usually founded by one individual, often by bequest. Sometimes individuals or groups of people, such as family members, form a foundation while the donors are still living. Many large independent foundations, such as the Rockefeller and Ford Foundation, are no longer governed by members of the original donor's family, but are now run by boards made up of community, business and academic leaders—often with members from around the world.
As a rule, private foundations make grants to other tax-exempt organizations to carry out their charitable purposes. Private foundations must make charitable expenditures of approximately 5% of the market value of their assets each year. Although exempt from federal income tax, private foundations must pay a yearly excise tax of one or two percent on their net investment income.

1. Company Foundations
These foundations are established to directly fund the
Not-for-Private Profit activities of For-Profit Companies, which yearly can donate and deduct up to 10% from their gross corporate income upon which they pay taxes.
Such foundations represent the company, as in the case of the “Hewlett-Packard Foundation,” and not the
founders, each of whom have founded, under their own family foundation: the “Hewlett Foundation” and “Packard Foundation,” to which each can yearly donate and deduct from up to 50% of their gross income upon which they pay taxes. The family foundations fall into the following classification.

2. Family Foundations
The concept "Family foundation,” which includes those such as the Hewlett Foundation and the Packard Foundation (discussed immediately above) is not a legal term, but denotes those private foundations that are either managed or strongly influenced by the original donor or members of the donor's family. It is estimated that about two-thirds of all the foundations in the U.S. are family foundations

These foundations must have at least one-third of their income from the broad general public and no more than one-third from one single donor.

3. Community Foundations
These foundations build their endowments through contributions from several donors, usually within a given geographic region. The first Community Foundation was established in 1914 in Cleveland.
Community foundations support charitable activities focused primarily on "local" needs--those of a particular town, county or state. They are designated "public charities” and they raise a significant portion of their resources from a broad cross-section of
the public each year.
Community foundations provide an array of services to donors who wish to establish endowed funds without incurring the administrative and legal costs of starting independent foundations. There are approximately 300 community foundations across the U.S. today, the New York Community Trust being the largest.
In the 1990s a dynamic new type of community foundation has emerged to help government adopt entrepreneurial attitudes, as is exemplified in the case of the Silicon Valley Joint Venture TEO. Joint Venture has successfully merged private sector motives and funds with public policy that encompasses several counties in the greater Silicon Valley, which includes Stanford University. In providing “venture capital” type funding, for example, Joint Venture has funded local schools provided that they agree to fundamental redesign by providing computer-based education to all students in order to develop an electronic community. At the outset in 1992, Joint Venture Silicon Valley set up 14 working groups with over 1,000 citizens who distilled creative ideas into new initiatives intended to continually rejuvenate the area’s economy. The working groups have focused on such clusters as education and workforce, business services, technology, regulatory process, tax policy, bioscience, and physical environment.
As we will see, the El Paso Community Foundation defines “community” in non-geographic terms as well as geographic one.

3. Other Grant-Making Foundations.
Operating foundations, (like UCLA is equivalent to an operating foundation) are carrying out major services (like hospitals and schools.)

There are two failings that NGOs may fall into:
a. first danger is that NGOs increasingly look like businesses themselves, looking like “industries.” Many NGO groups have become multi-million dollars sophisticated operations, with high media visibility, and spend a lot of time and money on marketing themselves.
These NGOs are labeled as BINGOS, are becoming operationally similar to corporations, as their managers earn wages comparable to the private sector. Today NGOs have to abide by the 1995 code of conduct.
The two basic tenets of the code read as follows:
- aid should be delivered only “on the basis of need.”
- NGOs hold themselves accountable to both those they seek to assist and those from whom they accept resources.

b. NGOs can become self-perpetuating. An example is the Apartheid movement, its job once completed, it became another lobbying group for southern Africa.

The division between the NGOs and corporate world seems to be blurring up to the point of disappearing.
Governments are very close to contracting not only businesses to carry out their programs, but also less bureaucratic and efficient NGOs. One analyst emphasizes that foundations should be wary of becoming assimilated into government, for fear of losing their plurality.
This is true for the European Union NGOs too. To conclude, cross-border cooperation gains support also within the European Union (twenty-seven countries), but there are too many hurdles to overcome yet in order to achieve a philanthropic common market.
That is why NAFTA is considered a success from the point of view of harmonizing charity laws.

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