CGD’s Decision to Walk the Transparency Walk

Guest bloggers Katie Douglas Martel and Todd Moss from the Center for Global Development explain why they decided to publish how their think tank is funded. The views expressed in this blog are those of the authors alone, and may not reflect the views of Transparify.

We at the Center for Global Development (CGD) believe strongly that transparency and accountability can foster better development outcomes. That’s why our policy research and ideas include open government contracting, biometric identification systems, extractive revenue management, illicit financial flows, as well as more general work on the benefits of openness.

Our transparency work led to a logical question: If it’s is good for development, what about development think tanks? What’s more, we were receiving a lot of very good questions from our supporters and networks about where our money comes from and where we apply it. So, spurred in part by our friends at Transparify and frank discussions about think tank strategy by Enrique Mendizabal’s On Think Tanks blog and Andrew Selee’s book What Should Think Tanks Do?, we decided it was time to up our game on our own financial transparency.

Thus, we launched CGD’s How We’re Funded in March 2014. This web page, currently in a Beta version (improvements coming!), lists all grants and donations we received in 2013 and so far in 2014 above $100,000 or roughly anything more than 1% of our annual budget. We will also continue our practice of disclosing the membership of the Center’s Partners Council (corporate and individual contributors who give $2,500 and above) and CGD Society ($150-$2,500). Donations received from these groups are also aggregated in the Funding table.

How We’re Funded goes beyond what’s traditionally disclosed in US tax forms and annual reports. A benefit of our approach is that we are able to show how multi-year grants are allocated over time, as opposed to simply showing the year in which a grant was awarded and providing a potentially misleading view of our revenue streams. (The tax data can inadvertently and falsely suggest volatility.)

We also have another agenda here:we hope that our move towards transparency and posting How We’re Funded will encourage other nonprofits to do the same. By aiming to raise the standards for the whole field, we hope to bolster the credibility of think tanks as independent voices.

CGD conducts research with the aim of shaping rich countries’ and development actors’ policies that affect poor people in the developing world. Katie Douglas Martel is Deputy Director of Institutional Advancement, and Todd Moss is Chief Operating Officer and a Senior Fellow.

Secret Think Tank Funding and Reputational Risk

Important note: Below, we present two 2013 case studies to illustrate a general argument about transparency and the media. The use of these case studies should not be taken to imply that Transparify regards either of the think tanks involved as particularly transparent or opaque.

Transparency can be a tough sell. Some think tanks worry that disclosing who funds them may provide ammunition to their critics. But do they ever worry about the potential reputational risks of non-disclosure?

Let’s briefly review two cases from the past year in which think tank funding data was cited critically by the US media.

Think Tank A and Kazakhstan. In 2013, a prominent research institution somewhat reluctantly released a list of foreign donors in response to a demand by 25 Republican senators. The list showed that the think tank had received funding from 15 foreign governments, including that of Kazakhstan; these did not fully match the names in a different list already on the institution’s website. Journalists claimed that a conference on Kazakhstan organized by the think tank and paid for by a company that had vast oil interests in the country was essentially a “love poem” to Kazakh president-for-life Nazarbayev.

Think Tank B and Taiwan. After the think tank’s staff had over several years published opinion pieces arguing that the US should sell sophisticated weapons systems to Taiwan, journalist Eli Clifton through a filing error acquired tax documents that showed that the institution had received a 550,000 dollar contribution from Taiwanese public funds in 2009, a financial relationship that the think tank had not previously publicly disclosed (and was not legally obliged to disclose). The article noted that if the institution “took direction” from the government of Taiwan or “honored requests” after receiving the funds, it would have broken the Foreign Agent Registration Act, which requires the agents representing the interests of a foreign country in the US to periodically disclose their relationship.

What can we learn from these episodes?

First, in both cases the availability of financial data enabled journalists to ask questions that were legitimate, important and should be publicly discussed in a democracy. Should respectable American institutions accept money from authoritarian governments? Is the need to solicit funding undermining the intellectual independence of policy wonks? Are foreign governments wielding hidden influence, maybe in breach of US law? Transparency is important because it enables all sides in public discussions to be informed by a common pool of data.

Second, the most damaging narratives revolve not around donor money as such but around integrity and intellectual independence. What think tanks do after they take the money is what generates most reputational risk. While the media could not present solid evidence of the two institutions compromising their independence or integrity after taking the money (how could they?), the think tanks were equally unable to present evidence that could conclusively refute such suspicions (how could they?).

Without hard evidence on either side, appearances become very important. And in terms of appearances, taking money behind closed doors is one of the worst things a think tank can do, as every subsequent step the institution takes can easily come to be seen and interpreted in the worst possible light.

To conclude, keeping donors secret is a bad reputational risk management strategy for think tanks. It may initially prevent tricky questions from being raised by critics, but when the donor relationship eventually does become public knowledge – as it very often does – initial secrecy substantially increases the potential for severe reputational damage.

Taking donors’ money behind closed doors may seem the easy option today, but in the long term, transparency pays greater dividends.

Transparency from a Southern Think Tank’s Point of View

Guest blogger Natalia Aquilino of the Argentinian think tank CIPPEC discusses transparency from a Latin American perspective. The views expressed in this blog are those of the author alone, and may not reflect the views of Transparify.

A discussion on think tanks’ transparency and accountability, as well as one about the evaluation function, is still pending within Latin American.

From CIPPEC’s point of view as a southern think tank, we believe it is very relevant to strengthen the debate on think tank legitimacy not only in the northern part of the world, but also in Latin America.

However, both the context and the reasons why it matters are different over here.

First, it’s a matter of values: transparency builds credibility. We believe the current lack of transparency undermines think tanks’ reputation and weakens our position as an independent, nonpartisan organization. In our case, letting everyone knows where the money comes from allows us to enhance the “research to policy” link.

Second, in our political context, where increasing polarization has been a key feature over the last 10 years, it definitely matters who finances you. This shapes the research agenda, but also conditions the fundraising strategy. For instance, it is getting harder to work with some donors that have different interpretations on how democracy should work in our countries from the interpretations of our governments. The risk here is not only not to get funded but also to become irrelevant to the local context.

Third, technology and digital resources facilitate the accountability function in our institutions. Given appropriate software for think tank management, information systematization and publicity becomes easy and smooth. Customization can also be provided via web sites as you may find in the section on donors on our website.

Last but not least, accountability and transparency needs to be a part of the think tank impact equation. Being accountable as an organization is a smart way of complementing the so-called "think tanks impact assessment" which most of the time just concentrates on resources management, reputation, media coverage, output quality or research uptake (as for instance in the Go To Think Tanks Index). 

Transparency completes the ‘policy impact’and ‘research to policy’ concepts by bringing in the issue of who supports your work. And of course, it can help to present a good accountability report in an innovative format. But we’ll discuss the usefulness of being transparent for think tank management in another post!

Natalia Aquilino is Director of the Influence, Monitoring and Evaluation Programme at the Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento (CIPPEC), a leading Argentinian think tank. 

The Marketplace of Ideas Under Threat

Guest blogger Richard Epstein of the New York University School of Law argues that the principle of free speech is in danger of being forgotten. Transparify does not edit the content of guest blogs; the views expressed in this blog are those of the author alone, and may not reflect the views of Transparify.

Ninety five years ago, Justice Oliver Wendell Holmes uttered in Abrams v. United States the one sentence that encapsulates best the ideals of the First Amendment protection of freedom of speech:

“when men have realized that time has upset many fighting faiths, they may come to believe even more than they believe the very foundations of their own conduct that the ultimate good desired is better reached by free trade in ideas -- that the best test of truth is the power of the thought to get itself accepted in the competition of the market, and that truth is the only ground upon which their wishes safely can be carried out.” 

In that case, Holmes protested the conviction under the Espionage Act of socialists  who protested the United States’ involvement in the war against Germany.  The dissent that became law took the view that there was no direct incitement to the use of force or fraud, so that the speech was protected no matter how much discomfort it gave to those who disagreed with it.

That principle, which gained much support in the aftermath of the First World War, is now in danger of being forgotten.  I am struck today by how many people are so sure that they know the right answer that they think that their solemn duty is to expose the bad motive and corrupt arguments of their contemptible opponents.

One instance is of course the opposition to global warming, which has if anything gained some momentum because the original gloomy predictions on the subject have not been supported by the most recent evidence which shows little or no global warming over the last fifteen years even though there have been substantial increases in the levels of carbon dioxide in the atmosphere. 

No one should say that this single data point necessarily means that the debate is over. But it should caution us to be aware of the apocalyptic visions of doom that lead to the denunciation of any individual or organization that takes the contrary position.

I read with dismay the guest blog recently offered by Robert Brulle on Transparify’s website that denounces those nameless conservative foundations for their hidden support of think tanks that speak the forbidden language.  But what is striking about his and similar arguments is that they take it for granted that his opponents “deny scientific findings about global warming and raise public doubts about the roots and remedies of this massive global threat.” 

Yet at no point is there the most meager effort to look at the evidence on both sides of the issue so that readers can make up their minds.  Instead we are told that it is now imperative to engage in “rating think tanks on their transparency.”  But it is never explained who is entitled to the high ground on this issue, or how the rating process will be viewpoint neutral if the raters themselves have strong substantive views, as Professor Brulle surely does. 

The only cure, I think, is competition in the rating market. Holmes would have approved.

Richard Epstein is a professor of law at the New York University School of Law. He is also a senior fellow at the Hoover Institution, and the James Parker Hall Distinguished Service Professor of Law Emeritus and a policy advisor for the Heartland Institute. He is a prolific blogger and the author of several  books.

Disclosing Funding Data to the Media: Why Shoot Yourself in the Foot?

Guest blogger Robert Bourgoing argues that think tank managers should welcome greater scrutiny of their funding data by the media. The views expressed in this blog are those of the author alone, and may not reflect the views of Transparify.

Recently, the Sunlight Foundation had a great 7-part blog series listing ‘50+ reasons not to release open data’: apathy, confusion, it’s hard, cost, staffing concerns, legality, accuracy.

One important reason which I believe was missing from the list is the concern that it could unleash unwanted scrutiny, especially from journalists. After all, good news generally doesn’t make the news.What guarantees that disclosing funding data will not backfire at some point, especially when you’re a large organization dealing with multiple partners?

It is naturally tempting to not fully walk the transparency talk. This was made clear in a conversation I once had with a senior manager of an organization widely regarded as highly transparent:

“We are presenting information and data in a way that is positive to [us]. We show the main performance indicators, the success stories, the positive changes brought by [us]. But we’re not necessarily going to focus on a country which is not working because of all kinds of other contextual information that we don’t necessarily want to talk about or go in much detail. It makes sense: we’re not going to shoot ourselves in the foot”.

Does it really make sense? I was confronted by this question when I tried to initiate a training program for media representatives to make use of a former employer’s funding data. “Why invite the press to dig up stories that could potentially be embarrassing,or create more communication crises than we could deal with?” I was asked. Here is what I think:

• Being open about what goes wrong (and what you do about it) is good for your reputation. It shows courage, a sense of responsibilities and seriousness regarding transparency. Transparency is not meant to paint a rosy picture of reality but to highlight things as they are: successes AND challenges AND failures. Failure is okay as long as it allows you to learn and to act on what needs improvement. Running a negative story yourself – taking the time to prepare, put things into context, show what is being done to address the problem – will always be better than fighting allegations of a cover-up.

• Bad news may be good news when it is factual, fair and balanced.It can help to flag problems while there is still time to do something about them. Large think tanks, global organizations and multi-stakeholder partnerships cannot watch over everything everywhere. Providing journalists with easy access to the whole story about their funding data may serve as an early warning system, to flag issues before it is too late, to limit the damage done by mismanagement, misuse of funds or corruption.

Embracing transparency half-heartedly maybe a more risky option than not being transparent at all, a missed opportunity to work alongside the media for positive outcomes.

Robert Bourgoing is an independent consultant and aid transparency expert. He maintains a blog and a LinkedIn discussion group on the demand side of aid transparency in developing countries.

Pulling Back the Curtain

Guest blogger Robert Brulle reports on his attempts to uncover the sponsors of think tanks engaged with the issue of climate change. Transparify does not edit the content of guest blogs; the views expressed in this blog are those of the author alone, and may not reflect the views of Transparify.

Over the past forty years, there has been an enormous expansion of ideologically focused think tanks. These think tanks have become increasingly important in the development and advocacy of public policies on a range of issues. They have also increasingly been funded by undisclosed sources. So it is difficult to judge the validity of their assessments without full disclosure of their funders.

For example, my work has focused on think tanks engaged with the issue of climate change. What we see in this area is a group of think thanks that foster confusion about the science of climate change, and oppose action to address this issue. These think tanks have been bankrolled by funders known for their overall commitments to extreme free-market ideologies. Where funding can be traced, it has come from foundations driven by an encompassing ideological vision that posits government “interference” in markets as inherently illegitimate. Regulations and taxes are demonized, yet both are ingredients of proposals to reduce greenhouse gas emissions.

Despite thorough efforts, I could not find all of the sources of funding for organizations that mount climate-change denial efforts because the law allows secrecy. Many of the actors and organizations that have done so much to block U.S. actions to counter the global warming threat are able to operate in the shadows. Americans hear denial arguments funded on a grand scale by unknown wealthy manipulators.

This is a big problem for democracy. The U.S. constitution guarantees free speech, and the current Supreme Court enforces that right for corporations as well as individuals. In addition, current U.S. rules applying to “nonprofit” organizations make it easy for political activities to be supported on a huge scale in hidden ways. Nonprofit organizations not required to reveal their donors can simply collect funds and pass them to campaigns and think tanks. This hidden-funding system needs to change through the revision of nonprofit reporting laws. Without a free flow of accurate information, democratic politics and government accountability become impossible.

Powerful funders are supporting the campaign to deny scientific findings about global warming and raise public doubts about the roots and remedies of this massive global threat. So in this area, as well as many others, we have unaccountable funding flows to these think tanks from unknown sponsors trying to influence public policy in an enormous way, and that really runs counter to the whole notion of democracy and open debate.

Rating think tanks on their transparency is a first step in the right direction. This web site will allow citizens to see which think tanks are fully transparent about their funding sources, and those that hide behind a veil of secrecy. At the end of the Wizard of Oz, Dorthy’s dog Toto pulls back the curtain on the Wizard, who is manipulating the image of Oz. This exposes the true nature of power. I hope this web site will do the same.

Robert Brulle is Professor of Sociology and Environmental Science at Drexel University. 

Corporate Interests and Think Tanks – An Overview of Current Debates

How and why do corporations fund think tanks? How do think tanks manage potential conflicts of interest? How transparent and traceable is corporate funding to think tanks?

In order to answer these questions, Transparify has located, compiled and reviewed dozens of media stories and research papers. Today, we release the results of our work, an annotated bibliography on “Corporate Interests and Think Tanks”. This is the fourth and last in our series of think tank bibliographies.

Most authors suggest that many corporations fund think tanks out of strategic self-interest. For example,financial industry players in both the US and the UK are thought to systematically support think tanks that produce work that furthers their sponsors’ agendas within a context characterized by intensive lobbying efforts across multiple fronts.

Corporations’ possible influence on energy policy and climate change debates via their funding of think tanks has drawn particular attention. For example, one author claims that “climate change denial” by think tanks has been funded via trusts that enabled their donors to remain anonymous and untraceable despite over one hundred million dollars allegedly passing through such channels. Another retorts that the renewable energy industry too has vested interests, and that it sometimes promotes and defends these interests by… you guessed it… funding policy wonks. A third observer alleges that calls for financial disclosure by think tanks engaged in climate change debates have often been one-eyed as well as one-sided. (Here at Transparify, we simply believe that all think tanks should fully disclose who funds them, regardless of the policy stances that they take.)

Possible conflicts of interest also lurk when think tanks weigh in on questions of war and peace. In a recent guest blog on our website, Gin Armstrong explored such possible conflicts of interest that may have been at play when think tank experts with defence industry ties took to the airwaves in 2013 to discuss US military strikes against Syria. In recent days, she has voiced similar concerns with regard to policy advice being proffered on the ongoing crisis in Ukraine. Mind you, in an industry dependent on public sector contracts that is notorious for its revolving doors, even public funding for think tanks has not been immune against suspicions of self-interested dealings.

Does the tobacco industry really employ think tanks as mercenaries to fight on its behalf? Do car manufacturers really pay think tanks to talk governments into bailing them out with public funds? Indeed, can any think tank still accept funding from any source without immediately coming under suspicion of having been “bought” by some public or private vested interest?

We at Transparify don’t have the answers. For us, this little media review yields one conclusion: the think tank community may soon face a comprehensive crisis of credibility. If current trends continue, even the most sophisticated and methodologically scrupulous policy research outfits will find it hard to get their findings, ideas and policy recommendations taken at face value.

In an environment increasingly characterized by finger pointing, suspicion and paranoia, think tanks committed to intellectual independence and excellence in research need a way to actively signal to policy makers and the media that they deserve their trust and respect.

Transparify’s aim is to provide think tanks with a tool for signalling their credibility: a policy research institution publicly recognized for its exemplary financial transparency can hardly be accused of harbouring “hidden” agendas.

(For your reference, the bibliography discussed above is accessible here.)

Think Tanks and the Right to Information

Guest blogger Michael Karanicolas explores the applicability of the right to information to think tanks. Transparify does not edit the content of guest blogs; the views expressed in this blog are those of the author alone, and may not reflect the views of Transparify.

The right to information is internationally recognised as a human right which lies at the core of democratic accountability. Since State institutions are funded by public money, it is only natural to expect that the people have a right to know how their resources are being spent. In a democratic society, access to information held by the government is vital to ensuring that the electorate is fully and accurately informed, and can properly engage in the decision-making process. The right to information also fosters trust in government, and promotes efficiency through robust public oversight.

The right to information is not limited to State institutions. International standards hold that the right to information should apply to any private organisations that receive State funding or perform a public function to the extent of that funding or function. It is clear that, where an NGO – a category that includes most think tanks – is substantially funded from a State budget, a duty of transparency should apply.

However, many think tanks and other NGOs are not supported by State funds, and here the question becomes more difficult. Most right to information laws do not apply to NGOs, but there are exceptions. Indonesia’s Public Information Disclosure Act applies to NGOs which receive funding from public donations or from foreign sources, as well as any that receive money from the State budget. South Africa’s Promotion of Access to Information Act, 2000 allows for requests to any private organisation, including NGOs, if the information is required for the exercise or protection of any right. Sierra Leone’s Right to Access Information Act, which was passed in late 2013, includes a similar provision.

Several countries also impose additional transparency requirements on organisations which claim charitable status. This makes sense as charitable status is, in essence, a tax subsidy provided by the State.

Transparency is generally a good thing. However, there are legitimate reasons why NGOs may be wary of these requirements. For one thing, many smaller or developing world organisations lack the resources to respond efficiently to access to information requests, particularly if their records are not digitised. Another issue is that NGOs will sometimes require a certain amount of space to operate. Advocacy strategies, for example, will often need to be kept under wraps in order to ensure their efficacy. Although it is conceptually dangerous to start expanding the legitimate limits of exceptions to the right to information, these ideas require development to be properly applied to the NGO sector. 

But beyond the legal requirements of what NGOs must publish, there are legitimate operational reasons to want to push more information into the public domain. If an NGO seeks to pressure governments or corporations into being more transparent, while simultaneously guarding the secrecy of its own documentation, it runs the risk of being labelled a hypocrite.

Good advocacy means practicing what you preach, even if this may lead to some operational difficulties. Strictly speaking, the right to know does not generally extend to information that is held by NGOs. But if an NGO seeks to be an effective voice for transparency, it may need to lead by example.

Michael Karanicolas is the Legal Officer of the Centre for Law and Democracy, in Halifax, Canada.

Think Tanks Would Benefit from Better IRS Rules for Nonprofit Political Activity

Guest blogger Emily Peterson-Cassin of the Bright Lines Project argues that all nonprofits would benefit from a clearer definition of political activity. Transparify does not edit the content of guest blogs; the views expressed in this blog are those of the author alone, and may not reflect the views of Transparify.

Since the U.S. Supreme Court’s 2010 Citizens United decision, 501(c)(4) “social welfare” groups that can collect donations without disclosing their donors have proven irresistible to those looking for ways to spend millions on manipulating elections in secret. Through these groups, corporations and individuals were able to raise and spend more than 300 million dollars in the 2012 election cycle, leaving voters in the dark about their identity and unable to evaluate their motives.

To its credit, the IRS has recognized that this influx of dark money is a problem for its current system of classifying nonprofit entities.In November 2013, it proposed new rules for 501(c)(4)s that garnered more than 146,000 public comments – a record. The proposed rules are problematic for a variety of reasons, including that they don’t do enough to stop the dark money flowing into our elections. 

Nevertheless, groups that would be affected by the new rules overwhelmingly want the rulemaking to continue. 67% of organizations commenting or signing on to comments on the rules – the very entities the new rules would most affect –encourage the IRS to move forward in their effort to change the rules governing nonprofits, according to our analysis of the comments.

The existing rules not only have allowed groups to aggressively flout tax rules and pour millions into manipulating elections, but they also have constrained smaller groups dedicated to civic engagement. Too afraid of jeopardizing their nonprofit status, smaller groups have not participated in America’s democracy as fully as they are allowed. The IRS’ new rules seek to fix this imbalance by resolving the ambiguity of the current “facts and circumstances” test. Improving this definition will lead to more clarity for IRS agents as they work to monitor abuses and will help nonprofits engage confidently, knowing with certainty what they can and cannot do.

Currently, 501(c)(3) nonprofits such as think tanks are not allowed to engage in any political activity, and neither the proposed rules nor the Bright Lines Project’s suggested rules would change that.

However, the rules as proposed could jeopardize the daily operations of some 501(c)(3)s by complicating their relationships with (c)(4)s. Unless the same rules apply to all 501’s, organizations that fund or work with (c)(4)s could find that they are engaging in prohibited political activity merely by donating to a (c)(4), or possibly even linking to a (c)(4)’s website. 

That’s why the Bright Lines Project has advocated for clear rules that apply to all nonprofits.  Bright-line rules have the potential to greatly increase the amount of civic participation think tanks can undertake. 

The IRS has a long review process ahead, but should not lose focus on the realities that nonprofits face in navigating the confusion caused by the current rules.  The 67% of organizations that want to continue the rulemaking are resoundingly telling the IRS that they have taken a necessary first step. It’s essential that IRS continue the rulemaking and create a final rule that will help bring dark money into the light.

Emily Peterson-Cassin is the project coordinator of the Bright Lines Project, which was formed nearly five years ago to draft and advocate for clearer tax rules governing nonprofits. The project is housed at Public Citizen in Washington, D.C.

Think Tanks Have Little to Fear from New IRS Rules

Guest blogger David Earley of the Brennan Center argues that think tanks need not worry about proposed new tax rules limiting political activity by nonprofits. Transparify does not edit the content of guest blogs; the views expressed in this blog are those of the author alone, and may not reflect the views of Transparify.

In the wake of the Supreme Court’s 2010 Citizens United decision, political spending by social welfare groups has exploded.  These entities, organized under section 501(c)(4) of the tax code, spent 256 million dollars in the 2012 federal elections, even though they are supposed to be operated exclusively for social welfare rather than for political purposes. 

Due to legal loopholes, these organizations are not required to disclose their donors.  Consequently, individuals, corporations, and unions can anonymously funnel millions of dollars into elections without fear that their identities will be disclosed to the public. This deprives voters of information that would help them interpret the messages they receive before the election and allow them to make informed decisions at the ballot box.  And without full disclosure, the public cannot monitor for improper relationships between elected officials and their political benefactors, opening the door to corruption.

Recognizing this abuse of the tax code, the IRS recently proposed new rules to regulate political spending by 501(c)(4) organizations.  The rules replace the current, ineffective “facts and circumstances test” with bright-line standards, which benefits both nonprofits and the IRS by clarifying what constitutes political activity.  The IRS is also considering adding rules to significantly limit the amount of political spending that nonprofits can undertake.  Under current informal IRS guidance, nonprofits can spend up to 49% of their budgets on political activity without endangering their tax exempt status; new rules could greatly reduce this amount.  The IRS may also expand the restrictions to other nonprofit entities, such as 501(c)(6) trade associations and 501(c)(5) unions, which also engaged in significant political spending in recent elections.

The new standard for what constitutes political activity should also extend to 501(c)(3) charitable organizations. Because many think tanks are organized under section 501(c)(3), some in these organizations might think this is cause for concern.  However, since political activity by 501(c)(3)s is already prohibited entirely, it is unlikely that the new rules will have a significant impact on them – they already are forbidden from getting politically involved in elections.  So long as the IRS’s new rules properly define what constitutes political activity, 501(c)(3)s have little to fear.

The IRS should be applauded for moving to rein in political spending by nonprofit groups.  As the Brennan Center explained in its comments, “The nonprofit form was created to foster organizations that are devoted to the general welfare of their communities, not to furthering partisan political goals.  The proposed IRS rules are needed to help ensure that the nonprofit form is not abused by those who want to anonymously spend massive sums on elections.”

The proposed rules are not without their flaws.  For example, the proposed rules consider nonpartisan voter registration – an important type of social welfare work that should be exempt – to be political activity.  But these faults are a reason to refine the proposed rules, not to abolish them.  The IRS should implement new rules to protect the integrity of both our elections and the tax code.

David Earley is a Counsel at the Brennan Center for Justice at NYU School of Law, a law and policy institute that seeks to improve American systems of democracy and justice. The Brennan Center describes itself as “part think tank, part public interest law firm, part advocacy group, part communications hub”.

Misconceptions About ‘Dark Money’

Guest blogger Adam Meyerson of The Philanthropy Roundtable makes the case for the right to confidentiality of donors giving to think tanks and other non-profits. Transparify does not edit the content of guest blogs; the views expressed in this blog are those of the author alone, and may not reflect the views of Transparify.

A long legal tradition protects the rights of Americans to make charitable contributions without publicly disclosing them. This right to confidentiality in charitable giving is grounded in our constitutional freedom of association, and it is one of the most important elements of philanthropic freedom.

In a landmark 1958 Supreme Court judgment, the court held that the state of Alabama could not compel the NAACP to reveal the names and addresses of its members because doing so would expose its supporters “to economic reprisal, loss of employment, threat of physical coercion, and other manifestations of public hostility” and thereby restrain “their right to freedom of association.” (see NAACP v. Alabama)

Our tax code similarly protects the confidentiality of individual contributions to public charities. In their 990 tax returns, public charities have to disclose their largest contributors, but this is for purposes of tax administration only. The Internal Revenue Service is strictly forbidden by statute from revealing these names to the public or even, with a very limited number of exceptions, to other government agencies.

Donors do have to disclose publicly their contributions to private grant-making foundations, which in turn have to disclose their grants to public charities. These transparency requirements help to protect against self-dealing and to make sure that foundation grants support genuinely charitable organizations.

Donor-advised funds, America’s most rapidly growing charitable vehicle, receive donations from individuals and then make grants to other public charities on the recommendations of the original donors. Like foundations, the sponsors of donor-advised funds are required to disclose the grants they make to other charities; this helps ensure that the grants are going to charities and not to for-profit or partisan political operations. But consistent with America’s historic confidentiality protection for individual donors to public charities, the sponsors can keep private their own donors as well as those donors’ individual grant recommendations.

This protection is sometimes misunderstood. For instance, conservative critics of the Tides Foundation, a liberal-left donor-advised-fund sponsor, have called it a system “to evade transparency.” Liberal critics of DonorsTrust, a donor-advised-fund sponsor for “organizations that promote liberty,” have labeled it as a “secretive funding network” and “dark-money ATM.” But the right to privacy enjoyed by contributors to donor-advised funds is no different than the right to privacy that governs the overwhelming majority of charitable giving.

There are multiple reasons to give privately. Many anonymous donors want to protect themselves from unwanted solicitations, to protect their children from knowledge of their family’s wealth, or to be able to visit prospective grantees and “kick the tires” without anyone knowing they are a funder. Still others, like the 1950’s NAACP donors, want the freedom to support controversial organizations without fear of reprisal or ostracism.

So-called “dark money” illuminates our free society.  

Adam Meyerson is President of The Philanthropy Roundtable and a board member of the State Policy Network, a capacity building service organization for America's free market, state-focused think tank community. This guest blog is an abridged version of an article that originally appeared on the SPN website.

Arguments for Aid Transparency Equally Apply to Think Tanks

Guest blogger Nicole Valentinuzzi of Publish What You Fund explores common space shared by the aid transparency movement and efforts to make think tank funding more transparent. Transparify does not edit the content of guest blogs; the views expressed in this blog are those of the author alone, and may not reflect the views of Transparify.

Every year, Publish What You Fund produces an Aid Transparency Index (ATI) to rank the world’s biggest donors according to how transparent they are about the aid they give. The ATI has become the industry standard, assessing the state of aid transparency among the world’s major donors, while encouraging progress and holding them to account.

It is a fantastically useful tool for monitoring the progress made by donors with implementing their own commitments to make aid transparent. The ATI can work as both a carrot and a stick.

For example, in many cases, donors working to improve their aid transparency are keen to have their efforts reflected in the ATI. The deadline for collecting data for last year’s Index was 31st July, so donors had until the end of that month to make one final attempt at improving their ATI ranking – and several of them did, with a flurry of activity and phone calls in the final days of July.

Year-on-year, donors can improve either by making the information they already publish comprehensive for all their activities, or by publishing information items for the first time. This is fundamentally what makes for a good index - incentivizing those being measured to change their behaviour.

The good news in our field is that all the world’s largest donors have signed up to the International Aid Transparency Initiative (IATI), the only internationally-agreed standard for publishing aid data. As part of this commitment, they have said they will publish all their aid information to IATI by the end of 2015. (Our Aid Transparency Index also measures this commitment.)

This and other lessons learned by the aid transparency movement can also be applied to think tank transparency.

 So why do we bother?

Well, put simply, there is too little readily available information about aid, and this undermines the efforts of both sides, those who give and those who receive it. Knowing what is being spent where, by whom, and with what results is the basic foundation for increasing aid effectiveness.

Once all of the world’s largest donors are publishing to IATI, we’ll be able to track the money right down the development chain. Being able to follow the money from a donor all the way to the specific project it funds will make it possible to also track donor funds to individual think tanks in developing countries.

 Aid transparency is important because without it:

• Donor governments don’t know what other donors are spending or planning to spend, leading to the duplication of efforts in some areas and under-funding in others. Without aid transparency, donors cannot coordinate to achieve the maximum impact with their scarce resources.        
• Recipient governments struggle to know how much aid is invested in their country, let alone where and how it is spent.
• Civil society, including NGOs, legislators and citizens, who have the right to know what aid is coming into the country and what it’s being spent on, remain in the dark.

These arguments for aid transparency can equally be applied to think tank transparency, where it is just as important to be able to follow the money.

Nicole Valentinuzzi is the communications manager of Publish What You Fund, a not-for-profit organisation that campaigns for aid transparency. The campaign was originally launched in 2008 by a coalition of governance, aid effectiveness and access to information organisations.

When Think Tanking Hurts the Poor: Egypt and Beyond

Two decades ago, the Egyptian Center for Economic Studies think tank was formed with a ten million dollar endowment by USAID. According to the Washington Post, the think tank, which “gathered captains of industry in a small circle”, then advocated for a privatization program that eventually led to the sell-off of state assets worth 104 billion dollars. Apparently, less than ten percent of that value went into state coffers – the rest was lost to high-level corruption involving senior officials closely tied to the think tank. In total, the Washington Post reported, the losses to the Egyptian taxpayer of that privatization program exceeded the total amount of aid provided by the US to Egypt over the course of six decades.

While it would be facile to pin the blame for this sorry saga on a single think tank, it does highlight that some donor-funded think tanks can punch far above their weight when it comes to influencing political and economic decisions with massive implications for economic development and poverty reduction efforts. 

Throughout the developing world, donor-funded think tanks are now weighing in on domestic political debates on issues as diverse as democratic reforms, foreign affairs, military doctrine, economic governance and social policy. Having worked for a think tank in an emerging economy ourselves, we at Transparify strongly believe that think tanks can play a positive role in enriching national debates and decision-making, especially where there is limited capacity for policy analysis by other players. However, as long as most think tanks remain opaque, it will remain impossible for stakeholders in these debates to separate the wheat from the chaff.

Many think tanks in developing countries are predominantly or even exclusively dependent on foreign donors to carry out their work. Far from requiring these think tanks to be transparent, some donors – notably USAID – on occasions actively abet opacity by their non-profit grantees. Such opacity is not helpful at a time when developing countries are increasingly suspicious of donor-funded think tanks, a suspicion that often extends to all NGOs receiving support from abroad. For example, India is reportedly considering further restricting foreign funding for think tanks and other non-profits.

Policy decisions matter hugely, and developing country think tanks can play an important role in informing and improving them. Donors wishing to improve the quality and integrity of policy-making inside developing countries should do two things. First, donors themselves should disclose which think tanks they fund, with how much, and for what work. Second, they should require think tanks to be fully transparent about all the funding they receive before even considering their applications for grants. Financial transparency is not a panacea, but it is an important step on the road to making policies work better for the poor.

This blog is an abridged version of a longer piece written by Transparify that was originally posted on the website of Publish What You Fund, a not-for-profit organisation that campaigns for aid transparency.