Comments on: Rethinking charitable trusts http://www.kemplog.com/2005/02/22/rethinking-charitable-trusts/ Life and law in Eastern Indiana Thu, 04 Dec 2008 01:50:49 +0000 http://wordpress.org/?v=2.6 By: RiShawn Biddle http://www.kemplog.com/2005/02/22/rethinking-charitable-trusts/#comment-55 RiShawn Biddle Wed, 31 Dec 1969 16:00:00 +0000 #comment-55 I would argue that the problem has been that there hasn't been much in the way of regulatory oversight of public charitable trusts, foundations and even charitable service organizations. And when you think about their shape, more oversight is surely needed. After all, unlike corporations, sole proprietorships and the like, which have shareholders, owners and creditors to exercise some sort of supervisory role, PCTs and foundations don't have any of that. Trustees and boards are often self-selected by current players, who have their own self-interest in mind (and not always in a good way.) Benefactors can withhold money from foundations, but they can't actually vote for trustees. And in the case of PCTs, the benefactor is long dead. Technically, attorneys general are supposed to regulate PCTs and foundations. But they usually don't. Why? Because regulating charities isn't nearly as sexy as pursuing Wall Street firms or relate as closely to voters' interests as chasing down scammers does. Besides, the boards of foundations and PCTs often consist of influential people, some of whom may actually have relationships with the AG himself. The result: Charities often diverge from donor intent (a la Ford Foundation) or end up going into the crapper (the Barnes art charity in Philadelphia, which had to sell off its art.) And anyone who has ever worked in a foundation can tell you about some of the waste and poor accounting that plagues many a foundation or charity. So while I'm not sure Carter should be splitting babies in the Connor Prairie case -- I think Lilly's donor intent was made quite clear -- I think he's right to step in. And he should be given some more power to do so. I would argue that the problem has been that there hasn’t been much in the way of regulatory oversight of public charitable trusts, foundations and even charitable service organizations. And when you think about their shape, more oversight is surely needed. After all, unlike corporations, sole proprietorships and the like, which have shareholders, owners and creditors to exercise some sort of supervisory role, PCTs and foundations don’t have any of that. Trustees and boards are often self-selected by current players, who have their own self-interest in mind (and not always in a good way.) Benefactors can withhold money from foundations, but they can’t actually vote for trustees. And in the case of PCTs, the benefactor is long dead.

Technically, attorneys general are supposed to regulate PCTs and foundations. But they usually don’t. Why? Because regulating charities isn’t nearly as sexy as pursuing Wall Street firms or relate as closely to voters’ interests as chasing down scammers does. Besides, the boards of foundations and PCTs often consist of influential people, some of whom may actually have relationships with the AG himself.

The result: Charities often diverge from donor intent (a la Ford Foundation) or end up going into the crapper (the Barnes art charity in Philadelphia, which had to sell off its art.) And anyone who has ever worked in a foundation can tell you about some of the waste and poor accounting that plagues many a foundation or charity. So while I’m not sure Carter should be splitting babies in the Connor Prairie case — I think Lilly’s donor intent was made quite clear — I think he’s right to step in. And he should be given some more power to do so.

]]>